Dow Jones Futures Fall As Market Rally Retreats Amid Debt-Ceiling Drama; Nvidia Earnings Due

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Dow Jones futures fell modestly early Wednesday, along with S&P 500 futures and Nasdaq futures. Ongoing debt-ceiling talks are in focus, with Nvidia (NVDA) earnings due after the close.

Palo Alto Networks (PANW) rose on earnings Tuesday night. PTC Therapeutics (PTCT) dived on disappointing clinical trial data.

The stock market rally retreated Tuesday, with a number of stocks from leading groups suffering hefty losses.

Debt-ceiling talks continue with no deal imminent. House Speaker Kevin McCarthy said the two sides are “not anywhere near close” to a debt-ceiling deal. At the same time, President Joe Biden and House Republicans don’t seem that far apart on provisions to raise the debt limit. Meanwhile, the recent uptrend in Treasury yields and the U.S. dollar may be finally weighing on stocks, along with various hints of weakening consumer spending.

The video embedded in this article reviews Tuesday’s market action and analyzed Alamos Gold (AGI), Meritage Homes (MTH) and Las Vegas Sands (LVS).

Dow Jones Futures Today

Dow Jones futures fell 0.3% vs. fair value. S&P 500 futures retreated 0.3% and Nasdaq 100 futures lost 0.3%.

Crude oil futures climbed more than 1%. Copper, already around six-month lows, fell almost 2%.

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

Earnings

Palo Alto Networks, New Relic (NEWR), Intuit (INTU) and Toll Brothers (TOL) reported overnight.

PANW stock rose solidly in extended trade after Palo Alto earnings topped fiscal Q3 views while revenue was in line. The cybersecurity firm guided slightly higher for Q4 EPS. Shares fell 1.2% to 189.74 in Tuesday’s regular session, back below the 50-day line. Palo Alto stock is working on a 203.54 buy point from a handle in a long consolidation.

NEWR stock tumbled overnight, signaling a big drop below a buy point and a test of early entries around 76. New Relic earnings solidly topping while revenue slightly beat fiscal Q4 views. But the data analytics firm guided lower on fiscal Q1 and 2024 revenue. Shares fell 1.2% on Tuesday to 82.51, but rallied to close above an 80.98 buy point. New Relic stock spiked on March 17 on a report of a possible upcoming private-equity bid.

INTU stock fell solidly in premarket trade. Intuit earnings exceeded Q3 forecasts while revenue missed. The Turbo Tax software maker lost 0.95% on Tuesday to 449.80. Intuit stock has a 462.60 handle buy point from a long consolidation.

TOL stock rose modestly early Wednesday. Toll Bros. earnings comfortably beat fiscal Q2 consensus, with the luxury homebuilder also guiding up on Q3. Shares fell 1.5% to 63.75 on Tuesday, dropping below the 21-day line but still above a 62.71 buy point.

Analog Devices (ADI) reported better-than-expected fiscal Q2 earnings early Wednesday, but guided slightly lower for the current Q3. ADI stock fell solidly in premarket trade. It’s been starting to carve a handle on a cup base, but is in danger of tumbling back below its 50-day line. The current buy point is 198.35.

Nvidia, Elf Beauty (ELF) and Snowflake (SNOW) report late Wednesday.

Nvidia earnings and guidance could have a big impact on the chip sector and AI-related stocks. On Tuesday, Nvidia and Microsoft (MSFT), the two biggest names in artificial intelligence right now, said Tuesday that they will collaborate on AI. Nvidia stock retreated 1.6% Tuesday, declining modestly for a third straight session, just below 52-week highs.

ELF stock slipped 1.1%, just below its 50-day line after tumbling 4.3% on Monday. SNOW stock gave up 1.85%, pausing near the top of a bottoming base or within a longer consolidation.

NVDA stock is on IBD Leaderboard, while ELF stock is on the Leaderboard watchlist. AGI stock is on SwingTrader. SNOW stock is on the IBD 50. Alamos Gold was Tuesday’s IBD Stock Of The Day.

PTCT Stock Dives On Trial Data

PTC Therapeutics late Tuesday announced that its vatiquinone treatment did not meet its primary goals in a phase three trial of patients with Friedreich ataxia, an inherited disease that affects the body’s nerves. The biotech said vatiquinone did show significant benefits for some secondary metrics.

PTCT stock dived nearly 20% overnight. Shares had been trading at two-year highs after decisively clearing a base last week.

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

Stock Market Rally

The stock market rally started off mixed Tuesday but gradually lost more ground, led by techs.

The Dow Jones Industrial Average gave up 0.7% in Tuesday’s stock market trading. The S&P 500 index retreated 1.1%. The Nasdaq composite fell 1.3%. The small-cap Russell 2000 slid 0.4%

U.S. crude oil prices rose 1.2% to $72.91 a barrel. Copper prices, a good gauge of global economic activity, slumped 0.9% to its worst close in nearly six months.

The 10-year Treasury yield dipped 2 basis points to 3.7% after rising to 3.76% intraday. That snapped a seven-session streak of higher rates.

ETFs

Among growth ETFs, the iShares Expanded Tech-Software Sector ETF (IGV) slid 1.6%. PANW stock is a top-10 IGV holding. The VanEck Vectors Semiconductor ETF (SMH) gave up 1.4%. Nvidia stock is a major SMH holding, with Analog Devices also a component.

Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) fell 2.2% while ARK Genomics ETF (ARKG) eked out a 0.2% advance. Both hit three-month highs intraday.

SPDR S&P Metals & Mining ETF (XME) fell 0.6%. U.S. Global Jets ETF (JETS) descended 0.6%. SPDR S&P Homebuilders ETF (XHB) fell 1.6%. TOL stock is an XHB holding.

The Energy Select SPDR ETF (XLE) rose 1.1% and the Health Care Select Sector SPDR Fund (XLV) fell 1.1%

The Financial Select SPDR ETF (XLF) slumped 1.2%. The SPDR S&P Regional Banking ETF (KRE) climbed 1%, hitting resistance at the 50-day line.

Five Best Chinese Stocks To Watch Now

Market Rally Analysis

The stock market rally suffered significant losses Tuesday, especially for many leading stocks and groups.

The biggest losses came on the Nasdaq, which looks fine after running up significantly in the past few weeks. The S&P 500 may be drifting back into its sideways range after just hitting 2023 highs late last week. Or it could just be pausing momentarily before blasting higher.

The Dow Jones fell back below its 50-day line, with the 200-day line not far away.

The small-cap Russell 2000 reversed lower after hitting resistance at its 200-day line.

Decliners trumped advancing stocks, but not decisively.

The First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW) slumped 1.4%, though after hitting a three-month high on Monday. It’s still above the 50-day line.

The Invesco S&P 500 Equal Weight ETF (RSP) gave up 1.1%, back below the 200-day line and 50-day line. RSP needs to show more strength.

The biggest worry Tuesday was the hefty losses in several leading groups, including homebuilders, building materials, casinos, luxury goods, medical products, credit cards and more.

In some cases, the losses didn’t cause much chart damage, such as for Lantheus (LNTH) or Builders FirstSource (BLDR).

But LVS stock, Meritage, Visa (V) and LVMH (LVMUY) all tumbled below their 50-day lines, undercutting or invaliding buy points.

Meanwhile, tech titans and chip leaders, including Nvidia, pulled back slightly. Some AI stocks retreated after huge gains, while Palantir Technologies (PLTR) kept running.

There wasn’t an obvious trigger for the market rally’s step-back on Tuesday. Debt-ceiling negotiations continue with no signs of a rupture. Of course, a U.S. default looms if there’s no deal to raise the debt limit by early June. Perhaps the rebound in Treasury yields and dollar finally hit a pain threshold for stocks, though speculative stocks didn’t lead the downside. A new massive Covid wave may be taking shape in China.

Ultimately, it doesn’t matter why stocks are retreating.

Time The Market With IBD’s ETF Market Strategy

What To Do Now

The stock market rally has been odd in recent weeks, with pockets of enormous strength amid lackluster-at-best overall market action. Tuesday’s declines in many leading groups raise concerns that market leadership could narrow further.

There weren’t many buying opportunities Tuesday. The sell-offs in some stocks show that taking at least partial profits in winning stocks is still a sound strategy.

This is an uneven market rally. It could turn into a broad, long-term uptrend. Or it could stall or even break down. But as an investor, you need to pay attention to what the market is doing right now.

Keep working on those watchlists.

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.