Dow Jones futures edged higher early Wednesday, while S&P 500 futures and Nasdaq futures fell slightly as NVDA shares fell on a report that the United States could expand restrictions on chip exports.
The stock market rally had strong gains on Tuesday after a mixed session on Monday. Nasdaq and S&P 500 rallied from near their 21-day exponential moving averages, along with megacaps Tesla (TSLA) and Nvidia (NVDA). The overall market breadth was strong.
United Airlines (UAL), American Airlines (EEL), FedEx (FDX), Amkor technology (AMKR) and On holding (ONON) all approved purchase points.
Tesla, On Holding and Nvidia shares are on the IBD Leaderboard, while UAL shares are on the Leaderboard Watchlist. United Airlines and ONON shares are at the IBD 50. Tesla shares are at the IBD Big Cap 20. United Airlines was Tuesday’s IBD Stock Of The Day.
Is the decline in the market over, or is this just a one-day failure? That’s a big question. Investors can take advantage of buying opportunities, cautious but ready to step back if positions or the broader market pulls back again.
The video embedded in this article discussed Tuesday’s strong market rally and analyzed FDX stock, United Airlines and Data dog (DDOG).
US Mulls AI Chip Export Borders
The Biden administration is considering new restrictions on the export of artificial intelligence chips, The Wall Street Journal reported Tuesday night, citing sources.
The Commerce Department can stop AI chip shipments from Nvidia and others to China and other countries of concern without first obtaining a license.
Nvidia shares fell 3% in premarket trading. Advanced Micro Devices ( AMD ) fell 3%. Broadcom (AVGO) fell 1%.
In addition to possible lost business for Nvidia, AMD and others, expanded chip exports could spur China to retaliate. Beijing has already limited sales of Micron technology (MU) chips to key customers, citing cyber security concerns. Micron, which reports Wednesday evening, went down overnight.
In other news, Spirit AeroSystems (SPR) late on Tuesday reached a preliminary agreement with striking workers, who will vote on it on Thursday. Spirit Aero makes 737 fuselages for Boeing (BA). The SPR share rose modestly in pre-market trading. The BA share rose higher.
Dow Jones Futures today
Dow Jones futures edged up 0.1% relative to the real value, with Boeing shares giving a small gain. S&P 500 futures lost 0.1% and Nasdaq 100 futures fell 0.3%. Nvidia and AMD shares are notable S&P 500 and Nasdaq 100 components.
Keep in mind that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular session.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live
Stock market rally
The share rise had a strong, broad-based progress. Economic data was positive, with new home sales in May, while June reports on consumer confidence and manufacturing in the Richmond area also peaked.
The Dow Jones Industrial Average rose 0.6% in Tuesday’s trading. The S&P 500 index rose 1.1 percent. The Nasdaq composite rose 1.65 percent. The small-cap Russell 2000 jumped 1.5%.
US crude oil prices fell 2.4% to $67.70 a barrel.
The 10-year Treasury yield rose 5 basis points to 3.77%, staying within a range that goes back to late May.
Among growth ETFs, the Innovator IBD 50 ETF ( FFTY ) gained 2.6%, while the Innovator IBD Breakout Opportunities ETF ( BOUT ) gained 2.5%. The iShares Expanded Tech-Software Sector ETF ( IGV ) rose nearly 2%.
VanEck Vectors Semiconductor ETF (SMH) rose 3.2%. NVDA stock, the top SMH holding, rose 3.1%, bouncing off near its 21-day line. But it was an inward day after a 3.7% decline on Monday.
Reflecting more speculative history stocks, the ARK Innovation ETF ( ARKK ) rose 3.4% and the ARK Genomics ETF ( ARKG ) rose 0.7%. Tesla stock is the No. 1 component across Ark Invest’s ETFs. The electric car giant rose 3.8% to 250.21 on Tuesday, bouncing off its 21-day line, but after falling 6.1% on Monday. TSLA stock arguably has a buy point at 274.75 on a consolidation back to September.
The SPDR S&P Metals & Mining ETF (XME) rose 1.3% and the Global X US Infrastructure Development ETF (PAVE) rose 1.7%. The US Global Jets ETF (JETS) soared 4.4%, with UAL shares and American Airlines making up the bulk of the ETF. The SPDR S&P Homebuilders ETF (XHB) rose 2.9%. The Energy Select SPDR ETF (XLE) rose 0.2% and the Health Care Select Sector SPDR Fund (XLV) fell 0.2%.
The Industrial Select Sector SPDR Fund (XLI) rose 1.2%.
The Financial Select SPDR ETF ( XLF ) rose 0.8%. The SPDR S&P Regional Banking ETF (KRE) rose 3.2 percent.
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Shares in buying zones
UAL shares jumped 5.1% to 56.03, clearing a 54.05 cup-with-handle buy point. AAL shares jumped 5.5% to 17.35, flying above a 16.72 entry from its own cup with handle, according to MarketSmith analysis. Both United and American jumped as per Delta Air Lines (DAL) raised full-year guidance. DAL shares, already extended, rose 6.8%
FDX shares rose 5% to 246.76, rising above a 235.81 buy point with a flat base. FedEx had looked above that entry in mid-June, but then fell back on mixed earnings. Shares quickly recovered from the 50-day line.
AMKR shares rose 11.4% to 29.37 on heavy volume, easily clearing a buy point at 27.20. The chip maker is now well past the 5% buy zone, which goes to 28.56.
ONON shares rose 2.2% to 31.30, still within range of the 50-day line and a trendline. The high-end sports shoe maker moved above these key levels on Monday. Intraday Tuesday, the shares looked above a short-term high of 31.45.
Stock market forecast for the next six months
Market rally analysis
The stock market rally had a clear bullish session. Indices bounced back around a key near-term level in higher volume, with strong breadth and a number of stocks flashing buy signals.
The Nasdaq and S&P 500 rebounded from around the 21-day lines. Meanwhile, the Dow Jones and Russell 2000 have regained that key level.
The Invesco S&P 500 Equal Weight ETF ( RSP ), which retook its 21-day high on Monday, rose 1.2% on Tuesday, breaking the latest downtrend and topping its 10-day line
The First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW), which fell just 0.2% on Monday, fell 1.7% on Tuesday, also bouncing from the 21st.
Advancers easily beat decliners on Tuesday.
Airlines and travel were big winners, but chips, software, industrials, transport and the broad housing sector also showed bullish action.
Energy is still a weak area, while biotechnology and certain sectors are struggling.
Tuesday may have marked the start of a new stage in the market rally. Nasdaq arranged a subsequent follow-up day. But it hasn’t quite broken its recent decline and is just below the 10-day mark.
The AI chip export curb report to hit Nvidia overnight is an unexpected headwind.
Also, after Tuesday’s rebound, the Nasdaq is 6.5% above its 50-day moving average, while the Nasdaq 100 is up 7.5%. It didn’t take much for them to reach extreme levels again.
Time the market with IBD’s ETF market strategy
What to do now
With the stock market rally showing positive signs, investors could certainly look for places to add some exposure. There is still a risk that the pullback is not over, and that Tuesday’s buying opportunities will quickly go south. But if you’re waiting for definitive evidence that the pullback is over, such as the Nasdaq hitting a new high, it will be too late to chase stocks.
One possibility is to take smaller positions in new purchases. Be ready to move fast and consider taking partial profits quickly to lock in some gains.
Make purchases as close to listings as possible. It will provide some protection against stock and market reversals.
Definitely have the watch lists ready. Broad progress with diverse leadership means that it is more difficult to keep track of all the promising stocks. But it’s a good problem to have.
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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