Dow Jones Futures: Market Runs Into Fed Decision; GME Skyrockets Late, First Republic Tumbles

Dow Jones futures were little changed overnight, along with S&P 500 futures and Nasdaq futures. Nike (NKE) and GameStop (GME) reported after the close. Investors are already turning to Wednesday’s Federal Reserve rate hike decision.

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The stock market rally saw strong gains Tuesday as Treasury Secretary Janet Yellen signaled more support for banks. First Republic Bank (FRC) led a rebound Tuesday, but FRC stock fell solidly overnight as the California-based bank struggles to find a path forward.

Swiss athletic shoe maker On Holding (ONON), EV chip play Aehr Test Systems (AEHR) and Google parent Alphabet (GOOGL) offered buying opportunities on news. ONON gapped on earnings, Aehr rallied on new orders and Google cleared a key level on its AI chatbot.

Tesla stock made a bullish move Tuesday within an emerging bottoming base, as Tesla (TSLA) China sales continue to pick up and Moody’s upgraded its credit rating.

Dow Jones Futures Today

Dow Jones futures edged lower vs. fair value, with NKE stock acting as a drag.  S&P 500 futures and Nasdaq 100 futures tilted higher.

Crude oil futures fell slightly.

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

Fed Meeting

The Fed meeting announcement is due at 2 p.m. ET Wednesday. The odds of a quarter-point rate hike rose to 87% on Tuesday.

Markets also expect a quarter-point Fed rate hike in May, but then see rate cuts starting over the summer.

Along with the Fed rate decision, the central bank will release interest rate hike guidance and economic projections. Fed chief Jerome Powell will speak at 2:30 p.m. ET. His comments about inflation risks, the economy and the banking crisis will all be key.

Key Earnings

NKE stock fell 2%. Nike earnings and revenue topped forecasts but gross margins fell more than expected. Nike stock rose 3.6% on Tuesday to 125.61, moving above 50-day line. The Dow Jones athletic shoe and apparel giant is working on a 131.21 flat-base buy point, according to MarketSmith analysis.

GME stock surged 48% overnight as GameStop delivered a surprise profit, its first since 2021. Revenue unexpectedly rose slightly. That suggests the video game retailer and meme stock would vaulted above the 50-day line and move close to its 200-day lines. GameStop stock rose 4.6% on Tuesday.

ONON Stock

In Tuesday’s session, ONON stock gapped up 26% to 27.26, blasting past a cup-with-handle buy point in massive volume. Earnings came in light, but revenue jumped 92% with the upscale athletic shoe maker offering strong guidance.

Google Stock, AI News

Google on Tuesday released its AI chatbot Bard for testing in the U.S. and U.K. Google is trying to keep pace with Microsoft (MSFT) and its ChatGBT-4 AI tool.

Nvidia (NVDA), whose chips power a lot of AI functions, made a bevy of AI announcements at its annual developers conference.  That included partnerships with Google, Microsoft and Adobe (ADBE), which is getting into the generative AI space.

Google stock rose 3.7% to 104.92, topping its 200-day line and offering an early entry in its cup-shape bottoming base. Nvidia stock, which has surged in 2023 on AI buzz, rose 1.15% to an 11-month high. MSFT stock edged up 0.6%, just below a buy point after surging 12% last week.

AEHR Stock

Aehr Test Systems announced another sizable order early Tuesday. Shares surged 15% to 36.93 on decent volume. AEHR stock is close to a 37.67 buy point, but an early entry Tuesday morning was probably the safer play.

This remains a market rally attempt, not a confirmed uptrend. The Fed rate hike decision Wednesday looms large, while banking concerns remain high.

Nvidia stock is on Leaderboard. ONON stock is as a Leaderboard earnings options play. Microsoft and GOOGL stock are on IBD Long-Term Leaders.

The video embedded in this article discussed Tuesday’s market action and analyzed On Holding, AEHR stock and Google.

Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live

Bank Stocks

The U.S. government is ready to provide further deposit guarantees for smaller banks if there is “risk of contagion,” Treasury Secretary Janet Yellen said before Tuesday’s open.

The Financial Select SPDR ETF (XLF) rebounded 2.5%. JPM stock is a major XLF holding. The SPDR S&P Regional Banking ETF (KRE) bounced 5.8%. FRC stock and PacWest are both KRE components.

FRC stock leapt nearly 30% to 15.78 on Tuesday, but closed well off highs. Shares crashed 47% on Monday. First Republic stock is down 87% in March.

Meanwhile, FRC stock fell 9% after hours.

Banking giants and U.S. officials are discussing possible government backing to encourage a rescue deal for First Republic, Bloomberg reported Tuesday night. That could involve the government taking on First Republic assets with unrealized losses to encourage investors or a buyer. Separately, the California-based bank has hired Lazard and McKinsey as advisers, the Wall Street Journal reported Tuesday night, joining JPMorgan Chase.

Stock Market Rally

The stock market rally attempt showed modest, tech-led gains Tuesday. Volume was light heading into Wednesday’s Fed rate hike decision.

The Dow Jones Industrial Average popped 1% in Tuesday’s stock market trading. The S&P 500 index jumped 1.3%, with FRC stock the biggest gainer after being Monday’s worst performer. The Nasdaq composite leapt 1.6%. The small-cap Russell 2000 popped 1.9%.

U.S. crude oil prices rose 2.75% to $69.50 a barrel. Copper futures bounced 1.1%.

The 10-year Treasury yield jumped 13 basis points to 3.6%. The 2-year Treasury yield spiked 25 basis points to 4.175%, its biggest one-day jump in nearly 14 years.

ETFs

Among growth ETFs, the Innovator IBD 50 ETF (FFTY) rose 2.1%. The iShares Expanded Tech-Software Sector ETF (IGV) climbed 1.8%. Microsoft stock and Adobe are key IGV components. The VanEck Vectors Semiconductor ETF (SMH) edged up 0.3%. NVDA stock is a major SMH holding.

Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) leapt 5.55% and ARK Genomics ETF (ARKG) bounced 3.8%. Tesla stock is a major holding across Ark Invest’s ETFs.

SPDR S&P Metals & Mining ETF (XME) rose 1.5%. SPDR S&P Homebuilders ETF (XHB) advanced 1.4%. The Energy Select SPDR ETF (XLE) jumped 3.5% and the Health Care Select Sector SPDR Fund (XLV) climbed 0.6%.

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Tesla Stock

TSLA stock jumped 7.8% to 197.58, continuing to bounce from the 50-day line and retaking the 21-day moving average. A bottoming base is forming below the 200-day line, which is not ideal. But a breakout from the potential 217.75 buy point would also mean reclaiming the 200-day line.

An aggressive investor could have seen Tuesday’s move as a place to start a TSLA stock position. However, the 200-day line looms as key resistance. In any case, shares are now extended from their 50-day.

Tesla stock jumped as the EV giant’s China registrations rose for a fourth straight week. Also, Moody’s Investors Service raised Tesla’s credit rating out of junk.

Market Rally Analysis

The stock market rally enjoyed strong price gains Tuesday, albeit in light volume. The Nasdaq, led by Tesla stock and Google, moved above its March 6 levels.

The S&P 500 moved above its 21-day line after reclaiming its 200-day line Monday. It’s topped the 4,000 level and is just shy of the 50-day line.

The Dow Jones moved above its 200-day line but hit resistance at the 21-day line. The Russell 2000, which has heavy financial and energy weights, bounced Tuesday but is still some distance from its 200-day and especially 50-day line.

Several chip stocks started strong Tuesday, though volume was often lacking. But many pared gains or even reversed lower. AEHR stock was a big exception.

ONON stock was Tuesday’s big winner, along with Aehr Test Systems.

Several travel-related names showed strength while restaurants are acting well and a number of housing stocks are setting up. But breadth remains relatively narrow. A lot of stocks would need time to repair damage from the past couple of weeks.

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What To Do Now

A number of stocks have flashed buy signals over the past week, many of which have worked. The market rally is picking up. So investors could justify some modest exposure.

But remain cautious. It’s still a market rally attempt, not a confirmed uptrend. The Fed meeting is on tap while banks are still a big question mark.

Investors need to be ready to gradually boost exposure. Build up your watchlists with a focus on stocks that are actionable or nearly so.

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

Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.

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