Dow Jones futures experienced a notable increase overnight, alongside gains in S&P 500 and Nasdaq futures, following reassuring comments from a top Bank of Japan (BoJ) official. Conversely, shares of Super Micro Computer (SMCI), a key player in the AI sector, plunged after disappointing earnings and guidance.
Bank of Japan Deputy Governor Shinichi Uchida stated that the central bank would refrain from further rate hikes while markets remain unstable. This announcement weakened the yen against the dollar, which in turn bolstered Dow futures.
The recent sell-off in global markets was partly triggered by a strengthening yen following last week’s BoJ rate hike.
On Tuesday, the stock market saw a rebound from previous sharp declines, although the rally faded toward the end of the trading day. Major tech stocks such as Nvidia (NVDA) and Meta Platforms (META) led the recovery. MercadoLibre (MELI) and Palantir Technologies (PLTR) also saw gains, with the latter gapping up on positive earnings results.
However, it is still early in the market rally attempt, which began on Tuesday.
Futures Movement
Dow Jones futures rose 0.5% relative to fair value, while S&P 500 futures increased by 0.6% and Nasdaq 100 futures gained 0.85%. The overnight recovery was driven by Uchida’s comments but remains uncertain as it does not always reflect in the following trading session.
Key Earnings Reports
Several companies reported earnings, including Amgen (AMGN), Super Micro, Rivian (RIVN), Toast (TOST), Exelixis (EXEL), Halozyme (HALO), Fortinet (FTNT), Airbnb (ABNB), and Reddit (RDDT).
Fortinet’s stock surged, indicating a potential move above critical levels after reaching a 2024 low on Monday. Both Halozyme and Exelixis showed positive movement and could be actionable in trading on Wednesday.
Conversely, Super Micro’s stock dropped sharply after missing fiscal Q4 estimates and providing mixed guidance, despite announcing a 10-for-1 stock split. Airbnb shares fell as the company reported weaker demand, while Toast and Reddit also experienced declines. Rivian shares dropped significantly, and Tesla (TSLA) fell modestly in sympathy with its competitor.
Novo Nordisk (NVO) is set to report earnings early Wednesday, and Eli Lilly (LLY), a rival in the weight-loss drug market, will release its results before Thursday’s opening.
Market Rally Attempt
The stock market attempted a rally on Tuesday after suffering significant losses in the previous sessions. Major indexes showed some improvement but encountered resistance near the lows from Friday. The Dow Jones Industrial Average gained 0.8%, facing resistance at the 50-day moving average. The S&P 500 climbed 1%, while the Nasdaq Composite also rose 1%, bouncing off its 200-day moving average. The Russell 2000, a small-cap index, increased 1.2%, nearing its 50-day line after finding support at its 200-day moving average on Monday.
Investment Strategy
To capitalize on a potential market uptrend, investors should aim to capture the majority of the advance. However, pinpointing the exact start of a rally can be risky. Waiting for a follow-through day can mitigate the risk of entering too early, though even this is no guarantee of success, as confirmed uptrends can still falter.
Investors should exercise discipline by staying engaged with the market and remaining patient. It is crucial to maintain and update watchlists, focusing on stocks that hold key levels and exhibit relative strength. This approach helps in avoiding missed opportunities and enables better preparedness for new rallies.
