Dow Jones futures: Market rebounds on optimism, but Nvidia falls late on AI chip export ban report

Dow Jones futures were down slightly in after-hours trading, while S&P 500 futures and Nasdaq futures were down slightly. NVDA stock fell overnight on a report that the US could expand export restrictions on chips.




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The stock market rally posted strong gains on Tuesday after a mixed session on Monday. The Nasdaq and S&P 500 rallied from near their 21-day exponential moving averages, as did mega-caps Tesla (TSLA) and Nvidia (NVDA). Overall market breadth was strong.

United Airlines (UAL), American Airlines (EEL), FedEx (FDX), Amkor Technology (AMKR) and When holding (ONON) all approved purchase points.

Shares of Tesla, On Holding and Nvidia are on the IBD leaderboard, while UAL stock is on the ranked watch list. United Airlines and ONON shares are at the IBD 50. Tesla shares are at the IBD Big Cap 20. United Airlines was Tuesday’s IBD stock of the day.

Is the market decline over or is it just a one-day breakout? That’s a big question. Investors can cautiously take advantage of buying opportunities, but are willing to back down if positions or the overall market decline again.

The video embedded in this article discussed Tuesday’s strong market rally and analyzed FDX stock, United Airlines and data dog (DDOG).

The US is considering export restrictions on AI chips

The Biden administration is considering new restrictions on the export of artificial intelligence chips, the Wall Street Journal reported Tuesday night, citing sources.

The Commerce Department could stop Nvidia and others from supplying AI chips to China and other countries of concern without first obtaining a license.

Nvidia shares fell 3% in extended trading. modern micro devices (AMD) down more than 2%. Broadcom (AVGO) declined 1.5%.

In addition to potential business losses for Nvidia, AMD and others, increased chip exports could trigger China’s retaliation. Beijing already has limited sales of Micron technology (MU) chips to key customers, citing cybersecurity concerns. Micron, reporting Wednesday night, was down slightly overnight.

In other news, Spirit AeroSystems (SPR) reached a tentative agreement with striking workers late Tuesday. Spirit Aero manufactures 737 fuselages Boeing (BA). SPR stock was up slightly in late trade. BA shares rose slightly.

Dow Jones futures today

Dow Jones futures were just below fair value, even as Boeing stock offered a small bounce. S&P 500 futures fell 0.2% and Nasdaq 100 futures fell 0.4%. Nvidia and AMD stocks are notable components of the S&P 500 and Nasdaq 100.

Keep in mind that nightly action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular trading session.


Join IBD experts as they analyze actionable stocks from the stock market rally on IBD Live


stock market rally

The stock market rally picked up speed on a broad basis. Economic data was upbeat, with May new home sales beating expectations while June reports on consumer confidence and Richmond-area manufacturing also topped expectations.

The Dow Jones Industrial Average rose 0.6% in trading on Tuesday. The S&P 500 index rose 1.1%. The Nasdaq Composite rose 1.65%. The Russell 2000 small-cap index rose 1.5%.

US crude prices fell 2.4% to $67.70 a barrel.

The 10-year government bond yield rose 5 basis points to 3.77%, remaining in a range dating back to late May.

ETFs

Among growth ETFs, Innovator IBD 50 ETF (FFTY) is up 2.6%, while Innovator IBD Breakout Opportunities ETF (BOUT) is up 2.5%. The iShares Expanded Tech-Software Sector ETF (IGV) is up nearly 2%.

The VanEck Vectors Semiconductor ETF (SMH) is up 3.2%. NVDA stock, SMH’s largest stock, rose 3.1% and rebounded from near the 21-day moving average. But it was an insider’s day after the stock plunged 3.7% on Monday.

ARK Innovation ETF (ARKK) is up 3.4% and ARK Genomics ETF (ARKG) is up 0.7%, reflecting more speculative story stocks. Tesla stock is Ark Invest’s #1 component ETF. The EV giant rose 3.8% to 250.21 on Tuesday, recovering from the 21-day moving average after falling 6.1% on Monday. Consolidating since September sees TSLA stock buy point at 274.75.

The SPDR S&P Metals & Mining ETF (XME) was up 1.3% and the Global X US Infrastructure Development ETF (PAVE) was up 1.7%. The US Global Jets ETF (JETS) was up 4.4%, with UAL shares and American Airlines owning large stakes in the ETF. SPDR S&P Homebuilders ETF (XHB) is up 2.9%. The Energy Select SPDR ETF (XLE) was up 0.2% and the Health Care Select Sector SPDR Fund (XLV) was down 0.2%.

The Industrial Select Sector SPDR Fund (XLI) rose 1.2%.

The Financial Select SPDR ETF (XLF) is up 0.8%. The SPDR S&P Regional Banking ETF (KRE) rallied 3.2%.


The five best Chinese stocks to watch right now


Stocks in buy zones

UAL shares rose 5.1% to 56.03, beating a mug with handle buy point of 54.05. According to MarketSmith analysis, AAL stock rose 5.5% to 17.35, beating the opening price of 16.72 from its own cup with a handle. Both United and American jumped accordingly Delta Airlines (DAL) raised its full-year guidance. Already-extended DAL stock rose 6.8%

FDX stock is up 5% to 246.76 and jumped above a flat base buy point of 235.81. FedEx surpassed that level in mid-June but then fell back to mixed gains. Stocks quickly recovered from the 50-day moving average.

AMKR stock surged 11.4% to 29.37, easily surmounting a buy point of 27.20. The chip gear maker is now well above the 5 percent buy zone, which sits at 28.56.

ONON stock is up 2.2% to 31.30, still within the range between its 50-day moving average and a trendline. The high-end athletic footwear maker surpassed those key levels on Monday. For the day, shares climbed above a short-term high of 31.45 on Tuesday.


Stock market forecast for the next six months


Analysis of the market rally

The stock market rally was clearly bullish. Indices rallied around a key short-term level on higher volume, with broad breadth and buy signals from a number of stocks.

The Nasdaq and S&P 500 recovered from around their 21-day moving averages. Meanwhile, the Dow Jones and Russell 2000 have regained that key level.

The Invesco S&P 500 Equal Weight ETF (RSP), which reclaimed its 21-day mark on Monday, rose 1.2% on Tuesday, breaking the recent downtrend and breaching the 10-day moving average

The First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW), which fell just 0.2% on Monday, rose 1.7% on Tuesday, also recovering from the 21-day level.

The climbers easily beat the relegated on Tuesday.

Airlines and travel were big gainers, but chips, software, industrials, transportation and the general real estate sector were also positive.

Energy remains a weak area, while biotechnology and some sectors are struggling.

Tuesday may have marked the beginning of a new phase in the market rally. The Nasdaq hosted a subsequent follow-up day. But it has not quite broken its recent downturn and is just below its 10-day moving average.

Report that AI chip export restricts Nvidia overnight is an unexpected headwind.

Also, after Tuesday’s rebound, the Nasdaq is up 6.5% above the 50-day moving average, while the Nasdaq 100 is up 7.5%. It wouldn’t take much to bring these back to extreme levels.


Plan the market with IBD’s ETF market strategy


What now

Given the positive signals from the stock market rally, investors could certainly have been looking for places to increase exposure. There is still a risk that the decline is not over yet and the buying opportunity will fade quickly on Tuesday. However, if you’re waiting for definitive evidence that the decline is over, such as the Nasdaq making a new high, then it’s too late to chase stocks.

One way is to take smaller positions on new purchases. Be prepared to act quickly and consider taking quick partial wins to lock in some profits.

Make purchases as close to the listings as possible. This offers some protection against price and market swings.

Be sure to have your watch lists ready. Broad progress with diverse leadership means it’s harder to keep track of all promising stocks. But that’s a good problem.

Read The Big Picture daily to stay up to date on market direction and the leading stocks and sectors.

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

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