Dow Jones futures rose early Thursday, as did S&P 500 futures and particularly Nasdaq futures. Nvidia (NVDA) surged on its earnings.
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The stock rally retreated slightly as Nvidia’s results approached, in part due to the Fed’s somewhat hawkish minutes during the April 30-May 1 policy meeting. Many consumer goods and commodities names were also sold off.
Nvidia reported earnings well above quarterly forecasts, rose and announced a 10-for-1 stock split. Shares rose sharply.
Nvidia’s long-awaited report has huge implications for AI games such as Broadcom (AVGO), Advanced microsystems (AMD), Taiwan Semiconductor (TSM) and Microsoft (MSFT). These shares rose slightly in initial after-hours trading.
In the meantime, Synopsis (SNPS), Snowflake (SNOW) and Elf beauty (ELF) also reported Wednesday evening.
Nvidia and Eli Lilly stocks are in the IBD rankings. Stock reservation is done on SwingTrader. Microsoft and Synopsys stocks are among IBD’s long-term leaders. Nvidia stock is on the IBD 50.
Dow Jones Futures Today
Dow Jones futures were up 0.1% from fair value. S&P 500 futures rose 0.6%. Nasdaq 100 futures jumped 0.95%. Nvidia stock is a major component of the S&P 500 and Nasdaq 100.
Remember that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading during the next regular trading session.
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Nvidia Earnings
Nvidia’s profits soared 461% and revenue soared 262%, the fourth straight quarter of triple-digit growth for both.
The AI chip leader grew its revenue in the second quarter, but not by the same margin as before.
“The next industrial revolution has begun,” said Jensen Huang, CEO and founder of Nvidia, in the press release.
Nvidia will split its shares 10 for 1. It also increased its dividend by 150%, to 10 cents per share, up from 1 cent after the split.
Nvidia stock rose 6% in overnight trading, signaling a move above 1,000 for the first time. Stocks gained momentum as executives discussed growth prospects and the company’s latest AI chips and projects during the conference call. Shares fell 0.5% during Wednesday’s regular session to 949.50. NVDA stock broke through a 922.20 cup-with-handle buy point last week.
Broadcom, AMD and Taiwan Semiconductor rose about 1.5-4% overnight.
Super microcomputer (SMCI) and Dell Computer (DELL), both of which use Nvidia chips in their AI servers, made solid progress.
Microsoft and ServiceNow (NOW), two big players in software AI, increased slightly.
Other earnings
Synopsys’ profits were lower while the electronics design software maker gave a rather weak forecast. SNPS stock fell slightly in extended action. Shares edged up 0.3% to 573.13 on Wednesday. Synopsys stock has a buy point of 582.97.
Snowflake missed earnings, but revenue beat solidly while the data analytics software company also gave strong guidance. SNOW stock rose sharply overnight but pared its initial gains. Shares rose 0.4% to 163.34 on Wednesday. The snowflake stock is still far from the 52-week highs set in February.
ELF Beauty’s profits beat easily again, but the cosmetics maker declined after raising targets consistently for several quarters. ELF stock rose slightly in extended trading after initially plunging more than 10%. Shares of low-cost cosmetics makers fell 2.1% on Wednesday, between the 50- and 200-day lines.
Stock market rally
The stock market rally was marked by modest losses across major indexes, with a number of leaders taking a bigger hit.
The Dow Jones Industrial Average fell 0.7% in Wednesday trading. The S&P 500 index slipped 0.3%. The Nasdaq Composite Index fell 0.2%, reversing from a new intraday all-time high. The small-cap Russell 2000 lost 0.8%.
Consumer stocks struggled on Wednesday. Target (TGT) was sold due to weak earnings and forecasts, but Urban outfitters (URBAN), Williams-Sonoma (WSM) and luxury home builder Toll Brothers (TOL) reversed sharply despite seemingly strong results.
Energy and raw materials stocks fell. Copper prices fell 4.9%, their biggest loss in almost two years, after a sharp rise. U.S. crude oil futures fell 1.4% to $77.57 a barrel, down 3.1% so far this week.
The 10-year Treasury yield rose 2 basis points to 4.43%.
Minutes from the Fed’s April 30-May 1 meeting, released Wednesday, show policymakers are concerned about the lack of progress in reducing inflation. However, since May 1, new inflation data and economic data indicate a further slowdown in inflation. Fed Governor Christopher Waller, a policy hawk, noted an improvement Tuesday.
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Among growth ETFs, the iShares Expanded Tech-Software Sector ETF (IGV) was mostly flat, with large Microsoft and ServiceNow components. The VanEck Vectors Semiconductor ETF (SMH) rose 0.8%. Nvidia stock is the No. 1 stock in SMH, with also large stock members Broadcom, AMD and TSM. SNPS stock is in both SMH and IGV.
Reflecting more speculative stocks, the ARK Innovation ETF (ARKK) fell 0.5% and the ARK Genomics ETF (ARKG) climbed 1%.
The SPDR S&P Metals & Mining ETF (XME) fell 2.4%. The SPDR S&P Homebuilders ETF (XHB) fell 2.3%. The Energy Select SPDR ETF (XLE) was down 1.85% and the Health Care Select Sector SPDR Fund (XLV) was up 0.2%.
The SPDR Industrial Select Sector Fund (XLI) edged up 0.1%. The Financial Select SPDR ETF (XLF) fell 0.6%.
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What to do now
Nvidia’s earnings are finally released. Are you ready?
Futures suggest a positive market reaction to Nvidia’s results. If this continues into Thursday’s regular session, investors could see a number of buying opportunities.
But a reversal in the downward trend could trigger heavy selling. With the consumer, commodities, and some infrastructure sectors taking a hit recently, the market rally could hardly afford to see any weakness in AI.
Investors must therefore be prepared. Prepare your watchlists, paying particular attention to your top targets. But also have your exit strategies in place.
Read The Big Picture every day to stay in tune with market direction and leading stocks and sectors.
Please follow Ed Carson on Threads at @edcarson1971 and X/Twitter at @IBD_ECarson for stock market updates and more.
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