Dow Jones futures were little changed early Friday, along with S&P 500 futures and Nasdaq futures, with Fed chief Jerome Powell’s big Jackson Hole speech on tap.
The stock market rally attempt had an ugly session Thursday, with the major indexes all reversing lower after hitting resistance near the 50-day line, closing near session lows.
Nvidia (NVDA) essentially erased its big initial gains on its blowout earnings, while many other AI stocks reversed lower to varying degrees, including MRVL stock, Broadcom (AVGO), Adobe (ADBE), Palantir Technologies (PLTR), C3.ai (AI) as well as server maker Super Micro Computer (SMCI).
MRVL stock fell solidly in late trade as Marvell earnings eked past views. That followed a big downside reversal in Thursday’s session.
WDAY stock rose solidly overnight after Workday earnings topped and the software giant guided higher. Shares fell modestly Thursday, moving slightly below the 50-day line in a short consolidation.
INTU stock declined slightly in extended action. Intuit earnings topped and the TurboTax maker hiked its dividend by 15%, but revenue guidance was light. Shares edged lower Thursday, holding in a buy zone after rebounding from the 50-day line last Friday.
Fed Chief Powell’s Jackson Hole Speech
Fed chief Jerome Powell will give a policy speech at 10:05 a.m. on Friday at the annual Jackson Hole symposium.
Fed chief Powell is likely to signal patience, while still leaving the door open to further rate hikes. He’ll also likely push back on the prospects for rate cuts. With inflation still too high but coming down, policymakers see less urgency to act.
The big jump in 10-year Treasury yields in recent weeks means that market rates have tightened considerably, further reducing the need for official Fed rate hikes.
But Powell could signal that longer-term trends will make bringing inflation back to 2% a challenge.
Powell’s speech will be important for rate-hike expectations. Investors see about a 20% chance of a Fed rate hike in late September. But the odds of a hike by the Nov. 1 meeting have risen to 45%. Expectations of Fed rate cuts have been pushed well into next year.
Dow Jones Futures Today
Dow Jones futures rose 0.1% vs. fair value. S&P 500 futures edged higher. Nasdaq 100 futures fell 0.1%.
The 10-year Treasury yield edged up to 4.25%.
Stock Market Rally
The stock market rally opened higher, but the indexes quickly hit resistance at the 50-day line and reversed lower, with the Nasdaq showing the biggest swing.
The Dow Jones Industrial Average fell 1.1% in Thursday’s stock market trading. The S&P 500 index slumped 1.35%. The Nasdaq composite sold off 1.9%. The small-cap Russell 2000 sank 1.3%.
U.S. crude oil prices edged up 0.2% to $79.05 a barrel. Copper futures sank 0.95%.
The 10-year Treasury yield rose nearly 4 basis points to 4.23%. The U.S. dollar continues to climb.
Among growth ETFs, the Innovator IBD 50 ETF (FFTY) fell 1.6%. The iShares Expanded Tech-Software Sector ETF (IGV) gave up 2.3%, with INTU stock and Workday key members. The VanEck Vectors Semiconductor ETF (SMH) slumped 2.6%. Nvidia stock is the top holding in SMH, with Marvell and AVGO stock also notable components.
SPDR S&P Metals & Mining ETF (XME) sank 1.5% and the Global X U.S. Infrastructure Development ETF (PAVE) gave up 1.2%. U.S. Global Jets ETF (JETS) descended 1.7%. SPDR S&P Homebuilders ETF (XHB) stepped down 1.55%. The Energy Select SPDR ETF (XLE) fell 0.7% and the Health Care Select Sector SPDR Fund (XLV) declined 0.8%.
The Industrial Select Sector SPDR Fund (XLI) gave up 1.2%.
NVDA stock jumped to a record 502.66 soon after the open, following the latest blowout Nvidia earnings and guidance Wednesday night. But shares quickly pared gains, closing up just 0.1% to 471.74.
The AI chip leader had run up sharply heading into earnings. Nvidia stock is still up 8.9% for the week.
AI Stocks Reverse Lower
Meanwhile, other AI stocks simply turned negative — modestly, solidly or sharply. Many were around key technical levels and suffered outside, downside days following initial gaps higher.
MRVL stock hit 64.23 intraday, jumping from the 50-day line, but then reversed for a 6.85% loss to 57.29 ahead of Thursday night’s earnings.
AVGO stock sank 2.5% to 854.46 after touching 909.86 after the open. Broadcom earnings are due Aug. 31.
SMCI stock tumbled 5.4% to 262.50, reversing from 298.35 intraday.
ADBE stock retreated 3.4% to 512.43, below its 21-day line but holding its 50-day. Shares briefly hit 539.67 Thursday morning.
PLTR stock slid 7.6% to 14.14, reversing from 15.72 intraday as it hit resistance at the 21-day line.
AI stock reversed near its 21-day at its morning peak of 33.67, plunging 11.6% to 28.83. C3.ai stock hit a three-month low.
Market Rally Analysis
Thursday was ugly. The losses were one thing, but to see the major indexes and many leading stocks reverse sharply lower from key resistance in a nascent market rally was discouraging. Thursday’s higher volume followed market gains in below-average trade.
Clearly, Nvidia earnings expectations were sky high for the market.
A follow-through day could still happen.
The Nasdaq and S&P 500 rally attempts are intact as long they hold above their Aug. 18 lows. The Dow Jones undercut recent intraday lows on Thursday, so its market rally day count goes to zero.
Fed chief Powell’s speech offers a possible catalyst. But, as with Nvidia, we don’t know which way. Markets also could take time to digest the implications Powell’s longer-term outlook.
The market correction could end up running longer and perhaps deeper than investors thought a day earlier. That may be especially true of AI stocks and the tech sector overall.
Energy and some non-tech areas are holding up better.
What To Do Now
Investors should remain defensive and ready to cut individual holdings as needed.
It’s not a good time to be making new buys. Instead, Thursday offered some shorting opportunities as the indexes and key stocks reversed lower from key levels.
Investors shouldn’t get aggressive before a follow-through day with the major indexes facing stiff resistance.
But stay engaged and flexible. Have your watchlists up to date so you’re prepared.
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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