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Dow Jones futures fell modestly overnight, while S&P 500 futures and Nasdaq futures rose. Microsoft (MSFT) fell on weak Azure cloud computing growth, but AMD and Nvidia were overnight winners. The decision of the Fed meeting will be announced on Wednesday.
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Nasdaq drops in earnings, Fed; Spotify, Progressive, Texas Roadhouse in focus
Nvidia rival Advanced micro devices (AMD), Arista Networks (A NET), First solar energy (FSLR) And Pinterest (PIN) also reported Tuesday evening.
The stock market rally collapsed on Tuesday, leading to huge gains and the decision of the Fed meeting. The Dow Jones, small caps and many non-tech sectors held or rose modestly. The S&P 500 undermined key support, while the Nasdaq fell sharply, led by Nvidia (NVDA).
Nvidia stock is on IBD rankings, with AMD on the Leaderboard Watchlist. Microsoft stock is listed at IBD Long-Term Leaders.
The video embedded in the article discusses Tuesday’s market action and analysis Spotify (PLACE), Progressive (PGR) And Texas Roadhouse (TXRH).
Dow Jones futures today
Dow Jones futures fell 0.45% from fair value, with Microsoft shares a major Dow component. S&P 500 futures rose 0.1% and Nasdaq 100 futures rose 0.6%, both reversing initial losses. Microsoft, AMD, Arista Networks and First Solar are S&P 500 and Nasdaq 100 stocks.
Remember, overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading during the next regular stock market session.
Federal Reserve Meeting
The Federal Reserve meeting ends Wednesday, with a policy statement at 2 p.m. ET. Fed chief Jerome Powell will speak at 2:30 p.m., with investors hoping Powell will hint he is about to cut rates. Markets have priced in a rate cut in September, so there is a risk of disappointment.
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Stock market rally
The stock market rally saw mixed action on Wednesday, with small caps and non-tech sectors doing well, while Nvidia and the tech leaders continued to slide.
The Dow Jones Industrial Average rose 0.6% in stock trading on Tuesday. The S&P 500 index fell 0.5%, just below the 50-day line.
The Nasdaq index fell 1.3% to a seven-week low before paring some losses. Nvidia shares fell 7% to 103.73 on Tuesday, hitting a two-month low and coming close to the breakout seen in late May.
The small-cap Russell 2000 rose 0.35%.
The Invesco S&P 500 Equal Weight ETF (RSP) climbed 0.5%, just below the all-time high.
The first Trust Nasdaq 100 equal-weighted index ETF (QQEW) fell 0.6%, but better than the Nasdaq 100’s 1.4%.
US crude oil prices fell 1.4% to $74.73 per barrel, the lowest since June 5.
The yield on ten-year government bonds fell by 3 basis points to 4.14%, reaching the lowest level since March.
ETFs
Among the growth ETFs is the Innovator IBD 50 ETF (FFTY) lost 0.9%. The iShares Expanded Tech-Software Sector ETF (IGV) lost 1%, with Microsoft shares having a major stake. The VanEck Vectors Semiconductor ETF (SMH) sold 3.8%. AMD stock is a big SMH member, but is overshadowed by Nvidia.
The SPDR S&P Metals & Mining ETF (XME) fell 0.4%, and the GlobalPAVE) fell by 0.2%. The SPDR S&P Homebuilders ETF (XHB) rose by 0.7%. The Energy Select SPDR ETF (XLE) gained 1.55%, and the Health Care Select Sector SPDR Fund (XLV) rose by 0.1%.
The Industrial Select Sector SPDR fund (XLI) advanced 0.3%. The Financial Select SPDR ETF (XLF) rose by 1.15%.
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Microsoft earnings
Microsoft’s fourth-quarter earnings and revenue slightly exceeded expectations. Azure cloud computing revenue rose 29%, but that was down from 31% in the third quarter and slightly lower than the number of views.
Capital expenditures in the fourth quarter were higher than expected.
Based on the profit figures, the Dow Jones tech titan recorded slightly lower turnover in the first quarter. But it sees Azure growth of 28%-29% in fiscal 2025, with growth accelerating in the second half. Microsoft also sees capital spending increasing starting in fiscal 2024.
The capital expenditure and capex guidance reduces investor fears of AI fatigue, good news for Nvidia, AMD, Arista Networks and many others.
MSFT stock fell modestly overnight, paring losses after issuing guidance. Shares fell 0.9% to 422.92 during Tuesday’s regular session, falling further below the 50-day mark and previous buy point of 430.82.
AMD revenue
AMD’s profits exceeded expectations in the second quarter, with data center sales doubling. The chipmaker also rose slightly for the third quarter.
AMD shares rose in extended trading. Shares fell 0.9% to 138.44 on Tuesday. Since mid-July, AMD has plummeted, dropping below the 50 and then 200 day mark. Shares peaked in early March.
AMD competes in AI processors with Nvidia, with the latter currently having the technological lead.
Nvidia shares rose solidly after hours in the wake of AMD and Microsoft gains, but could only pare some of Tuesday’s losses.
Other important income
Arista’s earnings slightly exceeded consensus, while the networking giant posted third-quarter revenue fractionally higher.
Microsoft is a more than 10% customer for Arista Networks. Metaplatforms (META), which reports Wednesday evening, is another major Arista customer.
ANET shares rose modestly overnight. Arista shares fell 2.85% to 311.42 on Tuesday, a further decline from the 50-day line and just above an earlier buy point.
First Solar’s revenues doubled and views beat. FSLR stock rose modestly amid extended action. First Solar shares fell 4.3% to 210.89 on Tuesday.
Pinterest revenue was lower than views, but the social media site showed lower revenue in the third quarter. PINS stock fell in overnight trading. Shares lost 1 cent to 37.35 on Tuesday and plunged over several weeks.
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What to do now?
The market turnaround of recent weeks continues, with long-lagged small caps leading the way and the Nasdaq struggling below the 50-day line.
The coming days will determine whether Nvidia, other titans, and engineers in general can find their footing, but it could be some time before they take the lead again.
Investors can continue to find buying opportunities outside of technology, although the barrage of news on the horizon may be reasons to be cautious about new purchases.
It is critical to stay engaged and ready to act appropriately in different scenarios.
Read The Big Picture every day to stay informed about market direction and the most important stocks and sectors.
Follow Ed Carson on Threads at @edcarson1971 and X/Twitter on @IBD_ECarson for stock market updates and more.
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