Dow Jones futures ticked slightly higher overnight, accompanied by gains in both S&P 500 and Nasdaq futures. Investors are keenly anticipating luxury homebuilder Toll Brothers’ (TOL) earnings release, set for Tuesday night, followed by Target (TGT) reporting before Wednesday’s opening bell.
Recent Market Pullback
After a strong two-week rally, the stock market saw a minor pullback on Tuesday, as traders positioned themselves ahead of two critical events: Federal Reserve Chair Jerome Powell’s upcoming speech on Friday and Nvidia’s (NVDA) highly anticipated earnings next week. Nvidia stock dipped modestly in response to the broader market conditions.
Bullish Signals for Key Stocks
Meanwhile, Palo Alto Networks (PANW) and Netflix (NFLX) exhibited bullish buy signals. Meta Platforms (META), Arista Networks (ANET), and Shift4 Payments (FOUR) are also showing promising signs, pausing in a bullish manner after recent gains.
Key Stock Moves
Nvidia remains a key player on the Leaderboard, with its stock also making a strong appearance in the IBD 50, alongside Netflix, Arista, and Meta. Arista is additionally featured on the IBD Big Cap 20. On Tuesday, Palo Alto Networks was crowned IBD Stock of the Day.
Dow Jones Futures Performance
As of early Wednesday, Dow Jones futures rose by 0.1% in premarket trading, alongside a 0.1% gain in both the S&P 500 and Nasdaq 100 futures. The yield on the 10-year Treasury note eased slightly, falling to 3.81%. It’s important to note that overnight movements in Dow futures and other futures markets do not necessarily dictate market performance in the upcoming regular trading session.
Earnings Reports and Forecasts
Toll Brothers posted a strong earnings beat late Tuesday, with revenue surpassing estimates, prompting the luxury homebuilder to raise its future guidance. In after-hours trading, TOL shares climbed higher. During Tuesday’s regular session, the stock dipped 0.1%, closing at 133.52, after facing resistance near a previous buy point of 135.37.
Looking ahead, earnings reports from Target, TJX Companies (TJX), and Analog Devices (ADI) are slated for early Wednesday. TJX shares are nearing a breakout point, while Analog Devices and Target stocks continue to face resistance at key levels.
Stock Market Overview
The stock market rally took a brief pause on Tuesday, with major indexes pulling back slightly. The Dow Jones Industrial Average dipped by 0.2%, while both the S&P 500 and Nasdaq Composite each lost 0.2% and 0.3%, respectively. This ended the eight-session winning streak for both the S&P and Nasdaq. Small caps, represented by the Russell 2000, fell more sharply, losing 1.2%.
This healthy pause follows a strong market run, allowing stocks to potentially form more attractive bases or handles ahead of Friday’s Jackson Hole speech from Powell and Nvidia’s earnings on Aug. 28.
Commodity and Treasury Market Movements
Meanwhile, U.S. crude oil prices declined for the third consecutive session, falling by 0.4% to settle at $74.04 per barrel—a cumulative loss of 5.3% over the past three trading days. The yield on the 10-year Treasury note also edged lower, closing at 3.82%, a decrease of five basis points.
The release of the Federal Reserve’s July 30-31 policy meeting minutes is expected at 2 p.m. ET on Wednesday, offering further insights into Fed policy. However, Powell’s speech on Friday at the Jackson Hole Economic Symposium remains the week’s key event.
ETFs and Sector Performance
Growth-focused ETFs reflected mixed performances on Tuesday. The Innovator IBD 50 ETF (FFTY) slipped 0.65%, while the iShares Expanded Tech-Software Sector ETF (IGV) inched up 0.2%, with Palo Alto Networks being a notable holding. The VanEck Vectors Semiconductor ETF (SMH) fell 1.3%, weighed down by Nvidia’s dip.
Among other sector ETFs, the ARK Innovation ETF (ARKK) dropped 1.2%, while the ARK Genomics ETF (ARKG) pulled back by 1.8%. The SPDR S&P Metals & Mining ETF (XME) lost 0.9%, while the SPDR S&P Homebuilders ETF (XHB) shed 0.7%, with Toll Brothers as a top-10 holding. Energy stocks took a hit, with the Energy Select SPDR ETF (XLE) tumbling 2.6%, while the Health Care Select Sector SPDR Fund (XLV) rose 0.4%. Other key sectors, including the Industrial Select Sector SPDR Fund (XLI) and Financial Select SPDR ETF (XLF), each declined by 0.3%.
Stock Spotlights: Nvidia, Palo Alto, and Netflix
Nvidia: Nvidia shares declined by 2.1% to close at 127.25, ending a six-session winning streak. Despite the pullback, Nvidia maintains a solid technical setup, with a cup base forming and a buy point at 140.76. Investors may eye 136.15 as an earlier entry. Ideally, Nvidia will develop a handle ahead of its earnings release next week.
Palo Alto Networks: Shares of Palo Alto surged 7.2% to 368.01, easily surpassing an early buy point of 345.90 within a deep consolidation. Despite slowing earnings and sales growth, the company’s next-generation cloud-computing products drove a 43% increase in annual recurring revenue.
Netflix: Netflix climbed 1.45% to 698.54, slightly above its 697.49 buy point from a shallow cup base. The stock has seen a strong run, posting gains in 10 of the past 11 sessions, while its relative strength line reached new highs on a weekly chart.
Meta, Arista, and Shift4
Meta Platforms: Meta edged down by 0.5% to 526.73, continuing to consolidate below a buy point of 542.81. The stock remains in a bullish pause near this key level.
Arista Networks: Arista stock inched up 0.5% to 353.79, possibly working on forming a short handle in its current consolidation. The base formation looks promising following earlier volatility and the broader market sell-off in early August.
Shift4 Payments: Shift4 shares fell by 3.1% to 79.16. After a strong earnings-related rebound, the stock is cooling off. Investors may want to wait for the formation of a handle before considering further entries.
Conclusion
As the stock market prepares for a critical week with key earnings reports and major speeches, investors are cautiously navigating recent market volatility. The temporary pullback offers an opportunity for stocks to stabilize and build stronger technical bases. With pivotal events on the horizon, including Jerome Powell’s speech and Nvidia’s earnings, market participants remain vigilant for potential shifts in market dynamics.
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