Dow Jones Futures: Cisco, Nvidia Move On Earnings; Key Recession Signal Intensifies

Dow Jones futures rose slightly overnight, along with S&P 500 and Nasdaq futures, with Nvidia and Cisco earnings in focus.




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Stock market rally retreats amid weakness Target (TGT) earnings and holiday guides, as well as Micro technology (MU) cut its memory chip production plan. The bond market is flashing brighter recession risks with 10-year Treasury yields continuing to fall while short-term interest rates move higher.

giant electric car Tesla (TSLA) retreated, showing the weakest recent performance among large-cap stocks.

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Nvidia (NVDA), the lithium giant Sociedad Quimica y Minera de Chile (SQM) and Cisco system (CSCO) led earnings Wednesday night.

NVDA stock rose modestly in overnight trading, in mixed earnings and guidance.

CSCO stock has rallied 4% over the long haul as Cisco tops in terms of views in fiscal Q1 and leads in revenue. Cisco stock fell 1.1% on Wednesday, trading between the 50-day and 200-day lines. IBD . Stock Charts Network Arista (ANET) increased slightly thanks to Cisco earnings.

SQM earnings are still due tonight. SQM stock fell 2.6% on Wednesday, down more than 10% this week amid concerns about lithium prices. The Chilean fertilizer and lithium giant is in a cup base with a buy point of 115.82. It can operate on a handle.

Chinese e-commerce giant alibaba (BABA) and the US department store chain Macy’s (M) and Kohl’s (KSS) will premiere early Thursday. BABA stock fell slightly on Wednesday, but after gaining 11% on Tuesday. Shares of Macy’s and KSS fell Wednesday ahead of Target’s holiday warning.

Dow Jones Futures Today

Dow Jones futures are up 0.15% above fair value. S&P 500 futures rose 0.1%. Nasdaq 100 futures are up 0.25%. CSCO stock is a component of the Dow Jones, S&P 500, and Nasdaq, but Nvidia has a larger weighting on the S&P 500 and Nasdaq.

The yield on the 10-year Treasury note rose 4 basis points to 3.73%.

Crude oil futures fell 1%.

According to multiple media outlets, Republicans have regained control of the House of Representatives. But that would be a slim majority, much less than expected before Election Day.

Remember that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading during the next regular stock trading session.


Join IBD experts as they analyze stocks that could act in the stock market rally on IBD Live


Stock market recovers

The stock market rally lost ground on Thursday, with small caps and technology leading the decline.

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The Dow Jones Industrial Average fell 0.1% in stock market trading on Wednesday. The S&P 500 index rose 0.8%. Nasdaq composite slid 1.5%. The Russell 2000 small-cap index fell 1.8 percent.

US crude oil prices fell 1.5% to 85.59 USD/barrel. Natural gas futures rose 2.8%.

Treasury yield curve blinking Recession risk

The yield on the 10-year Treasury note fell 11 basis points to 3.69%, its lowest level since early October and down from 4.15% just a week earlier. Benchmark Treasury yields are now well below the current fed fund yield range of 3.75%-4%, with the Fed expected to raise rates by 50 basis points to 4 .25% -4.5% next month.

The yield on the two-year Treasury note, more closely aligned with Fed policy, was unchanged at 4.36%, while the three-month yield was at 4.23%. The 3-month and 10-year Treasury yield curves are sloping up to their highest level since a short period of time in late 2019. That suggests recession risks are increasing, or at best, recession risks. negligible economic growth in 2023.

Fed Director Jerome Powell and some of his colleagues have signaled that a recession may be needed to keep inflation in check, although other policymakers see an opportunity for a soft landing.

The always inverted yield curve comes amid a still strong labor market and strong retail sales reports for October.

ETFs

Among the best ETFs, the Innovator IBD 50 ETF (FFTY) fell 1.7%, while the Innovator IBD Breakout OPPORTUNITY ETF (BOUT) lost just over 1%. The iShares Expanded Tech-Software Sector ETF (IGV) lost 2.1%, with many cloud software names having a bad day. The VanEck Vectors Semiconductor ETF (SMH) fell 3.6%, with shares of Nvidia and major Micron components.

The SPDR S&P Metals & Mining ETF (XME) was down slightly more than 2% and the Global X US Infrastructure Development ETF (PAVE) was down 0.5%. The US Global Jets ETF (JETS) fell 2.4%. The SPDR S&P Homebuilders ETF (XHB) fell 1.4%. The Energy Select SPDR ETF (XLE) fell 2% and the Financial Select SPDR ETF (XLF) fell 0.5%. Selective Healthcare SPDR (XLV) Fund ended just below breakeven.

Reflecting more speculative stocks, the ARK Innovation ETF (ARKK) fell 5.15% and the ARK Genomics ETF (ARKG) 3.7%. Tesla stock remains a large holding on Ark Invest ETFs.


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Nvidia’s earnings

Nvidia earnings missed out on views in Q3, but revenue fell less than feared. Demand for data center chips remains strong. Game revenue is down, but not as bad as feared. The chip giant guided Q4 sales slightly lower.

Nvidia shares rose 2% in active trading overnight. Shares fell 4.5% to 159.10 on Wednesday. But NVDA stock has rallied since hitting a bear market low of 108.13 on October 13, on hopes that business will improve going forward. The chip giant moved well above the 50-day line but remained below the 200-day line.

Nvidia stock has no buy point. Ideally, the stock should rise above the 200-day line and create a new base.

Tesla shares

Tesla shares fell 3.9% on Wednesday to 186.92. Despite staying above the two-year low of 177.12 set on November 9, TSLA stock is hitting resistance at the 10-day moving average. The EV giant hasn’t closed the road for 21 days since September 21.

Other supercaps have struggled, but Apple (AAPL), Microsoft (MSFT) and the parent company of Google Alphabet (GOOGL) is above their 50-day moving average, while even parent company Facebook Meta . Platform (META) is above its 21-day line.

Meanwhile, other EV stocks look as bad or worse than Tesla. Additionally, CEO Elon Musk’s Twitter reign could affect TSLA stock in a variety of ways.

Musk testified Wednesday in a trial that Tesla stock options in 2018 accounted for about $50 billion of his fortune. He hinted that he won’t be the director of Twitter permanently.


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Analysis of market recovery

The stock market rally was attributed to a pause or drop in prices, and that’s what happened on Wednesday.

The Dow Jones Industrial Average holds comfortably above the 200-day line, pausing just below the short-term August high. The S&P 500 looks pretty normal, with a modest drop, not far from the 200-day line.

The Nasdaq is clearly still above the 50-day line but has fallen back below its October high. The Russell 2000 Index fell below the 200-day line and crossed Monday’s intraday low.

Meanwhile, some stocks that signaled to buy in the past few sessions turned lower on Wednesday. Growth generally faltered while defensive names rebounded and defensive growth stocks held steady, although many retailers tumbled as they missed Target’s earnings.

If the market recovers in the near future, Wednesday’s action will soon be forgotten. But if the Nasdaq breaks below its 50-day threshold and the top stocks come under more pressure, that will be worrisome.

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While markets have focused on Fed policy, there are other concerns. However, the cumulative effect of the Fed’s rate hikes this year is taking a toll on the economy. And the impact will continue several months after the last rate hike ends.

The inverted yield curve reflects rising recession risks.

Even now, the combination of high inflation and weakening demand is having significant consequences. Target earnings show that, although competitors Walmart (WMT) has had strong results and guidance. Inflation is likely to taper off next year, but that doesn’t mean the outlook for corporate earnings and stock prices will be bright.


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What to do now

Wednesday’s action offers reasons why investors should be cautious about quickly adding more risk. Buying a bunch of new positions in one day can backfire if the market pulls back, as happened on Wednesday. It is better to add exposure gradually, assuming the market recovers and your positions are progressing.

The stock market rally is still in good shape, but prone to high volatility, industry rotation and earnings surprises. It is not yet clear which stocks and sectors will lead. So don’t get too focused on one particular area or topic.

But you want to regularly update your watchlist, creating a large network.

Early entry is still important. Traditional buying points, especially if notably on the 50-day line, have not performed well.

Investors may still want to lock in a portion of their profits when they make a quick profit from a stock. That can give you the confidence to hold onto your remaining shares for longer and will protect your portfolio from round-trips in stocks.

Read the Big Picture every day to stay in sync with market trends and top stocks and sectors.

Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.

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