Dow Jones futures rose after hours, along with S&P 500 futures and Nasdaq futures.
The stock market rally cleared June highs on Wednesday as the CPI inflation report came in lighter than expected, lowering government bond yields and fears of rate hikes by the Fed. Overall CPI inflation fell from 4% in May to 3%. Core CPI inflation fell from 5.3% to 4.8%.
Nasdaq and S&P 500 hit new highs in 52 weeks as many stocks flashed buy signals.
Nvidia (NVDA) and Microsoft (MSFT), two giants benefiting from artificial intelligence, flashed buy signals on Wednesday. So did AI-exposed chipmakers Taiwan semiconductor (TSM), Monolithic energy systems (MPWR) and ST Microelectronics (STM). Other AI games that led to purchases included Chinese internet giants alibaba (BABA) and Baidu (BIDU) as well Arista Networks (A NET).
Some cybersecurity games fell hard as Microsoft expanded its security offerings this week.
Delta Airlines (Valleys Confirmation (FAST) report early Thursday.
Nvidia stock is on IBD Leaderboard. ANET Shares and Monolithic Power are listed on SwingTrader. Microsoft stock and Monolithic Power are on IBD Long-Term Leaders. MPWR stock is at the IBD 50. Taiwan Semiconductor was the IBD stock of the day on Wednesday.
The video embedded in the article discussed and analyzed Wednesday’s bullish market action Cava Group (CAVA), Shopify (SHOP) and MPWR stock.
Dow Jones Futures Today
Dow Jones futures rose a fraction from fair value. S&P 500 futures rose 0.1% and Nasdaq 100 futures rose 0.1%.
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 stock market rally rose sharply on weaker-than-expected inflation data.
The Dow Jones Industrial Average rose 0.3% during Wednesday trading. The Dow briefly peaked in 2023, but closed near session lows. The S&P 500 index rose 0.75% and the Nasdaq index rose 1.15%, both at their best levels in more than a year. The small-cap Russell 2000 rose 1.1%, its fourth straight gain of at least 1%.
The Invesco S&P 500 Equal Weight ETF (RSP) climbed 0.5% to its highest level since mid-February. The First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW) rose 0.6% to a 52-week high.
The 10-year Treasury yield fell 12 basis points to 3.86%, after briefly reaching a 2023 high of 4.09% on July 9. quarter-point movement this year.
With yields falling, the US dollar sold hard and retreated for a fifth consecutive session. This gave a boost to equities and especially commodities.
US crude oil prices rose 1.2% to $75.75 a barrel. Copper prices rose by 2.4%.
Among growth ETFs, the Innovator IBD 50 ETF (FFTY) was up 0.4%. The iShares Expanded Tech-Software Sector ETF (IGV) climbed 0.55%. MSFT stock is a major IGV component. The VanEck Vectors Semiconductor ETF (SMH) rose 2.1%. NVDA stocks and Taiwan Semi are SMH’s two largest holdings, while STM and MPWR stocks are also part of the ETF.
Reflecting more speculative story stocks, ARK Innovation ETF (ARKK) was up 0.9% and ARK Genomics ETF (ARKG) was up 3.6%.
SPDR S&P Metals & Mining ETF (XME) rose 1.2%. US Global Jets ETF (JETS) fell 0.8% as the June CPI report showed airfares falling. DAL stock is an important JETS component. SPDR S&P Homebuilders ETF (XHB) rose 2.15. The Energy Select SPDR ETF (XLE) was up 0.9% and the Health Care Select Sector SPDR Fund (XLV) was down 0.3%.
The Industrial Select Sector SPDR Fund (XLI) lost 0.2%.
The Financial Select SPDR ETF (XLF) rose 0.6%. The SPDR S&P Regional Banking ETF (KRE) posted a 2% gain.
Five best Chinese stocks to watch right now
AI stocks in buy zones
Nvidia shares rose 3.5% to 349.02, a new closing high and above most of a four-week tight pattern. The official buy point is 439.90. Nvidia will invest $50 million Repetition (RXRX) AI models used for drug discovery. The AI chip giant could reportedly be an anchor investor in an upcoming Arm Holding IPO.
Microsoft stock rose 1.4% to 337.20, extending the gain from the 10-week line and reclaiming the 21-day line. Investors were able to nibble on this, although MSFT stock met resistance at a short trendline and some short-term highs. The Dow technology is on track for a tight three-week period within an emerging flat base.
Taiwan Semi-stocks rose 2.6% to 103.90, marking a rise from the 21-day and 10-week lines, as well as the top of a previous base. TSM shares also broke a short downtrend in another consolidation. The chip foundry giant is playing indirect AI by making chips for Nvidia, Broadcom (AVGO), amd (AMD) and others. Taiwan Semi-earnings for the second quarter are expected early on July 20.
Artificial intelligence and AI stock news to watch
The BABA share rose 2.4% to 94, breaking a downward trend that stretched back to the end of January. Alibaba has surged in above-average trading for four straight sessions and reclaimed the 200-day line on Friday.
BIDU shares gained 3.8% to 148.83, breaking a handle downtrend as well as a trendline stretching back to the end of March. Baidu shares have a buy point of 151 handles.
ANET shares broke a trendline within a 17% deep consolidation and rose 2.4% to 164.04. The volume was below average, but was the highest so far this month. Arista is a major supplier to Microsoft and Meta platforms (META).
MPWR share rose 3.4% to 561.04, erasing a flat-base buy point of 553.64, extending a bounce from the 21-day line.
STM shares rose 4.6% to 51.66, breaking out above a buy point of 50.30 cups with handle, according to MarketSmith’s analysis. STM has a range of clients including Tesla (TSLA) and Alibaba.
Analysis of the market rally
The stock market rally sees new highs for the Nasdaq composite and S&P 500 indices, with Nvidia shares entering new buying territory on Wednesday and many others continuing bullish moves. The market breadth has improved dramatically through a variety of measures.
These are all very positive signs. The only concern is that the Nasdaq is back 6.6% above its 50-day line and the Nasdaq 100 7% above that key level. That’s not extreme, but it doesn’t take much. That could mean another pushback blocking or undermining recent purchases.
Time the market with IBD’s ETF market strategy
What to do now
This week has provided many opportunities for investors to expand existing positions or take new positions. If you do this gradually on any given day, it can quickly add up as the market and your buyers work. If conditions falter, even if only temporarily, you are protected against a sudden drop in your portfolio.
If you are an active investor, you don’t just make your money work for you, you work for your money. Much of that work goes through screens and keeping your watchlists up to date.
While the macroeconomic headwinds are currently easing, earnings season is about to get underway. So pay attention to the profit results for your holdings and key rivals, suppliers and customers.
Read The Big Picture every day to stay in sync with market direction and leading stocks and sectors.
Follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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