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.
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Nasdaq Skids Into Earnings, Fed; Spotify, Progressive, Texas Roadhouse In Focus
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 nontech 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 point in July to 49.4, below the break-even 50 level but just above views for 49.3. The nonmanufacturing dipped 0.3 point 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.
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Stock Market Rally
The stock market rally showed divergent action Wednesday, with small caps and nontech 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%.
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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.
MSFT stock fell modestly in overnight action, paring losses after giving guidance. Shares edged down 0.9% in Tuesday’s regular session to 422.92, falling further below the 50-day line and prior buy point of 430.82.
AMD Earnings
AMD earnings beat second-quarter views with sales to data centers doubling. The chipmaker also guided up slightly for Q3.
AMD stock surged in extended trade. Shares declined 0.9% to 138.44 on Tuesday. Since mid-July, AMD has tumbled, falling below its 50-day and then 200-day lines. Shares peaked in early March.
AMD competes in AI processors against Nvidia, with the latter having the technological edge right now.
Nvidia stock rose solidly after hours in the wake of AMD and Microsoft earnings, but only recovered a chunk of Tuesday’s losses.
Other Key Earnings
Arista earnings exceeded consensus slightly, while the networking giant fractionally guided higher on Q3 revenue.
Microsoft is a 10%-plus customer for Arista Networks. Meta Platforms (META), which reports Wednesday night, is another big Arista customer.
ANET stock climbed modestly overnight. Arista stock fell 2.85% to 311.42 on Tuesday, falling further from its 50-day line and just above a prior buy point.
First Solar earnings doubled, beating views.
After a slight increase in extended trading, FSLR stock saw a 4.3% decline to 210.89 on Tuesday. Meanwhile, Pinterest reported earnings that surpassed expectations but gave a lower guidance on Q3 revenue, causing PINS stock to drop in overnight trading. Shares fell by 1 cent to 37.35 on Tuesday, declining steadily over the past few weeks.
As the market continues its reversal in recent weeks, with small caps leading and the Nasdaq struggling below the 50-day line, investors are advised to stay engaged and be prepared to act accordingly to different scenarios. While tech stocks may take some time to regain their strength, there are still buying opportunities available outside of the tech sector. It is important to remain cautious about new purchases amidst the influx of news.
For daily updates on market direction and leading stocks and sectors, readers are encouraged to follow The Big Picture. Additionally, for stock market updates and more, follow Ed Carson on Threads and Twitter. For more tools and resources to simplify the search for top stocks and maximize profits while minimizing losses, consider using IBD’s MarketSurge and SwingTrader tools. Don’t forget to keep an eye on the best growth stocks to buy and watch for potential opportunities.