Futures: AI Play Soars; Watch Out For This

Dow Jones futures fell slightly overnight, along with S&P 500 futures and Nasdaq futures.




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The stock market rally rebounded Wednesday after Tuesday’s tech-led sell-off, but the major indexes closed well off intraday highs.

Fed chief Jerome Powell continued to say there’s no rush to cut interest rates, while labor market data didn’t set off any alarms. CrowdStrike (CRWD) gapped up on earnings, but came well off highs. And CRWD didn’t give much of a lift to the software sector, which was hammered Tuesday. On the plus side, Nvidia (NVDA), Advanced Micro Devices (AMD) and Super Micro Computer (SMCI) all hit new highs.

AI software play Palantir Technologies (PLTR) cleared a buy point Wednesday on news. So did diabetics products giant Dexcom (DXCM). Chipmaker Qorvo (QRVO) regained a buy point.

Square parent Block (SQ) is setting up.

Meanwhile, Tesla (TSLA) briefly undercut 2024 lows as it continues to show significant underperformance vs. the S&P 500.

Overall, investors should be careful as bullish sentiment reaches near-euphoric levels.

Nvidia stock is on Leaderboard while SQ stock is on the Leaderboard watchlist. CrowdStrike, Nvidia and Palantir stock are on the IBD 50. Nvidia, Super Micro, Palantir and CRWD stock are on the IBD Big Cap 20. Block was Wednesday’s IBD Stock Of The Day.

Dow Jones Futures Today

Dow Jones futures dipped 0.1% vs. fair value. S&P 500 futures declined 0.15%. Nasdaq 100 futures fell 0.3%.

The 10-year Treasury yield rose slightly to 4.12%.

Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.


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Stock Market Rally

The stock market rally rebounded Wednesday, but ended up regaining only a portion of Tuesday’s sharp losses.

The Dow Jones Industrial Average advanced 0.2% in Wednesday’s stock market trading. The S&P 500 index climbed 0.5%, with Dexcom the No. 1 gainer. The Nasdaq composite gained 0.6%, pushing it back above the 16,000 level.

The small-cap Russell 2000 bounced 0.7% after sliding 1% Tuesday.

CrowdStrike stock soared 10.8% to 329.57 on Wednesday, rebounding from the 50-day line on strong earnings and guidance. But shares came off a record intraday high of 365. Many other software plays had modest bounces after big Tuesday losses, or even kept sliding.

Meanwhile, Nvidia stock gained 3.2% on Wednesday and 7.8% for the week. AMD stock rose 2.7% Wednesday and is up 3.9% so far this week. SMCI stock advanced 3.1%, and is up a massive 24% for the week. All hit fresh record highs.

So while the Nasdaq is basically trading around the same 16,000 level it has for the past few weeks, there is a divergence. AI chip-and-server plays have kept soaring while many other techs have tested or undercut key levels in recent days and weeks.

U.S. crude oil prices rose 1.25% to $79.13 a barrel.

The 10-year Treasury yield fell 3 basis points to 4.1%. The two-year Treasury yield, more closely aligned with Fed policy, edged up 1 basis point to 4.56%. Markets see a 70% chance of a June rate cut, down fractionally from Tuesday.

Bulls Bear Watching

The Investors Intelligence bulls-bears reading showed 59.4% of investment newsletters are bullish, the highest percentage since the summer of 2021. Bears are down to 16%, the lowest since the summer of 2021. Bull readings of 60% or more are considered excessive.

Separately, the Nasdaq is not extended from the 50-day line but it wouldn’t take much for it to get there.

ETFs

Among growth ETFs, the iShares Expanded Tech-Software Sector ETF (IGV) rose 1.4% after tumbling 3.8% Tuesday. CrowdStrike stock and Palantir are in IGV. The VanEck Vectors Semiconductor ETF (SMH) jumped 2.6%. Nvidia stock and AMD are major SMH components, with Qorvo stock a small holding.

Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) rose 1.6% and ARK Genomics ETF (ARKG) edged up 0.2%. Tesla stock is a major holding across Ark Invest’s ETFs, along with Square-parent Block. Cathie Wood also owns some Palantir stock.

SPDR S&P Metals & Mining ETF (XME) climbed 1.4%. U.S. Global Jets ETF (JETS) ascended 1.3%. The SPDR S&P Homebuilders ETF (XHB) rose 0.9%. The Energy Select SPDR ETF (XLE) and the Health Care Select Sector SPDR Fund (XLV) rose less than 1%. Dexcom stock is in XLV.

The Industrial Select Sector SPDR Fund (XLI) and the Financial Select SPDR ETF (XLF) advanced 0.5%. The SPDR S&P Regional Banking ETF (KRE) dipped 0.1% after big recent gains.


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Stocks To Watch

Palantir stock leapt 9.9% to 26.26, clearing an aggressive or add-on 26.52 entry from a short consolidation that’s modestly above a prior buy point. The data analytics and AI play won a U.S. Army contract for Project TITAN. Palantir also will hold an AI event on Thursday.

Dexcom stock leapt 9.8% to 133.72, just topping a 132.03 buy point from a flat base with a larger consolidation. Investors could have bought DXCM stock Wednesday morning as it rebounded from the 50-day line and cleared a downward-sloping trendline. Late Tuesday, the FDA approved Dexcom’s latest glucose monitor for people that don’t need insulin treatment, including non-diabetics. Its Stelo product can be bought over the counter.

Qorvo stock bounced 2.2% to 115.89, regaining a 114.79 buy point from a cup-with-handle base. Wednesday’s gain was an inside day to Tuesday, when shares tumbled 5.8%. QRVO stock did find support at the 21-day line that day.

SQ stock rose 1.5% to 75.53, ending a three-day decline. Square-parent Block has an 83.29 high-handle buy point, formed after shares briefly broke out on earnings. Investors could use a downward-sloping trendline as an early entry, which would roughly coincide with the original 80.29 cup-base buy point.

Tesla Stock Breaks Low

Tesla stock fell 2.3% to 176.54, extending its weekly loss to 12.9%. Shares fell to 173.70 intraday, undercutting its February low to hit the worst levels in 10 months. Morgan Stanley analyst Adam Jonas said Tesla could “potentially” lose money this year amid weak sales, price cuts and heavy spending.

Tesla Berlin will remain shut through the end of next week, after an environmental group targeted electricity infrastructure on Tuesday to knock the EV plant’s power offline. With Model Y inventories high in Europe, another extended production halt is not all bad.

TSLA stock fell 1% in extended trade.

The relative strength line hit a fresh 52-week low. The RS line, the blue line in the charts provided, track a stock’s performance vs. the S&P 500.

Market Rally Analysis

The market rally doesn’t want to go down, continuing to bounce back after short, brief pullbacks and marching higher. For those who got significant exposure near the start of the rally in early November, it’s been easy to hold. But it’s often been hard to add exposure in the past few months, with windows of opportunity limited.

A few stocks flashed buy signals or reclaimed entries Wednesday, but not many.

Don’t get complacent, especially as investors overall are approaching excessive bullishness.

Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.

Please follow Ed Carson on Threads at @edcarson1971 and X/Twitter at @IBD_ECarson for stock market updates and more.

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