Overnight, Dow Jones futures experienced a modest decline, accompanied by dips in S&P 500 and Nasdaq futures. This movement followed a significant tumble in Micron Technology shares on Wednesday night after the company reported its earnings. The results have substantial implications for the AI sector and the broader semiconductor industry.
Stock Market Overview
In Wednesday’s stock market action, the major indexes posted modest gains, but the overall market breadth was negative. Despite this, some megacap stocks like Tesla and Amazon.com saw breakouts. Additionally, Arm Holdings and Chipotle Mexican Grill are currently in buy range. Nvidia managed to erase its modest losses, closing up fractionally.
Notably, Nvidia and Amazon stocks are part of IBD’s Leaderboard, with Amazon also featured on SwingTrader. Both Nvidia and Arm are included in the IBD 50 list.
Overnight Futures Movement
Dow Jones futures experienced a slight decline, falling by 0.3% against fair value. Similarly, S&P 500 futures retreated by 0.4%, while Nasdaq 100 futures saw a decrease of 0.5%. Although Micron is listed on the NYSE, its guidance had a significant impact on many Nasdaq-listed tech stocks. The 10-year Treasury yield saw a slight increase, reaching 4.34%.
Micron Earnings Impact
Micron’s fiscal Q3 earnings surpassed expectations, with revenue growth accelerating to 82%. However, the memory-chip giant’s Q4 EPS guidance was only slightly higher at the midpoint, aligning with revenue expectations. As a result, Micron’s stock fell 8% in overnight trading. In contrast, during Tuesday’s regular session, Micron shares had edged up 0.9% to 142.36, finding support at the rising 21-day exponential moving average.
Micron’s earnings and guidance are crucial for AI-related companies such as Nvidia, Broadcom, TSM, and Arm Holdings, as well as other memory-focused firms like Western Digital. Generally, these stocks fell by 1%-2% after hours. However, memory-exposed chip-equipment makers like Applied Materials, Lam Research, and KLA Corp. saw slight increases overnight as Micron announced increased capital-spending plans.
Additionally, other companies such as drone maker AeroVironment and denim giant Levi Strauss experienced significant declines late Wednesday.
Market Rally and Index Performance
On Wednesday, the stock market rally had a relatively quiet session, finishing near session highs:
- Dow Jones Industrial Average rose marginally.
- S&P 500 index climbed 0.2%.
- Nasdaq composite gained 0.5%.
Nvidia closed up 0.25% after an intraday dip of more than 2%, and shares fell slightly overnight following Micron’s results. The small-cap Russell 2000 slipped 0.2%, further distancing itself from its 50-day moving average.
The Invesco S&P 500 Equal Weight ETF retreated 0.4%, dropping below its 50-day moving average, while the First Trust Nasdaq 100 Equal Weighted Index ETF also dipped 0.4%, trading just below record highs.
Sector and ETF Performance
U.S. crude oil prices edged up 0.1% to $80.90 per barrel, while the 10-year Treasury yield increased by 8 basis points to 4.315%.
Among growth ETFs:
- Innovator IBD 50 ETF fell 0.6%.
- iShares Expanded Tech-Software Sector ETF edged up 0.1%.
- VanEck Vectors Semiconductor ETF declined 0.3%, with Nvidia and Micron being significant holdings.
Reflecting more speculative stocks:
- ARK Innovation ETF climbed 0.6%.
- ARK Genomics ETF slumped 2%.
In other sectors:
- SPDR S&P Homebuilders ETF inched down 0.2%.
- Energy Select SPDR ETF lost 1%.
- Health Care Select Sector SPDR Fund retreated 0.35%.
- Industrial Select Sector SPDR Fund dipped 0.3%.
- Financial Select SPDR ETF gave up 0.6%.
Individual Stock Highlights
Amazon Stock: Amazon shares surged 3.9% to 193.61, surpassing a flat-base buy point of 191.70. The stock now has a market cap of $2.01 trillion, closing above this threshold for the first time. This rise was fueled by an optimistic assessment from Bank of America and a significant boost from Rivian’s joint venture announcement with Volkswagen. Additionally, Amazon is planning to launch a discount section similar to Temu, directly connecting buyers with Chinese suppliers.
Tesla Stock: Tesla shares jumped 4.8% to 196.37, breaking through a 191.08 handle buy point from a two-month consolidation. Despite still being below a declining 200-day line, Tesla’s stock has seen consistent buying, reflected in a strong Accumulation/Distribution Rating of A-. Stifel recently initiated Tesla stock with a buy rating and a 250 price target. Tesla is expected to release its second-quarter delivery figures on July 2.
Arm Stock: Arm shares rose 2.6% to 164.72, reclaiming a buy point of 164 from a deep consolidation phase. Despite a pullback from its highs, the UK-based wireless chip design giant remains well above its 50-day moving average. Arm shares dipped slightly overnight following Micron’s earnings announcement.
Chipotle Stock: Chipotle edged up 0.3% to 65.86, rebounding from an earlier test of its 50-day line. The stock remains above buy points of 64.80 and 65.20, with its recent 50-for-1 split taking effect before Wednesday’s open.
What to Do Now
The stock market rally is continuing its upward trend, which is evident on weekly charts. Investors should consider AI hardware plays like Arm while also exploring opportunities in software, social media, and various non-tech sectors. Making new buys is advisable, but maintaining significant exposure is also a valid strategy.
To stay in sync with market direction and leading stocks, investors should read The Big Picture daily and follow market updates from experts.