The major stock market indices retreated from the afternoon peaks on Wednesday. Nvidia (NVDA) and other chip stocks felt pressure from news that the US could place more restrictions on chip exports.
Investors tuned in to Fed Chair Powell’s morning speech during a policy panel discussion at the European Central Bank Forum in Portugal on Wednesday. “Policies haven’t been restrictive for a very long time … so we think there will be more restrictions,” Powell said.
Mr Powell is scheduled to speak later in the day in a public chat with the governor of the Bank of Spain.
The 10-year US Treasury yield fell 5 basis points to 3.71%. The Fed paused interest rate hikes at its last meeting, but indicated it will resume at the July meeting.
The CME FedWatch Tool showed over 80% odds of a quarter-point hike at the July Fed meeting.
The Nasdaq reversed course from the morning’s lows and was up 0.2% on the day. The Dow Jones Industrial Average fell 0.3 percent. The S&P 500 trimmed 0.1 percent. The Russell 2000 was flat.
Nasdaq 100-tracker Invesco QQQ Trust ETF ( QQQ ) reversed early losses to gain 0.1%. The First Trust Nasdaq 100 Equal Weighted ETF (QQEW) was relatively unchanged.
The Innovator IBD 50 ETF (FFTY) gained 2%, outperforming the market indices. NYSE volume was higher and Nasdaq was lower, compared to the same time on Tuesday.
Crude oil rose 2.8% to $69.61 a barrel. The price of bitcoin retreated 1.6% to $30,225.
European shares closed higher, with Germany’s DAX up 0.6% and the Paris CAC up 1%. London’s FTSE rose 0.5 percent.
The Mortgage Bankers’ Association mortgage applications Composite Index rose 3% for the week ended June 23, easily outpacing the 0.5% gain the previous week.
Stock market action: Chip stocks under pressure
The Biden administration is considering new restrictions on the export of artificial intelligence chips, according to a Wall Street Journal article published Tuesday evening.
The Commerce Department could stop AI chip shipments from Nvidia and others to China and other countries of concern if they don’t first get a license.
Leaderboard stock Nvidia fell from previous major losses, now down 1.5% on the news. Advanced Micro Devices (AMD) declined 0.7%, Broadcom (AVGO) fell 0.3% and Marvell technology (MRVL) retreated 0.8%.
In addition to possible lost business for Nvidia, AMD and others, extended chip export restrictions could spur China to retaliate.
Beijing has already limited sales of Micron technology (MU) chips to key customers, citing cyber security concerns. Micron trimmed a bigger loss to a minor drop of 0.1% and will report its late-May quarterly results on Wednesday after the market closes.
The VanEck Semiconductor ETF (SMH) fell 1% on news of possible further restrictions on chip exports.
Cruise Line shares sail higher
IBD 50 stock carnival (CCL) soared 7.9% on heavy volume after Citigroup reiterated a buy rating and kept its price target at 18. The cruise line is the leader today in the IBD 50 and S&P 500.
The shares are above the 20% profit zone of a cup base with a buy point of 12.62. Shares hit a 52-week high and are up a whopping 113% this year so far.
Norwegian Cruise Line (NCLH) increased 7.3% in heavy volume while Royal Caribbean (RCL) added 1.9% in sympathy with Carnival. Both stocks also hit 52-week highs on the rally.
IBD 50 and Leaderboard stocks MongoDB ( MDB ) rallied another 5.8% to hit a 52-week high. Shares in the data platform stock are up around 108% this year so far.
Cloud analytics software stock ZoomInfo Technologies (ZI) rose 6% after Needham started coverage of the stock with a buy rating and a price target of 35. The company has a focus on AI and machine learning.
Warehouse for consumer products General Mills (GIS) was down 4.6% in heavy volume after reporting worse-than-expected sales and higher earnings in the fourth quarter. Shares fell further below the 200-day moving average. The shares are down more than 8% compared to the year.
Stock Market Movers: Network Stock Surges
Extreme networks (EXTR) rose 6% in heavy volume after Oppenheimer initiated coverage with an outperform rating and a price target of 35 on the stock.
Shares are above the buy zone of a long, choppy base with a buy point at 21.03. Shares tested the 21-day exponential moving average on Tuesday, ahead of today’s big move.
Extreme provides cloud-based network infrastructure to industries including government, financial services, healthcare, hospitality and manufacturing.
Axsome Therapeutics ( AXSM ) fell more than 9% after the biopharmaceutical company announced a public offering of 3 million shares of common stock at 75 per share.
Shares fell below their 50-day moving average, giving investors a sell signal.
Defense drone manufacturer AeroVironment (AVAV) jumped 3.5% after providing full-year revenue guidance that beat analysts’ forecasts.
The positive outlook overshadowed the mixed Q4 earnings report with a loss in profit and a hit to sales. Shares retook the 200-day line on the fly.
Spirit AeroSystems (SPR) reversed lower 1.4% after reaching a tentative agreement late Tuesday with striking workers on a four-year contract proposal and will vote on it Thursday. Spirit Aero makes 737 fuselages for Boeing (BA). The Dow Jones share Boeing rose 0.3 percent on the news.
Follow Kimberley Koenig for more stock market news on Twitter @IBD_KKoenig.
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