Key Takeaways
Tech Stocks Led Tuesday’s Rally
Dow Benefited From Sector Rotation, Diverging From Nasdaq’s Movements For First Time Since 1995.
Earnings From FedEx Better Than Expected
Stocks rallied on Tuesday allowing the Nasdaq to break a three-day slump. Shares of the tech dominated index gained 1.26% while the S&P 500 was also up on the day, gaining 0.39%. At the same time, the Dow Jones Industrial Average fell 0.76%.
I don’t often mention the Dow in these columns because most traders do not follow it all that closely. However, we have seen a bit of sector rotation lately with the Dow being the beneficiary of that. In fact, the Dow and Nasdaq have moved in opposite directions in eight out of the last ten days. That is something that hasn’t happened since April of 1995, according to Dow Jones Market Data. We also saw a slight divergence between the S&P 500 and Nasdaq on Monday. According to tastylive, that is something that only happens about 14.5% of the time. However, indices are largely incapable of clean breaks from one another and tend to converge the following day, which is exactly what we saw happen from Monday to Tuesday.
Yesterday’s move was tech-driven and largely a result of Nvidia’s 6.8% gain. That ended what had been a 9% drop between last Thursday and Monday. Shares of Nvidia are indicated higher by another 2% in premarket. And though the tech sector was the primary beneficiary of yesterday’s move, it wasn’t the only sector to see gains. Shares of cruise company Carnival gained nearly 9% on better than expected earnings.
Speaking of earnings, shares of FedEx surged higher by 15% in after-hours trading Tuesday. The company beat on earnings and revenues amidst a massive $4 billion cost cutting effort. The earnings beat also comes following a 10% increase in the company’s quarterly dividend, which was announced earlier this month. Meantime, shares of General Mills are down a little over 4% in premarket following a mixed earnings report and forward-looking guidance that came in lower than expected. The cereal-maker said it is seeing consumers trade down to less expensive brands as a result of inflationary pressures.
Tonight, after the close, Micron will report their latest earnings. Micron shares are up over 65% so far this year and expectations for the most recent quarter are high. Therefore, I’ll be very closely monitoring not only what the company says about the most recent quarter, but also what they see moving forward. Then tomorrow after the close, Nike will report. Nike’s stock has struggled this year with shares down around 13%.
One of the bigger stories heading into today is the Japanese Yen. The currency is down to its lowest level since December of 1986, according to Reuters. That has Japanese officials warning of possible intervention and is something I’m closely monitoring.
Other stocks in the news include Rivian. On Tuesday, Volkswagen announced they are considering investing as much as $5 billion in the electric vehicle maker. Shares of Rivian are up nearly 40% in premarket. I’m also keeping an eye on Microsoft following charges of antitrust violations by the European Union (EU) related to the company’s Office 365 offering which includes the bundling of Teams. Those allegations come shortly after the EU also announced charges against Apple for breaching the bloc’s Digital Markets Act.
For today, I’m watching to see if we can get some follow through following yesterday’s gains. Although we saw some pressure on tech stocks relatively recently, the overall market hasn’t shown signs of concern. The VIX remains well below its historical average after falling over 3.5% on Tuesday to close at 12.84. I’m also watching bonds which have been rallying of late. The yield on the benchmark 10-year note closed just below 4.24% on Tuesday, which is down from 4.74% as recently as April. We are going to have a bunch of economic data releases on Thursday and Friday, with Personal Consumption Expenditures (PCE), the Fed’s preferred gauge for measuring inflation, due out on Friday. As always, I would stick with your investing plans and long-term objectives.
tastytrade, Inc. commentary for educational purposes only. This content is not, nor is intended to be, trading or investment advice or a recommendation that any investment product or strategy is suitable for any person.
