Dow Jones futures fell slightly overnight, while S&P 500 futures and especially Nasdaq futures rose. Microsoft (MSFT) fell on weak Azure cloud-computing growth, but AMD and Nvidia were overnight winners. The Fed meeting decision is on tap Wednesday.
Nvidia rival Advanced Micro Devices (AMD), Arista Networks (ANET), First Solar (FSLR), and Pinterest (PINS) also reported Tuesday night.
The stock market rally diverged Tuesday, heading into huge earnings and the Fed meeting decision. The Dow Jones, small caps, and many non-tech sectors held up or rose modestly. The S&P 500 undercut key support, while the Nasdaq fell solidly, led by Nvidia (NVDA).
Nvidia stock is on IBD Leaderboard, with AMD on the Leaderboard watchlist. Microsoft stock is on IBD Long-Term Leaders.
The video embedded in the article discusses Tuesday’s market action and analyzes Spotify (SPOT), Progressive (PGR), and Texas Roadhouse (TXRH).
Dow Jones Futures Today
Dow Jones futures fell 0.2% vs. fair value, with Microsoft stock a major Dow component. S&P 500 futures rose 0.4% and Nasdaq 100 futures climbed 0.9%. Microsoft, AMD, Arista Networks, and First Solar are S&P 500 and Nasdaq 100 stocks.
The 10-year Treasury yield edged up to 4.15%. Crude oil futures rose 1%.
The China manufacturing index edged down 0.1 points in July to 49.4, below the break-even 50 level but just above views for 49.3. The non-manufacturing dipped 0.3 points to 50.2, meeting estimates.
Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
Federal Reserve Meeting
The Federal Reserve meeting ends Wednesday, with a policy statement due at 2 p.m. ET. Fed chief Jerome Powell will speak at 2:30 p.m., with investors hoping Powell will hint that he’s about ready to reduce interest rates. Markets have priced in a September rate cut, so there’s the risk of disappointment.
Stock Market Rally
The stock market rally showed divergent action Tuesday, with small caps and non-tech sectors doing fine while Nvidia and tech leaders kept skidding.
The Dow Jones Industrial Average rose 0.6% in Tuesday’s stock market trading. The S&P 500 index sank 0.5%, just below its 50-day line.
The Nasdaq composite slumped 1.3%, hitting a seven-week low before paring losses slightly. Nvidia stock plunged 7% to 103.73 on Tuesday, hitting a two-month low and getting close to round-tripping the late-May breakout.
The small-cap Russell 2000 advanced 0.35%.
The Invesco S&P 500 Equal Weight ETF (RSP) climbed 0.5%, just below all-time highs.
The First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW) fell 0.6%, but better than the Nasdaq 100’s 1.4% skid.
U.S. crude oil prices sank 1.4% to $74.73 a barrel, its lowest close since June 5.
The 10-year Treasury yield fell 3 basis points to 4.14%, hitting its lowest levels since March.
ETFs
Among growth ETFs, the Innovator IBD 50 ETF (FFTY) shed 0.9%. The iShares Expanded Tech-Software Sector ETF (IGV) lost 1%, with Microsoft stock a major holding. The VanEck Vectors Semiconductor ETF (SMH) sold off 3.8%. AMD stock is a big SMH member, but it’s dwarfed by Nvidia.
The SPDR S&P Metals & Mining ETF (XME) slipped 0.4%, and the Global X U.S. Infrastructure Development ETF (PAVE) dipped 0.2%. The SPDR S&P Homebuilders ETF (XHB) climbed 0.7%. The Energy Select SPDR ETF (XLE) gained 1.55%, and the Health Care Select Sector SPDR Fund (XLV) edged up 0.1%.
The Industrial Select Sector SPDR Fund (XLI) advanced 0.3%. The Financial Select SPDR ETF (XLF) rallied 1.15%.
Microsoft Earnings
Microsoft earnings and revenue slightly beat fiscal Q4 views. Azure cloud-computing revenue jumped 29%, but that was down from Q3’s 31% and slightly below views.
Q4 capital spending was higher than expected.
On the earnings call, the Dow Jones tech titan guided slightly lower on Q1 revenue. But it sees 28%-29% Azure growth in fiscal 2025, with growth accelerating in the second half. Microsoft also sees capital spending up from FY 2024.
The capital spending and capex guidance eased investor fears of AI fatigue, good news for Nvidia, AMD, Arista Networks, and many others.
What To Do Now?
The market reversal over the past few weeks continues, with long-lagging small caps leading and the Nasdaq struggling below the 50-day line.
The next few days will determine whether Nvidia, other titans, and techs overall can find their footing, but it may be some time before they lead again.
Investors can continue to find buying opportunities outside of tech, though the barrage of news coming may offer reasons to be cautious about new purchases.
It’s crucial to stay engaged and be ready to act appropriately to different scenarios.
