The stock market experienced a robust rally with the Nasdaq and Nvidia (NVDA) driving significant gains.
Sea Limited (SE) surged into a favorable buying zone following strong earnings results. Other stocks such as Meta Platforms (META), ServiceNow (NOW), and Monolithic Power Systems (MPWR) also flashed buy signals, offering opportunities for investors to increase their exposure, provided the market maintains its positive momentum.
Earnings Reports and Stock Movements
Nu Holdings (NU) reported earnings that exceeded expectations, leading to a modest increase in its stock price. NU stock rose 1.7% to $12.71 on Tuesday, marking its sixth consecutive gain since falling to $9.67 on August 5.
Key stocks such as Nvidia and ServiceNow are featured on Leaderboard, with ServiceNow also joining SwingTrader. Monolithic Power is listed on the IBD Long-Term Leaders watchlist, while Samara and ServiceNow are part of the IBD 50. Notably, ServiceNow was highlighted as Tuesday’s IBD Stock Of The Day, and Samsara was featured on Friday.
Futures and Crude Oil
Dow Jones futures were stable relative to fair value, while S&P 500 and Nasdaq 100 futures also held steady. Crude oil futures saw a slight rise.
It is important to note that overnight futures movements do not always correlate with trading outcomes in the subsequent regular market session.
DOJ Considers Google Breakup
The Justice Department is contemplating a potential breakup of Google-parent Alphabet (GOOGL) following last week’s antitrust victory. Reports suggest that the DOJ might seek to end exclusive search agreements, such as Google’s default search status on Apple iPhones. Potential breakup scenarios could involve separating Google’s Android mobile operating system and Chrome web browser.
Following the news, Google’s stock fell slightly in after-hours trading, despite a 1.15% gain to $164.16 during the day. Apple (AAPL), which benefits from a $20 billion annual revenue stream from the Google search deal, saw a minor decline, with its stock rising 1.7% to $221.27 on Tuesday.
CPI Inflation Report
The Labor Department is set to release the consumer price index (CPI) at 8:30 a.m. ET. Economists forecast a modest 0.2% monthly increase for both the overall CPI and core CPI in July. This would keep the 12-month CPI inflation rate at 3%, while core inflation is expected to ease to 3.2%, the lowest since April 2021.
The core PCE price index, the Federal Reserve’s preferred inflation gauge, derives about 70% of its data from the CPI and 30% from the PPI.
Stock Market Performance
The stock market rally showed broad-based gains with the Nasdaq leading. Cooling producer price index (PPI) inflation provided a boost ahead of the CPI report and other significant economic data.
On Tuesday, the Dow Jones Industrial Average rose just over 1%, surpassing its 50-day moving average. The S&P 500 climbed 1.7%, reclaiming the 21-day moving average and nearing the 50-day line. The Nasdaq composite surged 2.4%, also surpassing the 21-day moving average, while the Russell 2000 increased 1.6%, approaching the 50-day line.
Trading volume was higher compared to Monday, and U.S. crude oil prices fell 2.1% to $78.35 per barrel, ending a five-session winning streak. The 10-year Treasury yield dropped six basis points to 3.85%.
Market Sentiment
Since the global sell-off on August 5, which was driven by recession fears and Nvidia AI chip concerns, financial markets have rebounded sharply. The CBOE Volatility Index (VIX) has significantly decreased from its recent peak.
With a renewed risk-on sentiment, growth stocks and the Nasdaq are attempting to regain their leadership positions. However, resistance at the 50-day moving average for both the S&P 500 and Nasdaq could pose challenges. The upcoming CPI report, along with retail sales and other data due Thursday, will test the market’s rally.
ETFs
Among growth ETFs, the Innovator IBD 50 ETF (FFTY) rose 0.4%. The iShares Expanded Tech-Software Sector ETF (IGV) gained 1.8%, bolstered by holdings in ServiceNow and Samsara. The VanEck Vectors Semiconductor ETF (SMH) jumped 4.1%, driven by Nvidia and Monolithic Power.
Reflecting more speculative stocks, the ARK Innovation ETF (ARKK) advanced 4.1%, and the ARK Genomics ETF (ARKG) rose 4%. The SPDR S&P Metals & Mining ETF (XME) increased 1.1%, while the SPDR S&P Homebuilders ETF (XHB) bounced 2.1%. The Energy Select SPDR ETF (XLE) fell 1%, and the Health Care Select Sector SPDR Fund (XLV) rose 1.2%. The Industrial Select Sector SPDR Fund (XLI) gained 1.05%, and the Financial Select SPDR ETF (XLF) climbed 0.8%.
