Dow Jones futures, along with S&P 500 futures and Nasdaq futures, tilted lower after the market experienced significant losses due to the unexpected rise of the August ISM services index. This caused Treasury yields and Fed rate hike odds to increase. The S&P 500 fell just below its 50-day moving average, while the Nasdaq briefly undercut that key level but ultimately closed above it. The Dow Jones and Russell 2000 also slid further below their 50-day lines. Additionally, the S&P 500 and Nasdaq are not far from the lows of their Aug. 29 follow-through day.
Apple, Nvidia, and Tesla all lagged in the market after megacap stocks generally outperformed on Tuesday. The overall market breadth was weak, particularly in the energy sector.
C3.ai, Sprinklr, and UiPath reported their earnings after the market closed. Nvidia stock is on IBD Leaderboard and the IBD 50.
In overnight trading, Dow Jones futures fell slightly, as did S&P 500 futures and Nasdaq 100 futures. However, it should be noted that overnight action in futures does not always translate to actual trading in the next regular stock market session.
C3.ai stock fell sharply in late trading after falling short on Q1 2024 revenue and issuing a low guidance for Q2 sales. The company also withdrew their forecast for non-GAAP profitability by the end of fiscal 2024. On the other hand, Sprinklr earnings exceeded expectations, causing CXM stock to edge lower overnight. UiPath earnings also beat expectations, resulting in a solid rise in PATH stock during extended trading.
The stock market opened lower and experienced larger losses after the release of the ISM services index, which showed a surprise gain. The Dow Jones Industrial Average fell 0.6%, the S&P 500 declined 0.7%, the Nasdaq composite retreated 1.1%, and the small-cap Russell 2000 gave up 0.3%. Crude oil prices rose to a fresh 2023 closing high, and Treasury yields also increased.
In the ETF realm, the Innovator IBD 50 ETF closed just above break-even, while the iShares Expanded Tech-Software Sector ETF edged up slightly. The VanEck Vectors Semiconductor ETF, with Nvidia stock as its top holding, fell 1.2%. The ARK Innovation ETF rose 0.4%, as did the ARK Genomics ETF. Tesla stock is a top holding for both of these ETFs. Other notable ETFs include the SPDR S&P Metals & Mining ETF, the U.S. Global Jets ETF, the SPDR S&P Homebuilders ETF, the Energy Select SPDR ETF, the Health Care Select Sector SPDR Fund, the Industrial Select Sector SPDR Fund, the Financial Select SPDR ETF, and the SPDR S&P Regional Banking ETF.
In individual stocks, Apple, Nvidia, and Tesla all experienced declines. Apple stock fell below its 50-day moving average, while Nvidia stock slid below its 21-day average but remained above its 50-day. Tesla stock fell below the 50-day line but found support at the 21-day. These stock movements could potentially impact the AI-led market rally.
Overall, the stock market faced losses due to the unexpected rise of the ISM services index. The market is closely watching the movements of key indices such as the S&P 500 and Nasdaq, as well as individual stocks like Apple, Nvidia, and Tesla.
Definitions:
- Dow Jones Futures: Futures contracts that track the performance of the Dow Jones Industrial Average, allowing investors to speculate on the future value of the index.
- ISM Services Index: An index that measures the economic activity of the services sector in the United States.
- Treasury Yields: The interest rates on the U.S. Treasury bonds, which are used as benchmarks for other interest rates in the economy.
- Fed Rate Hike Odds: The probability of the Federal Reserve increasing interest rates.
- S&P 500: A stock market index that measures the performance of 500 large-cap U.S. companies.
- Nasdaq: A stock market index that focuses on the performance of technology and growth-oriented companies.
- Megacap Stocks: Stocks of companies with very large market capitalizations, typically exceeding $200 billion.
- Earnings: The financial performance of a company, typically reported on a quarterly basis.
- ETFs: Exchange-traded funds are investment funds that are traded on stock exchanges, similar to stocks.
- Stock Market Rally: A period of sustained upward movement in the stock market.
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