Dow Jones futures, S&P 500 and Nasdaq Futures all rose overnight.
Stocks closed Wednesday with a mixed performance, despite a CPI report that was tame and Alphabet's (GOOGL) big move. The Nasdaq jumped up to a new 2023 high while the S&P500 had a modest advance.
Google sent out buy signals when it touted the artificial intelligence work it is doing to try and beat Microsoft (MSFT). Advanced Micro Devices, another AI player, has continued its recent big bounce.
The Nasdaq didn't reflect the strength of the market. Aside from a few megacap techs, and some software names that were downgraded, it was not as strong as suggested.
The S&P 500 trailed the Nasdaq, while the Dow Jones fell and the S&P 500 ETF with equal weight also declined.
Last but not least, the number of buyers remained low.
Investors should temper their bullishness, even though these aren't reasons for being bearish.
Late Wednesday, Walt Disney (DIS), Trade Desk Markets (HOOD), DoubleVerify Markets (DV), Maxeon Solar Technologies MAXN, Sonos (SONO), and Allegro Microsystems ALGM reported.
Disney's earnings were mixed, but the streaming losses decreased as price increases offset Disney+ subscribers losses. After hours, DIS shares fell sharply.
Trade Desk beat expectations and guided higher. TTD's stock price rose modestly after closing below buy points.
DoubleVerify's earnings and revenue are at their highest. The DV stock surged late, signaling that it is moving back above the 50 day line.
Robinhood exceeded forecasts. HOOD shares rose modestly during extended action, but have been trading below moving-averages.
Maxeon Solar surpassed EPS expectations and raised EBITDA guidance for the full year. MAXN's stock rose late, after it bounced off its 10-week line.
The EV-exposed chipset maker is still recovering after an April sale.
Stocks of smart speaker maker Sonos plunged after the company guided to low.
Microsoft shares are on IBD leaders Flywire (FLYW), and Axon (AXON)
Dow Jones Futures Today
Dow Jones futures were slightly higher compared to fair value. DIS is a Dow component. S&P 500 and Nasdaq futures both rose by 0.2%.
The Labor Department releases the weekly unemployment claims and April producer price index at 8:30 am. ET Thursday.
Keep in mind that overnight trading in Dow futures or elsewhere may not necessarily translate to actual trading during the next regular session of the stock market.
Google AI efforts
Google's annual developer conference on Wednesday focused on artificial intelligence. The internet giant announced that it will bring AI to search. Google has explained in detail how it will keep ads within search results.
Google's stock rose 4.1% to 111.75 and hit an eight-month record. GOOGL is only a few cents away from the 106.69 cup with handle buy point that was cleared on April 6th. Investors could also use the high of April 6, 109.17, as an entry.
Google has accelerated its AI efforts to catch up with Microsoft (MSFT), who uses OpenAI's ChatGPT in search, among other things.
The MSFT stock rose 1.7% to 312.31, forming a tight base that could last three weeks around the 52-week high.
AMD shares rose 2.1% to 97.06 despite a slight retreat from morning highs. AMD stock, which fell on May 3 due to weak guidance, has risen 19% since then, even surpassing its 50-day line. The bounce began after a report that AMD was working with Microsoft on an AI chip. Even after Microsoft partially denied the report, the advance continued.
Google has also unveiled a folding phone for $1,799, the Pixel Fold.
Stock Market Rally
Stock market rallies started strong, but then waned before GOOGL stock boosted the Nasdaq 500 and S&P 500.
In Wednesday's trading, the Dow Jones Industrial Average fell by 0.1%. The S&P 500 index rose 0.45%. Nasdaq Composite jumped by 1%. The Russell 2000 small-cap index rose 0.6%.
The U.S. crude prices dropped 1.6% to $72.56 per barrel, ending a three-day winning streak.
The yield on the 10-year Treasury fell by 8 basis points, to 3.44%.
The Innovator IBD ETF (FFTY), which is a growth ETF, has gained 0.65%. The iShares Expanded Tech Software Sector ETF climbed by 1.4% with MSFT as a major component. VanEck Vectors Semiconductor ETF grew by 0.8%. SMH's key holding is AMD.
ARK Innovation ETFs (ARKK) and ARK Genomics ETFs (ARKG), which reflect more speculative stocks, both advanced by 1.4%.
Energy Select SPDR Fund XLE (XLE) fell 1.1%, while Health Care Select Sector SPDR Fund XLV (XLV) gained 0.3%.
The Financial Select SPDR ETF slipped 0.6%. The SPDR S&P Regional Banking ETF KRE lost 1%. KRE has fallen 3.4% this week.
Market Rally Analysis
On Wednesday, the Nasdaq finally surpassed its 2023 highs. This is what growth investors had been waiting for for weeks. Volume was higher on Wednesday than it was on Tuesday.
The Nasdaq fell at the opening, but rebounded by mid-afternoon. Google, Microsoft, AMD and Apple (AAPL) are all to be credited for the rise in Google's stock.
The S&P 500 recovered to a modest gain, but it did not confirm Nasdaq reaching a new record. This is a slight divergence in the market so far this month.
Divergence continued between megacap technology and the broader markets. The NYSE and Nasdaq saw modest gains by the advancers, but not a dramatic, wide-ranging one.
First Trust Nasdaq 100 Equal Weighted Index ETF QQEW (QQEW), which is up 0.6% but still a distance away from the 2023 highs, bounced off its 50-day line. The Nasdaq itself jumped 1.1% and reached yet another 2023 record.
The Invesco Equal Weight ETF for the S&P 500 (RSP), closed a fraction lower than its previous closing price, but still below all of its major averages.
The Nasdaq 100 was dominated by names like Datadog (DDOG), and Zscaler, which are bouncing but still far below their highs.
There were not many stocks available to purchase.
Investors could have purchased Celsius (CELH), Exact Sciences(EXAS), or Li Auto (LI) based on a gap-up in earnings. These gap-ups have held up but are risky in the current market.
FLYW's stock moved nicely intraday after earnings but faded beneath a clear entry.
What to Do Now
Investors may have been able to increase exposure slightly on the market on Wednesday. However, it was not clear what would work. Staying mostly cash is a sound strategy. This is not the time to invest heavily.
It would be concerning if the market continued to show a narrow spread or diverge. If the S&P 500 reaches new highs, and the market breadth improves, then the rally may be about to pick up.
Investors should keep an open-minded mindset and not be confined to bullish or negative thinking. Continue to look for new stocks. Many stocks have been rising in recent weeks.
Earnings season is not to be forgotten. Although the megacaps have been removed, stocks continue to make huge movements on earnings. Many of them are down. Airbnb (ABNB), Axon Enterprise, and CELH were all big losers on Wednesday.
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