by Dow Jones futures were little changed after hours, along with S&P 500 futures and Nasdaq futures.
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The stock market rally ended on a mixed note on Tuesday, but leading stocks like Nvidia rallied as some new breakouts fizzled.
The Nasdaq initially outperformed like Nvidia (NVDA) and other AI stocks continued to pivot Tuesday morning, as did Tesla (TSLA). The composite gave up all of its gains by mid-afternoon before closing modestly higher.
The rest of the market was lackluster throughout the session, with the S&P 500 flat and the Dow Jones slightly lower.
Not many stocks were usable on Tuesday, and some of them flopped quickly, including Lifetime group (LTH) and ON Semiconductor (ON). Others looked stretched out.
PC and printer giant HP Inc. (HPQ), Hewlett-Packard Enterprise (HPE), Ambarella (AMBA) and Box (BOX) reported Tuesday night. Box shares rose slightly, while HPQ, HPE and especially AMBA shares fell on results or guidance.
Salesforce. com (CRM) looms on Wednesday along with artificial intelligence white-hot play C3.ai (KI).
The video embedded in this article highlights Tuesday’s market action and analyzes the shares of Life Time Group, ON Semiconductor and FLNC.
Tesla rival Fluence energy (FLNC) was the IBD stock of the day on Tuesday.
Dow Jones Futures Today
Dow Jones futures fell 0.2% from fair value. S&P 500 futures fell 0.1% and Nasdaq 100 futures rose a fraction.
The 10-year Treasury yield fell 2 basis points to 3.68%.
China’s official purchasing managers index for manufacturing fell 0.4 points to 48.8 in May, further below the neutral level of 50 and defying expectations for an increase to 49.4. It is the latest sign that China’s economic revival is fading after the end of Covid regulations.
At 10 a.m. ET on Wednesday, the Labor Department will release the April JOLTS survey. Vacancies, which fell sharply but remain high, should fall to 9.35 million from March’s 9.59 million. Labor’s April jobs report is due on Friday.
Remember that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular trading session.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live
Stock market rally
The equity market rally after the long holiday weekend treated the tentative deal on the debt ceiling as a non-event. A positive opening was soon mixed, with the Nasdaq coming off the highs well.
The Dow Jones Industrial Average fell 0.15% during Tuesday’s stock trading. The S&P 500 index was essentially flat. The Nasdaq composite rose 0.3%. The small-cap Russell 2000 fell 0.3%.
US crude oil prices fell 4.4% to $69.46 a barrel.
The 10-year Treasury yield fell 12 basis points to 3.7%.
ETFs
Among growth ETFs, the iShares Expanded Tech-Software Sector ETF (IGV) rose 0.8%. CRM shares are a top holding of IGV, with AI shares also in the ETF. The VanEck Vectors Semiconductor ETF (SMH) climbed 0.5%. NVDA Shares is a large SMH holding company, with Onsemi also a part.
Reflecting stocks with more speculative narratives, the ARK Innovation ETF (ARKK) was up 1.8% and the ARK Genomics ETF (ARKG) was up 0.1%. Tesla stock is the top holding of Ark Invest’s ETFs.
The SPDR S&P Metals & Mining ETF (XME) fell 1.8%. US Global Jets ETF (JETS) rose 0.55%. The SPDR S&P Homebuilders ETF (XHB) climbed 0.2%. Energy Select SPDR (XLE) was down 1% and the Health Care Select Sector SPDR Fund (XLV) was down 0.6%.
The Financial Select SPDR ETF (XLF) closed just short of break-even. SPDR S&P Regional Banking (KRE) fell 0.2%
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Tesla stock
Tesla soared 4.1% to 201.16, just breaking the 200-day mark. Shares reached 204.48 intraday. TSLA shares are working at a buy point of 207.89 from what is a cup base or a double bottom consolidation.
Tesla CEO Elon Musk is in China for the first time since before Covid to meet with top officials. He will probably be given a tour of the Tesla factory in Shanghai.
AI stock
C3.ai (AI) shares surged 33% to 43.95 to an 18-month high on the eve of gains. AI shares have more than doubled since C3.ai reported preliminary Q4 earnings on May 15 that were slightly above previous targets and about level with a year earlier.
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Analysis of the market rally
The stock market rally remains divided with narrow leadership.
The Nasdaq started off strong, rising as much as 1.4% and nearly past its August peak. But the composite erased all that before closing modestly higher. The Nasdaq 100 also made gains as Nvidia, Tesla stock and others posted high numbers. It is now 9% above its 50-day line after peaking at 10% at one point on Tuesday.
The S&P 500, which hit a new nine-month intraday high, finished flat.
The Dow Jones drifted toward its 200-day mark, but was trading within a narrow range. The Russell 2000 continues its 50 days of testing after last week’s reversal of the 200 days.
The First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW) initially broke to a 52-week high, but reversed for a fractional loss.
The Invesco S&P 500 Equal Weight ETF (RSP) fell 0.2% and is still below moving averages.
Decliners were modestly faster than the progressives.
AI shares were generally up on Tuesday, though a few reversed lower and many, like Nvidia, came out of early highs well. C3.ai was a notable exception.
A few names made official buy points on Tuesday morning, with mixed results. Life Time and Onsemi shares broke out, but soon fell lower.
On the positive side, Arista Networks (ANET) entered a buy zone, but is 13% above the 50-day mark after rising 23.5% over three sessions. FLNC shares caused an early entry, finishing just below an official buy point, but it is 24% above the 50-day mark.
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What to do now
A split market rally is not a great situation, and there were few reasons or even opportunities to add exposure on Tuesday.
Not many stocks work, and most of those winners are comprehensive, like Nvidia. A decent number of stocks are near buy points, although some are extending from moving averages.
In recent weeks, many promising stocks have staged fakeout-or-shakeout outbreaks, such as LTH stocks on Tuesday. That makes it difficult to progress or build positions.
At some point, buying opportunities will work more consistently as the market rally shows broader breadth and leadership. But that probably won’t be immediately obvious. So investors should be careful with new purchases and limit losses quickly.
If you own some red-hot artificial intelligence games like Nvidia or AI stocks, enjoy the ride. They could continue to run, but significant pullbacks would come as no surprise in the days to come. NVDA shares, which briefly topped $1 trillion on Tuesday, are 103% above the 200-day line. C3.ai is 148% above that long-term level.
You might be waiting for a big, heavy downside reversal before you start exiting or splitting positions. Naturally, the size of your AI-related exposure, your belief in the theme and individual stocks, as well as your own investment style will play a major role in your decisions.
Keep working on your watchlists.
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