Dow Jones Futures Rise as Fed Decision Approaches; Nvidia and Tesla Grab Attention

Dow Jones futures climbed slightly overnight, alongside S&P 500 and Nasdaq futures. The upcoming Federal Reserve meeting, set to conclude on Wednesday afternoon, has investors anticipating a hawkish rate cut.

The stock market has experienced a rally, but with limited breadth, indicating weakness beneath the surface. The Nasdaq index recently dropped from its record highs, while leading growth stocks have faced pressure. The Dow has now hit a concerning milestone, marking the longest streak of declines since 1978.

Nvidia (NVDA) witnessed further declines, adding to its recent troubles after receiving negative comments from Microsoft (MSFT), among others. However, Nvidia's stock managed to recover somewhat from its lowest points. In contrast, Tesla (TSLA) saw a rise, further extending its recent gains.

The action in the market reflects cautious anticipation ahead of the Fed's decision. Investors are watching closely to see if the Fed signals a quarter-point rate cut, which would represent a total of 100 basis points cut over the last three meetings. The Fed's economic projections and commentary from chair Jerome Powell will also play critical roles in shaping market sentiment.

Current Dow Jones Futures Performance

As of now, Dow Jones futures are up by 0.1% compared to fair value. Meanwhile, S&P 500 and Nasdaq 100 futures are also slightly higher.

It is important to note that the overnight movement in Dow futures and other indices does not necessarily predict how the market will behave during the next trading session.

Anticipated Fed Meeting Outcomes

The latest meeting of the Federal Reserve, the last one scheduled for 2024, will conclude on Wednesday at 2 p.m. ET. Many market participants are betting on a quarter-point rate cut, given the solid economic growth and ongoing inflation issues. Investors expect that the Fed will accompany this rate cut with somewhat hawkish guidance.

Key indicators will include the Fed's updated economic forecasts and the policymakers' rate projections, known as the “dot plot,” along with comments from Powell.

Analyzing the Stock Market Rally

The recent stock market rally faced a downturn, as seen in Tuesday's trading session where the Nasdaq's momentum was stultified by poor breadth.

The Dow Jones Industrial Average dropped 0.6% in the latest session, marking its ninth consecutive loss, closing below the important 50-day moving average. The S&P 500 index fell 0.4% but managed to remain above its 21-day line. The Nasdaq composite decreased by 0.3% after reaching previously record heights. Small-cap stocks also struggled, with the Russell 2000 falling 1.2% and nearing its 50-day line.

In addition, the Invesco S&P 500 Equal Weight ETF (RSP) decreased by 0.8%, firmly below its 50-day moving average, while the First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW) dropped by 0.4%, testing its 21-day moving average. The Invesco S&P MidCap Momentum ETF (XMMO) also faced a decline of 1.4%, closing in on its 50-day line.

Despite Tesla's rally, most other major stocks fell, and new investment opportunities were hard to come by amid the overall market decline.

Nvidia's Current Stock Situation

Nvidia's stock price hit an all-time low of 126.86 earlier on Tuesday, which activated sell signals for those who had invested at the previous 140.76 buy point. By the end of the day, shares closed 1.2% lower at 130.39. This marked the fourth continuous day of declines for Nvidia and the eighth drop in the past nine trading sessions. The stock is now 6.3% below its 10-week moving average.

Investors were rattled by comments from Microsoft CEO Satya Nadella which suggested that Microsoft is not currently facing chip supply issues, further denting investor confidence in Nvidia as a major supplier. Additionally, concerns over chip overheating and competition from in-house custom chips are looming over Nvidia's future.

Long-term investors may not need to exit their Nvidia positions just yet, but having a clear exit strategy is advisable.

Tesla's Performance and Future Outlook

Tesla's stock continued its impressive run, gaining 3.6% to reach 479.86. This represents an overall monthly increase of 39%, following a remarkable 38% rise in November.

Recent upgrades from analysts, such as Mizuho increasing its price target to 515, have added to the positive sentiment for TSLA. Sales for Tesla's electric vehicles, particularly in China, remain strong, helping to counteract weaknesses in other regions.

Furthermore, Tesla is rolling out its Full Self-Driving version 13 widely, with significant improvements promised. This technological advancement is crucial for Tesla's future self-driving objectives and has been a strong motivator for TSLA stock lately.

The stock currently sits 16.2% above its 10-day moving average and a remarkable 55.2% above its 50-day moving average, though it showed slight decreases after hours.

Investors are faced with the decision of whether to take profits along the stock's ascent or wait for signs of a downturn. This depends largely on their individual strategies, belief in the stock's potential, and market conditions.

The key is to have a plan established from the outset.

Conclusion and Market Recommendations

The stock market rally is currently under pressure, aside from notable stocks like Tesla. A mixed market presents a higher risk of a larger decline or shifts in sector focus.

With the Fed's anticipated decision on rates approaching, investors should be cautious about new purchases in the short term. However, many stocks are showing potential to form bases or handle formations near their 21-day or 50-day lines, which could lead to good buying opportunities if the market rebounds.

Consistency in monitoring market trends and leading stocks is crucial for making informed investment decisions.

Dow, Jones, Futures