Dow Jones Futures Fall: AI Stock Goes Vertical With Earnings Due; Tesla Near Buy Point

Dow Jones futures, S&P 500 and Nasdaq Futures all fell modestly on Wednesday morning.

Stocks such as Nvidia, which had been leading the rally, fell off their highs. Meanwhile, some breakouts failed.

As Nvidia and other AI stocks continued to run Tuesday morning, so did Tesla (TSLA). By mid-afternoon, the composite had given up all of its gains before closing modestly better.

The S&P 500 was flat throughout the session and the Dow Jones slightly declined.

Some stocks, such as Life Time Group (LTH), and ON Semiconductor, flopped quickly. Some looked overbought.

Box (BOX), Ambarella, HP Inc. and Hewlett Packard Enterprise all reported results on Tuesday night. Box shares rose modestly while HPQ, HPE, and particularly AMBA stocks fell due to results or guidance.

Salesforce.com (CRM), Okta and CrowdStrike, all cybersecurity players, will be in the spotlight on Wednesday night. Meanwhile, white-hot artificial-intelligence play C3.ai (AI) may offer a heat check for AI stocks, including AI stock.

This article includes a video that highlights the Tuesday market action, and analyses Life Time Group stock, ON Semiconductor stock and FLNC.

IBD Stock Of The Day for Tuesday was Fluence Energy, a Tesla competitor (FLNC).

Dow Jones Futures Today

S&P 500 Futures fell 0.4%, and Nasdaq100 futures dropped 0.3%.

The yield on the 10-year Treasury fell 5 basis points, to 3.65%.

After a steep decline on Tuesday, crude oil futures fell by more than 2 percent early Wednesday.

China's official purchasing managers' index for manufacturing fell 0.4 points in May, to 48.8, a level that is further below neutral 50 and despite expectations of a rise to 49.4. The latest indication that China's economic rebound from the end of Covid regulation is waning.

Hong Kong's Hang Seng Index fell by 1.9% and has been in decline since late January.

The Labor Department will release the April JOLTS survey at 10 a.m. The Labor Department will announce the JOLTS April survey on Wednesday at 10 a.m. ET. The number of job openings has dropped sharply, but remains high. It should drop to 9,35 million, from the March figure of 9.59 million. Labor's April job report is due on Friday.

Keep in mind the overnight Dow Futures session.

Stock Market Rally

After the long weekend, the stock market rallied, and the debt ceiling deal was treated as an unimportant event. The Nasdaq's performance quickly shifted from positive to mixed.

In Tuesday's stock exchange trading, the Dow Jones Industrial Average slipped 0.15%. S&P 500 was basically flat. The Nasdaq composite increased by 0.3%. The Russell 2000 small-cap index fell by 0.3%.

Crude oil prices in the United States fell 4.4%, to $69.46 per barrel.

The yield on the 10-year Treasury fell by 12 basis points, to 3.7%.

ETFs

Among growth ETFs the iShares Expanded Tech Software Sector ETF rose by 0.8%. IGV's top holding is CRM, and AI is also included in the ETF. VanEck Vectors Semiconductor ETF SMH grew 0.5%. SMH holds NVDA and Onsemi.

ARK Innovation ETF jumped 1.8%, while ARK Genomics ETF climbed 0.1%. Tesla stock is Ark Invest's top holding.

Global Jets (JETS) rose 0.55%. The SPDR S&P Homebuilders ETF XHB grew by 0.2%. Energy Select SPDR Fund (XLE), and Health Care Select Sector SPDR Fund, both fell by 1%.

The Financial Select SPDR (XLF KRE), a financial select ETF, has dropped by 0.2%

Tesla Stock

TSLA is currently at a 207.89 buying point, which could be a cup bottom or a double bottom consolidation.

Tesla's premarket sales have declined.

Elon Musk, Tesla's CEO, is visiting China for the first since Covid and meeting with government officials. He will likely tour the Tesla plant in Shanghai.

AI Stock

On the eve before earnings, C3.ai's (AI) stock soared by 33% to reach 43.95, a new 18-month high. AI stock has doubled in price since C3.ai reported Q4 preliminary revenue on May 15, which was slightly higher than prior expectations and about flat with a year ago.

AI stocks fell dramatically early on Wednesday as several AI-related plays pulled back.

Market Rally Analysis

Stock market rally is still divided, with a narrow leader.

The Nasdaq began strong, rising by as much as 1,4% and nearly clearing its August high. The composite then erased that gain before closing modestly up. The Nasdaq 100, too, pared its gains as Nvidia stock, Tesla and other stocks fell off their highs. The stock is now 9% higher than its 50-day line, after reaching 10% intraday on Tuesday.

The S&P 500 index, which had reached a new intraday high of nine months, finished flat.

The Dow Jones traded within a narrow range, drifting toward its 200-day. Russell 2000 is still testing its 50-day following last week's reverse from the 200 day.

First Trust Nasdaq 100 Equal Weighted Index ETF QQEW initially reached a 52-week peak, but then reversed to suffer a small loss.

Invesco's S&P Equal Weight ETF, (RSP), has dropped 0.2% but is still below the moving averages.

The decliners are outpacing the advancers.

AI stocks advanced on Tuesday. However, some reversed lower. Nvidia was one of the many that fell well below their early highs. C3.ai made a notable difference.

A few names crossed official buy points on Tuesday morning with mixed results. Life Time and Onsemi stocks broke out but quickly reversed lower.

Arista Networks, (ANET), entered a zone of buy, but it is now 13% above its 50-day line, after a surge of 23.5% in three sessions. FLNC stock was triggered early and finished below a buy point. However, it is now 24% higher than the 50-day line.

What to Do Now

There were very few opportunities or reasons to increase exposure on Tuesday.

Nvidia is one of the few stocks that has been able to outperform. Many stocks are at or near their buy points. However, some are also extended from moving averages.

Many promising stocks, including LTH on Tuesday, have experienced fakeouts or shakeout breakouts in recent weeks. This makes it difficult to gain traction or build positions.

As the rally gains momentum and breadth, buying opportunities will become more consistent. This won't necessarily be obvious at first. Investors should be careful about making new purchases and quickly cut their losses.

The stock could continue to run, but a significant pullback in the next few days would not surprise. NVDA, which briefly reached a valuation of $1 trillion on Tuesday, is now 103% higher than its 200-day line. C3.ai has risen 148% over that long-term value.

Wait for a large, significant drop in the market before you start to sell or reduce your holdings. The size of your AI exposure, your confidence in the theme, individual stocks, and your investing style all play a major role in your decision.

Continue to work on your watchlists.

The Big Picture