Dow Jones Futures Fall; Market Rally Pauses, Microsoft AI Chip Hits Nvidia; 3 Tech Giants Dive Late

Dow Jones futures fell slightly Thursday morning, along with S&P 500 futures and Nasdaq futures. Palo Alto Networks (PANW), Cisco Systems (CSCO) and Alibaba (BABA) tumbled on earnings. Walmart (WMT) also retreated.

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The stock market rally added to Tuesday’s broad, powerful gains but closed off well off Wednesday’s intraday highs. Treasury yields bounced back after plunging Tuesday.

President Joe Biden met with China’s Xi Jinping near San Francisco on Wednesday.

Microsoft (MSFT) unveiled an in-house AI chip Wednesday, along with one powered by Arm Holdings (ARM) designs. The Microsoft AI chips will help lessen the Dow titan’s dependence on Nvidia (NVDA). Advanced Micro Devices (AMD), Super Micro Computer (SMCI), ARM stock also moved on the Microsoft news.

Tesla (TSLA) reclaimed the 50-day line while Chinese EV rivals Li Auto (LI) and BYD (BYDDF) flashed buy signals.

Microsoft and Nvidia stock are on IBD Leaderboard. MSFT stock is on the IBD Long-Term Leaders list. LI stock, Super Micro, Nvidia and Microsoft are on the IBD 50. PANW stock and Microsoft are on the IBD Big Cap 20.

Dow Jones Futures Today

Dow Jones futures fell 0.15% above fair value. S&P 500 futures lost 0.1%. Nasdaq 100 futures declined 0.3%.  Cisco and WMT stock both drags on blue chips. Cisco stock and Palo Alto are Nasdaq 100 components. All three are S&P 500 members.

The 10-year Treasury yield fell a few basis points to 4.5%.

Crude oil futures declined slightly.

Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.

Key Earnings

PANW stock fell solidly in extended trade, but off initial lows. Palo Alto earnings topped fiscal Q1 views and gave a positive EPS and revenue outlook, but the cybersecurity giant cut its full-year billings target. Shares had fallen 1.9% Wednesday to 256.18, dropping below a 258.88 buy point.

Peers Zscaler (ZS) and CrowdStrike (CRWD) fell modestly early Thursday on Palo Alto’s results.

CSCO stock plunged overnight. Cisco earnings topped fiscal Q1 views but the Dow Jones networking giant cut full-year guidance. Shares edged up 0.2% to 53.28 on Wednesday, slightly below the 50-day line.

Arista Networks fell modestly in extended action.

Early Thursday, WMT stock fell solidly. Walmart earnings and revenue slightly beat views, helped by e-commerce. The retail giant raised full-year EPS guidance, but still below analysts consensus. Walmart stock rose slightly Wednesday within a buy zone as rival Target (TGT) skyrocketed on strong results.

BABA stock tumbled in premarket trade as Q2 EPS slightly beat but revenue missed. Alibaba also said it won’t go ahead with the full spin-off of its cloud intelligence group. Shares gained 3.8% Wednesday as JD.com (JD) beat views, though both Chinese e-commerce giants are well off highs.

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Stock Market Rally

The stock market rally extended its advance Wednesday, but pared gains amid rebounding Treasury yields and Microsoft’s AI announcements.

The Dow Jones Industrial Average rose 0.5% in Wednesday’s stock market trading. The S&P 500 index climbed nearly 0.2%. The Nasdaq composite eked out a 0.1% advanced.

The Nasdaq moved above its September high intraday, but pulled back. The Nasdaq 100 came within a whisker of July’s 52-week high.

The small-cap Russell 2000 rose 0.2%, slashing intraday gains after hitting resistance around the 200-day line. The Invesco S&P 500 Equal Weight ETF (RSP) climbed 0.5%, just below its 200-day. Both reclaimed their 50-day lines on Tuesday.

A pause in growth stocks that have been running up while market breadth improves seems constructive. Both elements could create new buying opportunities.

U.S. crude oil prices fell 2% to $76.66 a barrel.

The 10-year Treasury yield popped 9.5 basis points to 4.535% after plunging 19 basis points on Tuesday.

ETFs

Among growth ETFs, the iShares Expanded Tech-Software Sector ETF (IGV) fell 0.6%, with MSFT stock a major holding and Palo Alto also a significant component. The VanEck Vectors Semiconductor ETF (SMH) xedged up 0.1%. Nvidia stock is the top component, with AMD also a notable holding.

Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) and ARK Genomics ETF (ARKG) both popped 2.5%. TSLA stock remains a major holding across Ark Invest’s ETFs.

SPDR S&P Metals & Mining ETF (XME) advanced 0.2% SPDR S&P Homebuilders ETF (XHB) declined 0.2%. The Energy Select SPDR ETF (XLE) dipped 0.2% and the Health Care Select Sector SPDR Fund (XLV) inched up 0.1%.

The Industrial Select Sector SPDR Fund (XLI) edged up 0.2%. The Financial Select SPDR ETF (XLF) advanced 0.55%.

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Microsoft AI Chips

Microsoft unveiled the Azure Maia AI chip and Arm-powered Azure Cobalt CPU at its Ignite 2023 conference. The aim is to lessen its dependence on Nvidia AI chips. There had been rumors earlier in the year that Microsoft was working with AMD on AI chips.

Microsoft plans to roll out the Maia AI chip to its data centers early next year. It will power Microsoft Copilot and Azure OpenAI services. Azure Cobalt is a general-purpose data center chip, also coming in 2024.

MSFT stock inched up 13 cents to 369.65, in range of a 366.78 cup-base buy point.

Nvidia stock sank 1.55% to 488.88, retreating from Tuesday’s record close but paring losses. Shares are still above a 476.09 double-bottom buy point. Nvidia earnings are due Nov. 21.

AMD stock fell 1.6% to 118. Shares have been running up the right side of a cup base following earnings. The buy point is 132.83, but a handle would be useful.

ARM stock popped 3.7% to 55.43. The U.K. wireless chip designer came public at 51 a share, hitting 69 on Sept. 15, its second day of trading. But shares tumbled to 46.50 last month. Investors could use resistance just above 56 as an early entry.

SMCI stock retreated to 287.78. Super Micro has been a big AI winner with Nvidia chips running on its servers, though it should be able to work with a variety of AI chips. SMCI stock is trading around some early entries after spiking 14.9% on Tuesday. Shares have an official 317.50 buy point from an ungainly double-bottom base, according to MarketSmith analysis.

Tesla Stock

Tesla stock rose 2.3% to 242.84, retaking its 50-day line for the first time in several weeks. Shares have rallied for four straight days, all on above-average volume. TSLA stock is building the right side of a double-bottom base with a 278.98 buy point. A downward-sloping trendline, currently above 255, might offer an early entry.

Li Auto stock climbed 1.7% to 40.53, moving above a 40.14 early buy point from a too-low handle. The maker of extended-range EVs will begin presales of its first all-electric vehicle, the MEGA minivan, on Friday.

China EV and battery giant BYD stock advanced 1.1% to 32.30. Shares rebounded from their 50-day line Tuesday to clear an aggressive entry. A safer, but still-early entry would be at 32.76 or 32.80. BYD also will have several key events on Friday, the start of an auto show.

Meanwhile, XPeng (XPEV) reversed higher following mixed third-quarter results, climbing 2.3% to 17.39. That’s near a short-term high of 17.91 that could offer an aggressive entry.

Tesla Rebounds, While Archrival Flashes Buy Signal

What To Do Now

With the market running up so much in the past couple of weeks, a lot of leaders are extended from buy points and moving averages. Investors could have made some new buys or adds, but standing pat was fine. This is why it’s a good idea to start building exposure from the follow-through day.

Don’t buy extended stocks. Keep updating your watchlists. There should be a lot of turnover from the past week or two. Make sure to cast a wide net, so you don’t miss industrials, housing, travel stocks and more setting up or moving out.

Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.

Please follow Ed Carson on X/Twitter at @IBD_ECarson, Threads at @edcarson1971 and Bluesky at @edcarson.bsky.social for stock market updates and more.

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