Dow Jones futures fell slightly overnight, along with S&P 500 futures and Nasdaq futures, heading into the Fed’s key inflation report. Dell Technologies (DELL) and Costco Wholesale (COST) were notable earnings reports late.

PCE Report, helps gauge the strength of the consumer sector of the economy. This is known as the Federal Reserve’s favorite inflation metric and can influence market watchers’ expectations of interest rate decisions made by the Fed. On this IBD Explains, Ed Carson and Meredith Heyman break down what investors need to know about the data.” vid-name=”How The Fed’s Interest Rate Cuts And Hikes Are Influenced By The PCE Report” vid-cat=”IBD Explains” vid-date=”05/23/2024″ vid-date-tmsp=”1716450329″ vid-image=”https://www.investors.com/wp-content/uploads/2024/05/IfSFuiBp-640×360.jpg” vid-authors=”MEREDITH HEYMAN”>
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The stock market rally saw significantly on the major indexes as Dow giant Salesforce.com (CRM) plunged on weak revenue and guidance. That triggered heavy losses in the software sector, including ServiceNow (NOW) and CrowdStrike (CRWD) with Microsoft (MSFT) breaking key support.

Meanwhile, Nvidia (NVDA) fell, halting a huge earnings run, amid reports of fresh U.S. export restrictions on AI chips.

However, small caps and midcaps rebounded.

Costco, Dell Technologies, NetApp (NTAP) and Marvell Technology (MRVL) reported late. Dell stock plunged overnight. while Marvell and Costco also fell. NetApp stock edged lower.

Nvidia stock is on IBD Leaderboard. Microsoft stock is on IBD Long-Term Leaders. Nvidia and CrowdStrike stock are on the IBD 50.

Core PCE Inflation

The April PCE price index is due out at 8:30 a.m. ET, as part of the Commerce Department’s income and spending report. The overall index is seen rising 0.3% vs. the prior month and 2.7% vs. a year earlier, both the same as in March. The core PCE price index, the Fed’s favorite inflation gauge should show a modest 0.2% monthly gain, down from 0.3% in March. Core PCE inflation should hold steady at 2.8% vs. a year earlier.

Dow Jones Futures Today

Dow Jones futures lost a fraction vs. fair value. S&P 500 futures dipped 0.2% and Nasdaq 100 futures declined 0.3%. Dell stock is an S&P 500 and Nasdaq 100 component.

The 10-year Treasury yield edged down to 4.54%.

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

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Stock Market Rally

The stock market rally had a mixed session, with Salesforce and the software sector weighing on the major indexes even as small caps and many sectors advanced.

The Dow Jones Industrial Average slumped 0.9% in Thursday’s stock market trading, with CRM stock leading the slide. The S&P 500 index slipped 0.6%, just below its 21-day moving average. The Nasdaq composite gave up 1.1%.

Meanwhile, market breadth was solidly positive after losers dominated Wednesday.

The small-cap Russell 2000 jumped 1%, back above the 50-day line. The S&P MidCap 400 also gained 1%, just shy of its 50-day.

The Invesco S&P 500 Equal Weight ETF (RSP) advanced 0.5%, though it’s still below the 50-day line. The First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW) fell 0.4%, now slightly below the 50-day.

U.S. crude oil prices fell 1.7% to $77.91 a barrel. Copper futures declined 2.6%.

The 10-year Treasury yield fell 7 basis points to 4.55%, but is still up for the week.

Software Stocks

Software took a beating Thursday following Salesforce, Nutanix (NTNX) and Okta (OKTA) selling off on results and guidance, following a weak outlook from Workday (WDAY) last week.

Salesforce crashed 19.7%, Nutanix dived 23.1% and Okta reversed lower for a 7.8% slide.

ServiceNow dived 12% to a six-month low. CRWD stock plunged 9.6%, below early entries and the 50-day line, CrowdStrike earnings are due next Tuesday.

Microsoft stock retreated 3.4%, undercutting its 50-day line. It’s still not far from a traditional buy point.

Megacap Stocks

Most megacap techs retreated beyond Microsoft.

Nvidia (NVDA) fell 3.8% on Thursday after soaring 20.9% over the prior four sessions. Reuters reported Thursday afternoon that the U.S. will restrict Nvidia and AMD AI chip sales to the Mideast, in part over fears that some of the chips will end up in China.

Meta Platforms (META) and Amazon.com (AMZN) declined 1.5%, while Google-parent Alphabet (GOOGL) lost 2.15%.

Bucking the trend, Apple (AAPL) edged up 0.5%.

Stock Market Areas Of Strength

On the plus side, Birkenstock (BIRK) and Burlington Stores (BURL) gapped up into buy range on earnings, with the latter also lifting peer TJX Cos. (TJX) back into buy range.

Hospital chains Universal Health (UHS) and HCA Healthcare (HCA) flashed buy signals, while a number of medical names held up or advanced.

Meanwhile, select restaurants, investment managers and overseas e-commerce giants are acting well.

ETFs

Among growth ETFs, the iShares Expanded Tech-Software Sector ETF (IGV) plunged 5.8%, undercutting the 50-day line for the first time since March 2023. Salesforce and Microsoft stock are huge components, with ServiceNow, Nutanix, CrowdStrike and Zscaler stock also in the ETF. The VanEck Vectors Semiconductor ETF (SMH) lost 1.4%, with Nvidia stock and Marvell both members.

Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) slid 1.6% and ARK Genomics ETF (ARKG) rose 0.6%.

SPDR S&P Metals & Mining ETF (XME) climbed 12.1% and the Global X U.S. Infrastructure Development ETF (PAVE) added 0.9%. U.S. Global Jets ETF (JETS) ascended 0.7%. SPDR S&P Homebuilders ETF (XHB) stepped up 1.7%. The Energy Select SPDR ETF (XLE) edged up 0.3% and the Health Care Select Sector SPDR Fund (XLV) rose a fraction.

The Industrial Select Sector SPDR Fund (XLI) gained 0.7%. The Financial Select SPDR ETF (XLF) climbed 0.5%.

Time The Market With IBD’s ETF Market Strategy

Key Earnings

Costco earnings slightly topped views but COST stock fell modestly in overnight trade. Shares rose 1.1% in Thursday’s regular session to 815.34, near the top of a buy zone with a 787.08 cup-base entry.

Dell earnings met FactSet views though missed some other consensus forecasts. Revenue beat, returning to growth. The PC and server maker turned AI play gave lackluster guidance. Shares dived more than 15% in extended action. Dell stock fell 5.2% to 169.92 on Thursday, but it was an inside day after hitting a record high Wednesday.

NetApp earnings edged past views. NTAP stock tilted lower overnight. The data storage giant dipped 0.85% on Thursday to 116.50, after hitting a record high intraday. NetApp stock closed modestly extended from a double-bottom buy point. NetApp rival Pure Storage (PSTG) edged up 0.4% on Thursday after a wild session, hitting a new high following its own results Wednesday night.

Marvell earnings and sales were largely in line with views. MRVL stock declined solidly in extended trade. The data center chipmaker rose 1.4% to 76.85 intraday, back above a 76.29 buy point from a double-bottom base.

What To Do Now

The market rally continues to be divided, though some of the winners and losers changed places.

So far this uneven market pause or pullback has let some stocks form handles or quickly show relative strength. A few stocks have flashed buy signals, though often from big earnings gap-ups.

Investors could choose to nibble on new positions, or hold what they have, aside from cutting losers.

If the market resumes a broad advance many more buying opportunities will appear. But if a split rally turns into a general slide, investors want to be ready to scale back their investments.

Keep updating your watchlists and your exit strategies.

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

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

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