Dow Jones futures rose modestly after hours, along with S&P 500 futures and Nasdaq futures, amid positive earnings reactions ServiceNow (NOW), IBM (IBM) and more. Key inflation data is tap.
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Techs Lead Market Sell-Off; Tenet Healthcare, Fiserv, Microsoft In Focus
United Rentals (URI), KLA (KLAC) and Universal Health (UHS) were also notable earnings after the close.
The stock market rally had a rough Wednesday. The Nasdaq composite and S&P 500 tumbled to below their 50-day lines. The small-cap Russell 2000 also fell sharply, though looks less damaged.
Tesla (TSLA) dived on earnings while Google-parent Alphabet (GOOGL) fell solidly. The remaining of the Magnificent Seven — Nvidia (NVDA), Microsoft (MSFT), Meta Platforms (META), Amazon.com (AMZN) and Apple (AAPL) — retreated in sympathy, amongst with dozens of leading techs,
The Magnificent Seven suffered its worst one-day loss since October 2022.
Nvidia stock is on IBD Leaderboard. Microsoft stock is on IBD Long-Term Leaders. Nvidia and Google stock are on the IBD 50.
The video embedded throughout the article reviewed Wednesday’s market motion and analyzed Tenet Healthcare (THC), Fiserv (FI) and Microsoft stock.
Dow Jones Futures Today
Dow Jones futures rose 0.25% vs. fair value, with IBM a Dow component. S&P 500 futures climbed 0.3%. Nasdaq 100 futures gained 0.5%. ServiceNow and KLA are Nasdaq 100 components. All are S&P 500 members.
Be mindful that overnight motion in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
GDP, Inflation Data Due
Before Thursday’s open, investors will get the first reading for second-quarter GDP. Economists expect a 1.9% annualized gain after Q1’s 1.4% rise. The report may even include a Q2 reading for the PCE price index. That comes ahead of Friday’s June PCE price index. The Federal Reserve uses the core PCE price index as its primary inflation gauge.
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Stock Market Rally
The stock market rally saw sharp, broad losses, led by megacaps and techs.
The Dow Jones Industrial Average fell 1.25% in Wednesday’s stock market trading, undercutting the 40,000 level and 21-day moving average. The S&P 500 index sank 2.3% to barely below its 50-day average. The Nasdaq composite slumped 3.6%, clearing undercutting its 50-day.
The small-cap Russell 2000 fell 2.1%, but only to around its 10-day line.
It’s an enormous test for the market rally. The S&P 500 and Nasdaq could rebound from these levels, or break lower in some variety of intermediate correction, on the very least for techs.
One positive: The CBOE Volatility Index, or VIX, spiked 22.55% to 18.04, its biggest one-day increase since June 2022. While still below the April peak during that correction, the market fear gauge is showing signs of life.
U.S. crude oil prices rose 0.8% to $77.59 a barrel.
The ten-year Treasury yield rose 4.5 basis points to 4.285%.
ETFs
Amongst growth ETFs, the Innovator IBD 50 ETF (FFTY) tumbled 4%. The iShares Expanded Tech-Software Sector ETF (IGV) gave up 3.4%, with Microsoft and NOW stock as major components. The VanEck Vectors Semiconductor ETF (SMH) plunged 5.45%. Nvidia stock is the No. 1 holding in SMH, with KLA Corp. throughout the ETF as well.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) sold off 6.4% and ARK Genomics ETF (ARKG) 3.1%. Tesla stock is the No. 1 holding across Ark Invest’s ETFs.
SPDR S&P Metals & Mining ETF (XME) gave up 2% and the Global X U.S. Infrastructure Development ETF (PAVE) lost 3.4%. SPDR S&P Homebuilders ETF (XHB) retreated 2.9%. The Energy Select SPDR ETF (XLE) edged up 1 cent and the Health Care Select Sector SPDR Fund (XLV) climbed 0.8%.
The Industrial Select Sector SPDR Fund (XLI) retreated 2.15%, with URI stock a member. The Financial Select SPDR ETF (XLF) declined 1.4%.
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Key Earnings
IBM, software giant ServiceNow, chip-equipment maker KLA and hospital operator Universal Health all beat earnings Wednesday night.
IBM stock rose 3% overnight, eyeing a breakout from a modern 189.47 cup-with-handle buy point.
ServiceNow leapt 7% late after closing down 4.5% to 730.87. Its results and guidance could have an enormous effect on other software plays.
KLAC climbed 4% in prolonged motion after skidding 6.4% on Wednesday, below its 50-day line.
Universal Health advanced nearly 2%. Shares had already reclaimed a buy zone this week on strong results from rivals HCA Healthcare (HCA) and Tenet.
Meanwhile, United Rentals topped EPS views but just missed on sales. URI stock edged higher late. Shares fell 3.8% on Wednesday, back below a buy point.
Tesla Stock
Tesla stock plunged 12.3% on Wednesday to 215.99, diving below its 21-day moving average. Technically, TSLA stock still has a 271 handle on a protracted consolidation, nevertheless it’s not tight.
Late Tuesday, Tesla reported a 43% EPS decline in Q2, the fourth straight big year-over-year decline and over again missing views. Revenue rose 2% to $25.5 billion, barely beating. But automotive revenue fell nearly 7%, even with a spike in regulatory tax credits.
Elon Musk on the Tesla earnings call didn’t offer much latest on upcoming vehicles, self-driving and other future potential growth drivers.
Google Stock
Google stock tumbled 5% to 172.63, clearly below the 50-day line and to its worst levels since early June.
Google earnings and revenue cleared estimates, because of Google Cloud and online marketing, though YouTube ad revenue fell short. Google signaled higher expenses in Q3, raising margin concerns.
Other Magnificent Seven Stocks Damaged Too
While Tesla had the larger drop, Google probably had the larger market impact. For one, it has an even bigger market cap. More importantly, its results and guidance weighed on fellow megacaps Microsoft, Meta Platforms, Amazon, Apple and Nvidia — along with many other tech firms.
Microsoft stock fell 3.6% and Nvidia stock tumbled 6.8%, each dropping below their 50-day lines. MSFT stock also undercut a previous buy point.
Meta stock sold off 5.6% while Amazon lost 3%, after each hit resistance at their 50-day lines Tuesday.
Apple stock slumped 2.9%, below its 21-day line for the first time since May 1.
Overall, the Magnificent Seven stocks lost 4.6% on Wednesday, their worst collective loss since Sept. 13, 2002.
Microsoft, Meta, Amazon and Apple stock all report earnings next week.
What To Do Now
Tech stocks are looking weak, and it will not be just the megacaps. Investors must recognize that, getting out of losing positions and taking some profits. In case you wish to carry core positions in a couple of long-term winners, that could be a unique story, nevertheless the market has been signal the need to reduce overall tech exposure for some time.
A divided-to-weakening market within the midst of earnings season is not going to be a very perfect time to be ramping up exposure. If the Nasdaq does break lower, there’s a high risk that the rest of the market may even come under pressure. The Russell 2000 and a number of non-tech sectors still look superb, but one other day or two like Wednesday and it’s going to be one other matter.
Investors may be higher served reducing exposure on net, even when only by cutting positions on an individual basis.
Watchlists presumably need significant changes from just just a couple of weeks ago. So make sure you’re up to this point.
Read The Big Picture day-to-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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