Dow Jones futures rose slightly overnight, along with S&P 500 futures and Nasdaq futures.
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The stock market rally closed mixed Wednesday, amid a tame CPI inflation report and a big move by Google parent Alphabet (GOOGL). The Nasdaq jumped to a 2023 high, while the S&P 500 had a decent advance.
Google flashed buy signals as it touted its artificial intelligence efforts as it tries to beat back Microsoft (MSFT). Advanced Micro Devices (AMD), another AI play, continued its big recent bounce.
Aside from some megacap techs and beaten-down software names, market action wasn’t as strong as the Nasdaq suggested.
But the S&P 500 lagged the Nasdaq while the Dow Jones and an S&P 500 equal-weight ETF edged lower.
Finally, buying opportunities remained relatively light.
These aren’t reasons to be bearish, but investors should temper their bullish enthusiasm.
Earnings
Walt Disney (DIS), Trade Desk (TTD), Robinhood Markets (HOOD), DoubleVerify (DV), Maxeon Solar Technologies (MAXN), Sonos (SONO) and Allegro Microsystems (ALGM) reported late Wednesday.
Disney earnings were mixed but streaming losses narrowed as price hikes offset Disney+ subscriber losses. DIS stock fell solidly after hours.
Trade Desk beat views and guided higher. TTD stock rose modestly overnight after closing just below buy points.
DoubleVerify earnings and revenue topped. DV stock popped late, signaling a move back above the 50-day line.
Robinhood topped forecasts. HOOD stock rose modestly in extended action but has been trading below moving averages.
Maxeon Solar crushed EPS views and raised full-year EBITDA guidance. MAXN stock jumped late after bouncing from its 10-week line.
ALGM stock rallied late on strong Allegro Micro earnings. But the EV-exposed chipmaker is still recovering from an April sell-off.
Sonos stock plunged as the smart-speaker maker guided low.
Microsoft stock is on IBD Long-Term Leaders. The video embedded in this article discussed Wednesday’s up-and-down market action and analyzed Google stock, Flywire (FLYW) and Axon Enterprise (AXON).
Dow Jones Futures Today
Dow Jones futures climbed 0.1% vs. fair value, with DIS stock a Dow component. S&P 500 futures and Nasdaq 100 futures rose 0.2%.
The Labor Department will release the April producer price index and weekly jobless claims at 8:30 a.m. ET Thursday.
Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live
Google AI Efforts
Google stressed artificial intelligence at its annual developer conference Wednesday. The internet giant said it will introduce AI to search. Notably, Google explained how it’ll keep ads in search results.
Google stock popped 4.1% to 111.75, hitting an eight-month high. GOOGL stock is just in range from a 106.69 cup-with-handle buy point initially cleared on April 6. Investors also could use the April 6 high of 109.17 as another entry.
Google is accelerating its AI efforts, to catch up to Microsoft (MSFT), which has used OpenAI’s ChatGPT technology in search and more.
MSFT stock climbed 1.7% to 312.31, working on a possible three-weeks-tight base around a 52-week high.
AMD stock climbed 2.1% to 97.06, though it backed off morning highs. Since tumbling on May 3 on weak guidance, AMD stock has surged 19%, racing past its 50-day line and an early entry. That bounce kicked off on a report that AMD and Microsoft were teaming up on an AI processor. The advance continued even after Microsoft denied the report, in part.
Google also announced a $1,799 folding phone, the Pixel Fold.
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Stock Market Rally
The stock market rally opened strong but faded considerably before GOOGL stock buoyed the Nasdaq and S&P 500 again.
The Dow Jones Industrial Average dipped 0.1% in Wednesday’s stock market trading. The S&P 500 index advanced 0.45%. The Nasdaq composite jumped 1%. The small-cap Russell 2000 rose 0.6%.
U.S. crude oil prices fell 1.6% to $72.56 a barrel, snapping a three-day win streak.
The 10-year Treasury yield fell 8 basis points to 3.44%.
ETFs
Among growth ETFs, the Innovator IBD 50 ETF (FFTY) advanced 0.65%. The iShares Expanded Tech-Software Sector ETF (IGV) climbed 1.4%, with MSFT stock a major component. The VanEck Vectors Semiconductor ETF (SMH) gained 0.8%. AMD stock is a key SMH holding.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) advanced 1.4% and ARK Genomics ETF (ARKG) jumped 2.6%.
SPDR S&P Metals & Mining ETF (XME) dipped 0.3% and the Global X U.S. Infrastructure Development ETF (PAVE) slid 0.5%. U.S. Global Jets ETF (JETS) sank just over 1%. SPDR S&P Homebuilders ETF (XHB) dipped 0.2%. The Energy Select SPDR ETF (XLE) retreated 1.1% and the Health Care Select Sector SPDR Fund (XLV) edged up 0.3%.
The Financial Select SPDR ETF (XLF) slipped 0.6%. The SPDR S&P Regional Banking ETF (KRE) lost 1%. KRE is down 3.4% so far this week.
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Market Rally Analysis
The Nasdaq finally moved above its 2023 highs on Wednesday, which is what growth investors have been waiting on for weeks. Volume was higher than on Tuesday.
The Nasdaq faded from the open, but bounced back from midafternoon. A lot of credit goes to Google stock, along with Microsoft, AMD, Amazon.com (AMZN) and Apple (AAPL).
The S&P 500 rebounded for a decent gain but did not confirm the Nasdaq’s move to a new high. That reflects a mild divergence so far this month.
Divergence between megacap techs and the broader market also continued. Advancers modestly beat decliners on the NYSE and Nasdaq, but it didn’t scream out as a powerful, broad advance.
The First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW) bounced from its 50-day line, up nearly 0.6%, but still some distance from 2023 highs. The actual Nasdaq 100 popped 1.1%, and hit yet another 2023 high.
The Invesco S&P 500 Equal Weight ETF (RSP) closed fractionally lower, still below all its major averages.
The big percentage winners in the Nasdaq 100 on Wednesday were mostly names such as Datadog (DDOG) and Zscaler (ZS) that are bouncing back but far below highs.
So there weren’t many stocks to buy.
Aside from Google stock, investors could have bought Celsius (CELH), Exact Sciences (EXAS) or Li Auto (LI) on earnings gap-ups. Those gap-ups held up, but the current market makes such buys risky.
New Relic (NEWR) and Li Auto rival BYD (BYDDF) also flashed buy signals.
FLYW stock made a nice move intraday following earnings, but faded below a clear entry.
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What To Do Now
Investors could have added exposure slightly on Wednesday, though it was hit or miss on what worked. Staying mostly in cash remains a perfectly sound strategy. It’s certainly not a time to be heavily invested.
If the market continues to diverge or show narrow breadth, that would be a concern. But if the S&P 500 runs to new highs and market breadth shows real improvement, the rally could be ready to step up.
So investors have to keep an open mind, not sticking to a bullish or bearish mindset. Also, continue to search for new potential stocks. A lot of stocks have been setting up in the past few weeks.
Don’t forget about earnings season. Yes, the megacaps are out of the way, but stocks are still making huge moves on earnings, many of them down. While CELH stock was hot, Airbnb (ABNB) and Axon Enterprise (AXON) were big losers Wednesday.
Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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