U.S. stock markets opened strongly on Wednesday but quickly lost momentum, leading to a downturn. Nvidia (NVDA) was a key driver of this reversal, following mixed results, guidance, and commentary from AI server maker Super Micro Computer (SMCI). The decline was echoed across other major technology stocks, as Meta Platforms (META), Apple (AAPL), Microsoft (MSFT), Tesla (TSLA), and Amazon.com (AMZN) all encountered resistance at critical levels.
Dow Jones Futures Today
Dow Jones futures fell 0.3% relative to fair value, while S&P 500 futures dropped 0.3% and Nasdaq 100 futures declined by 0.25%. The yield on the 10-year Treasury dipped to 3.91%.
At 8:30 AM ET, the Labor Department will release the weekly jobless claims report, which could provide insights into whether the weak July jobs data was influenced by short-term weather conditions. It is important to note that overnight movements in Dow futures and other indices do not always predict the direction of the market in the subsequent regular trading session.
Nvidia is featured on the Leaderboard, and Microsoft is listed among IBD Long-Term Leaders.
Key Earnings Reports
Several companies reported earnings after the close on Wednesday. McKesson (MCK), AppLovin (APP), HubSpot (HUBS), Dutch Bros (BROS), and Robinhood were among those making headlines. HubSpot saw a jump in its stock price overnight, while Dutch Bros’ stock plummeted. McKesson’s stock, despite closing in buy range, experienced a sharp decline. AppLovin and Robinhood both saw slight gains in premarket trading.
Upcoming reports include Shark Ninja (SN) and Eli Lilly (LLY) on Thursday.
Stock Market Rally Faces Setbacks
Wednesday’s market rally attempt faltered after a strong start. The Dow Jones Industrial Average fell 0.6%, the S&P 500 index dropped 0.8%, and the Nasdaq Composite declined 1.05%. The small-cap Russell 2000 tumbled 1.4%. The major indexes, including the Dow Jones and Russell 2000, encountered resistance at the 50-day moving average, as did the Invesco S&P 500 Equal Weight ETF (RSP), which finished down 0.7%. The First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW) retreated 0.7% from the 200-day line.
Despite a strong start, Wednesday’s downside reversal was concerning for the ongoing rally attempt, which remains intact as long as major indexes do not fall below their Monday lows.
Among the earnings winners were Fortinet (FTNT), Shopify (SHOP), Axon Enterprise (AXON), and Exelixis (EXEL). Conversely, Super Micro and Airbnb (ABNB) were notable losers.
U.S. crude oil prices rose by 2.8% to $75.23 per barrel. The 10-year Treasury yield increased by eight basis points to 3.97%.
ETFs Performance
Growth ETFs saw mixed performance. The Innovator IBD 50 ETF (FFTY) dropped 1.6%, while the iShares Expanded Tech-Software Sector ETF (IGV) fell 0.2%. The VanEck Vectors Semiconductor ETF (SMH) declined 2.75%, with Nvidia being a significant holding. The ARK Innovation ETF (ARKK) slid 1.8%, and the ARK Genomics ETF (ARKG) decreased 2.5%, with Tesla being a notable holding in Ark Invest’s ETFs.
The SPDR S&P Metals & Mining ETF (XME) fell 1.2%, and the SPDR S&P Homebuilders ETF (XHB) lost 2.6%. The Energy Select SPDR ETF (XLE) rose 0.4%, while the Health Care Select Sector SPDR Fund (XLV) dropped 1%, with Eli Lilly being a top holding. The Industrial Select Sector SPDR Fund (XLI) decreased by 0.5%, and the Financial Select SPDR ETF (XLF) edged up 0.1%.
Market Rally Analysis
Wednesday’s market action underscored the risk of rushing back into the market after an initial rally. Despite a strong start, the key indexes and stocks faced significant losses as the day progressed. The current rally attempt may either regain momentum or falter, potentially leading to a period of sideways movement or decline.
Investors are advised to remain cautious and prepare for future market uptrends by maintaining watchlists and focusing on stocks with strong relative strength. For daily market updates and insights into leading stocks and sectors, consult “The Big Picture.”
