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Dow Jones Futures: Market Rides into Fed Decision; GME soars late, First Republic falls




Dow Jones futures were little changed overnight, along with S&P 500 futures and Nasdaq futures. Nike (OF) and GameStop (GME) reported after the close. Investors are already turning to Wednesday’s decision to raise interest rates from the Federal Reserve.




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Stocks saw strong gains on Tuesday when Treasury Secretary Janet Yellen signaled more support for the banks. First Republic Bank ( FRC ) led a rebound on Tuesday, but FRC stock fell solidly overnight as the California-based bank struggles to find a way forward.

Swiss athletic shoe manufacturer On holding (ONON), EV chip game Aehr test systems (AEHR) and Google Parent Alphabet (GOOGL) offered buying opportunities on news. ONON gapped over revenue, Aehr got new orders and Google managed a key level on its AI chatbot.

Tesla stock made a bullish move Tuesday within an emerging bottom base, which Tesla (TSLA) China sales continue to pick up and Moody’s upgraded its credit rating.

Dow Jones Futures today

Dow Jones futures fell relative to fair value, with the NKE share a drag. S&P 500 futures and Nasdaq 100 futures edged higher.

Crude oil futures fell slightly.

Keep in mind that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular session.

Cool meeting

The announcement of the Fed meeting is due at 2:00 PM ET on Wednesday. The odds of a quarter-point rate hike rose to 87% on Tuesday.

Markets also expect a Fed rate hike of a quarter of a point in May, but then see interest rate cuts starting over the summer.

Together with the Fed interest rate decision, the central bank will release guidance on interest rate increases and economic projections. Fed Chair Jerome Powell will speak at 2:30 PM ET. His comments on inflation risk, the economy and the banking crisis will all be key.

Key income

The NKE share fell 2%. Nike’s earnings and revenue topped forecasts, but gross margins fell more than expected. Nike shares rose 3.6% on Tuesday to 125.61, moving above the 50-day line. The Dow Jones athletic footwear and apparel giant is working on a buy point of 131.21, according to MarketSmith analysis.

GME stock surged 48% overnight as GameStop posted a surprise profit, its first since 2021. Revenue unexpectedly rose slightly. That suggests the video game retailer and meme stock would vault above the 50-day line and approach the 200-day lines. GameStop shares rose 4.6% on Tuesday.

ONON stock

In Tuesday’s session, ONON shares rallied 26% to 27.26, pushing past a cup-with-handle buy point on massive volume. Earnings came in light, but revenue rose 92% with the high-end sports shoe maker providing strong guidance.

Google Stock, AI News

Google on Tuesday launched its AI chatbot Bard for testing in the US and UK Google is trying to keep up with Microsoft (MSFT) and the ChatGBT-4 AI tool.

Nvidia (NVDA), whose chips power many AI functions, made a slew of AI announcements at its annual developer conference. It included partnerships with Google, Microsoft and Adobe (ADBE), entering the generative AI space.

Google shares rose 3.7% to 104.92, topping its 200-day line and offering an early entry into the cup-shaped bottom. Nvidia shares, which have soared in 2023 on AI buzz, rose 1.15% to an 11-month high. MSFT shares rose 0.6%, just below a buy point after rising 12% last week.

AEHR share

Aehr Test Systems announced a new significant order early Tuesday. Shares rose 15% to 36.93 on decent volume. AEHR stock is near a buy point at 37.67, but an early entry on Tuesday morning was probably the safer bet.

This is still an attempt at a market rally, not a confirmed uptrend. The Fed’s rate hike decision on Wednesday is big, while concerns about banks remain high.

The Nvidia share is on the Leaderboard. The ONON stock is like a Leaderboard income options play. Microsoft and GOOGL stocks are on IBD Long-Term Leaders.

The video embedded in this article discussed Tuesday’s market action and analyzed On Holding, AEHR stock and Google.


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


Bank shares

The US government is ready to provide additional deposit guarantees for smaller banks if there is a “danger of contagion,” Treasury Secretary Janet Yellen said before Tuesday’s opening.

The Financial Select SPDR ETF (XLF) rose 2.5 percent. JPM stock is a large XLF holding. The SPDR S&P Regional Banking ETF (KRE) jumped 5.8%. FRC warehouse and PacWest are both KRE components.

FRC shares jumped nearly 30% to 15.78 on Tuesday but finished higher. The stock fell 47 percent on Monday. First Republic shares fell 87% in March.

Meanwhile, FRC shares fell 9% after hours.

Banking giants and US officials are discussing possible government support to encourage a bailout deal for First Republic, Bloomberg reported Tuesday night. It could involve the government taking over First Republic assets with unrealized losses to encourage investors or a buyer. Separately, the California-based bank has hired Lazard and McKinsey as advisers, the Wall Street Journal reported Tuesday evening, joining JPMorgan Chase.

Stock market rally

The attempted stock market rally showed modest, technology-driven gains on Tuesday. Volume was low heading into Wednesday’s Fed decision to raise interest rates.

The Dow Jones Industrial Average fell 1% in Tuesday’s trading. The S&P 500 jumped 1.3%, with FRC stock the biggest gainer after being Monday’s worst performer. The Nasdaq composite rose 1.6 percent. The small-cap Russell 2000 rose 1.9%.

US crude oil prices rose 2.75% to $69.50 a barrel. Copper futures jumped 1.1 percent.

The 10-year government yield rose 13 basis points to 3.6%. The 2-year Treasury yield rose 25 basis points to 4.175%, the biggest one-day jump in nearly 14 years.

ETFs

Among growth ETFs, the Innovator IBD 50 ETF (FFTY) rose 2.1%. The iShares Expanded Tech-Software Sector ETF ( IGV ) rose 1.8%. Microsoft Stock and Adobe are important IGV components. The VanEck Vectors Semiconductor ETF ( SMH ) rose 0.3%. NVDA stock is a large SMH holding.

Reflecting more speculative storied stocks, the ARK Innovation ETF ( ARKK ) rose 5.55% and the ARK Genomics ETF ( ARKG ) jumped 3.8%. Tesla stock is a large holding across Ark Invest’s ETFs.

The SPDR S&P Metals & Mining ETF (XME) rose 1.5%. The SPDR S&P Homebuilders ETF (XHB) rose 1.4%. The Energy Select SPDR ETF (XLE) jumped 3.5% and the Health Care Select Sector SPDR Fund (XLV) rose 0.6%.


Top five Chinese stocks to watch now


Tesla shares

TSLA stock jumped 7.8% to 197.58, continuing to bounce off the 50-day line and reclaiming the 21-day moving average. A bottom base forms below the 200-day line, which is not ideal. But a break from the potential buy point of 217.75 would also mean retrieving the 200-day line.

An aggressive investor could have seen Tuesday’s move as a place to start a TSLA stock position. However, the 200-day line is important resistance. Regardless, the shares are now extended from their 50 days.

Tesla shares rose as the EV giant’s registrations in China rose for the fourth week in a row. Also, Moody’s Investors Service raised Tesla’s credit rating from junk.

Market rally analysis

The stock rally had strong price gains on Tuesday, albeit in low volume. The Nasdaq, led by Tesla shares and Google, moved above March 6 levels.

The S&P 500 moved above its 21-day line after reclaiming its 200-day line on Monday. It has topped the 4000 level and is just shy of the 50-day line.

The Dow Jones moved above the 200-day line, but hit resistance at the 21-day line. The Russell 2000, which has heavy financial and energy weights, bounced on Tuesday but remains some distance from its 200-day and especially the 50-day line.

Several chip stocks got off to a strong start on Tuesday, although volume was often lacking. But many pared gains or even reversed lower. The AEHR share was a big exception.

The ONON share was Tuesday’s big winner, along with Aehr Test Systems.

Several travel-related names showed strength, while restaurants are performing well and a number of housing stocks are establishing themselves. But the width is still relatively narrow. Many stocks will need time to repair damage from the last couple of weeks.


Time the market with IBD’s ETF market strategy


What to do now

A number of stocks have flashed buy signals in the past week, many of which have worked. The market recovery is picking up. So investors can justify a modest exposure.

But be careful. It is still a market rally attempt, not a confirmed uptrend. The Fed meeting is on tap while the banks are still a big question mark.

Investors must be ready to gradually increase their exposure. Build your watchlists focusing on stocks that are actionable or nearly so.

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

Follow Ed Carson on Twitter at @IBD_ECarson for stock exchange updates and more.

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