Title: Stock Market Rally Stumbles as Tech Stocks Reverse Gains Ahead of Fed Chief Powell’s Jackson Hole Speech
Date: [Current Date]
After an initially positive start, the stock market rally took a hit on Thursday as major indexes faced resistance near the 50-day line and reversed lower, closing near session lows. Nvidia (NVDA), the AI chip leader, saw its big initial gains erased after blowout earnings, followed by other AI stocks, including MRVL, Broadcom (AVGO), Adobe (ADBE), Palantir Technologies (PLTR), C3.ai (AI), and Super Micro Computer (SMCI).
Earnings reports were also a major focus for investors. Marvell Technology (MRVL) eked past expectations but saw a big downside reversal, resulting in a solid decline in late trade. Workday (WDAY) reported better-than-expected earnings, leading to a rise in overnight trading, while Intuit (INTU) saw its stock decline slightly despite topping earnings estimates and increasing its dividend by 15%.
The upcoming speech by Federal Reserve Chief Jerome Powell at the annual Jackson Hole symposium is attracting significant attention from investors. Powell is expected to signal patience while keeping the possibility of further rate hikes open. However, he is likely to push back on the prospects of rate cuts, citing lower urgency to act due to inflation still being high but coming down. The recent surge in 10-year Treasury yields has also resulted in market rates tightening, reducing the need for official rate hikes.
Investors will closely watch Powell’s speech for insights into rate-hike expectations. Currently, there is a 20% chance of a Fed rate hike in late September, but the odds of a hike by the November 1 meeting have risen to 45%. Expectations of rate cuts have been pushed further into next year.
In after-hours trading, Dow Jones futures remained flat while S&P 500 futures and Nasdaq futures saw minimal changes. However, it is important to note that overnight action does not necessarily translate into actual trading during the next regular stock market session.
The stock market rally opened higher on Thursday but quickly encountered resistance at the 50-day line, resulting in a reversal across the major indexes. The Dow Jones Industrial Average fell 1.1%, the S&P 500 index slumped 1.35%, and the Nasdaq composite saw a 1.9% sell-off. U.S. crude oil prices slightly increased, while copper futures sank. The 10-year Treasury yield rose, while the U.S. dollar continued its climb.
Growth ETFs faced declines, with the Innovator IBD 50 ETF (FFTY) falling 1.6%, the iShares Expanded Tech-Software Sector ETF (IGV) losing 2.3%, and the VanEck Vectors Semiconductor ETF (SMH) slumping 2.6%. Story stocks including ARK Innovation ETF (ARKK) and ARK Genomics ETF (ARKG) also recorded negative returns.
Investors should remain cautious and be prepared to adjust their holdings as needed. While a follow-through day could still occur, it is not advisable to make new buys at this time. Instead, investors may find shorting opportunities as the indexes and key stocks reverse lower from critical levels. Staying engaged, flexible, and maintaining up-to-date watchlists is crucial in the current market environment.
The market correction may last longer and have deeper implications than initially expected, particularly for AI stocks and the tech sector. Non-tech areas and energy stocks are holding up relatively better.
As investors await Powell’s speech, they should actively follow updates on the market direction and leading stocks and sectors through resources like The Big Picture.
Please follow Ed Carson on Twitter at @IBD_ECarson for more stock market updates.
[Disclaimer: This article does not provide investment advice. The author and the AI assistant are not financial professionals. Readers should do their own research or consult a financial advisor before making any investment decisions.]