Dow Jones Futures Increase Ahead of Fed Rate Decision; Focus on Nvidia and Tesla Stocks

Dow Jones futures saw a slight uptick overnight, along with gains in S&P 500 and Nasdaq futures. Investors are awaiting the Federal Reserve's meeting decision set to be announced Wednesday afternoon, which is expected to indicate a hawkish approach towards a rate cut.

The stock market rally has recently shown persistent weakness in breadth. The Nasdaq has retreated from its record highs, and many growth stock leaders are under pressure. Notably, the Dow Jones has experienced its longest losing streak since 1978, losing key support levels.

Nvidia (NVDA) has suffered another decline, prompted by various sell signals, with Microsoft (MSFT) being a recent negative influence. However, Nvidia's stock bounced off its lows during the day. On the other hand, Tesla (TSLA) continued its upward trend, further extending its gains.

Current Futures Activity

As of now, Dow Jones futures have risen by 0.1% compared to fair value, while S&P 500 futures and Nasdaq 100 futures also show a slight increase.

It's important to note that any overnight movements in futures may not necessarily reflect actual trading results in the following market session.

Expectations for the Fed Meeting

The final Federal Reserve meeting of 2024 is set to conclude on Wednesday, with a crucial announcement scheduled for 2 p.m. ET. The market widely anticipates a quarter-point rate cut, marking a total of 100 basis points in rate cuts over three meetings. While economic growth remains stable, and inflation persists, many investors expect the central bank to accompany this dovish move with semi-hawkish guidance.

Key aspects of the announcement will include updates on the latest economic projections and the Fed's policymakers' rate forecasts, popularly known as the 'dot plot.' Additionally, comments from Fed Chair Jerome Powell will be closely monitored.

Market Rally Overview

In the latest session, the stock market rally appeared to face headwinds, with the Nasdaq contributing to an ongoing trend of weak breadth.

The Dow Jones Industrial Average fell by 0.6% in Tuesday's trading, marking its ninth consecutive decline, and closing just below its 50-day moving average. The S&P 500 index decreased by 0.4% but managed to hold above its 21-day moving average. Meanwhile, the Nasdaq composite dipped 0.3% after achieving a record high the previous day. In comparison, the small-cap Russell 2000 slipped by 1.2%, nearing its own 50-day line.

Other ETFs like the Invesco S&P 500 Equal Weight ETF (RSP) fell by 0.8%, and the First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW) dropped by 0.4%, as they continue to test their respective support levels.

While Tesla's stock rallied, most other market leaders struggled, as new buying opportunities remained limited amid the overall market drift. In commodities, U.S. crude oil prices fell by 0.9%, landing at $70.08 a barrel, and the 10-year Treasury yield decreased to 3.38%.

Performance of Notable ETFs

Among growth-focused ETFs, the Innovator IBD 50 ETF (FFTY) experienced a decline of nearly 1%. The iShares Expanded Tech-Software Sector ETF (IGV) fell by 0.9%, and the VanEck Vectors Semiconductor ETF (SMH) dropped by 1.3%, with Nvidia being the top holding in the latter.

Conversely, the ARK Innovation ETF (ARKK) held firm, inching up slightly, while ARK Genomics ETF (ARKG) fell by 2.1%. Tesla remains a significant position in several of Ark Invest's ETFs, alongside Nvidia's holdings.

Other sectors saw declines as well, with the SPDR S&P Metals & Mining ETF (XME) dropping by 1.8%, and the SPDR S&P Homebuilders ETF (XHB) down by 1.2%. Notably, the Energy Select SPDR ETF (XLE) slipped 0.7%, while the Health Care Select Sector SPDR Fund (XLV) retracted by about 0.1%.

Nvidia Stock Analysis

Nvidia's stock fell as low as $126.86 during Tuesday's session, triggering the 7%-8% sell rule for those who purchased at the $140.76 buy point. It closed at $130.39, marking a decline of 1.2%. This represents its fourth consecutive drop and the eighth decline in nine sessions. Importantly, Nvidia closed below its recent low of $131.80.

Currently, NVDA stock sits about 6.3% below its 10-week moving average. The downturn was exacerbated by remarks from Microsoft CEO Satya Nadella, who stated that Microsoft is not facing chip supply constraints, which raises concerns for Nvidia as one of its major clients. Additional worries include overheating issues with Nvidia's new Blackwell chips and increasing competition from in-house produced custom chips.

While long-term investors may opt to hold onto Nvidia, having an exit strategy is prudent given the current volatility.

Tesla Stock Update

Tesla shares surged 3.6% to $479.86, bringing its monthly gain to an impressive 39%, following a 38% increase in November. Investment firm Mizuho has recently upgraded TSLA stock, raising the price target to $515, driven by strong EV sales in China that offset declines in other markets.

Moreover, Tesla has commenced a wider rollout of its Full Self-Driving (FSD) version 13 to FSD owners utilizing HW4.0 after the initial limited release. Elon Musk and Tesla have promised substantial improvements in driving safety based on mileage data, which is vital for achieving fully autonomous driving by mid-2025, a goal Musk has long touted.

Optimism surrounding self-driving capabilities has heavily influenced TSLA stock price movements recently.

Currently, shares are trading 16.2% above the 10-day line and 55.2% above the 50-day. There was a modest decline observed in after-hours trading.

TSLA stock could potentially correct back to the 10-day moving average or lower, while there's also the possibility of a dramatic upward surge or a more extended run. Investors must decide whether to realize some profits on Tesla as the stock rises, or wait for specific sell signals in alignment with their investment strategies.

The key is to have a proactive strategy in place for managing trades.

What Investors Should Consider

The overall stock market rally is facing challenges aside from a few large-cap stocks like Tesla. A divided market presents a higher risk of transitioning into a more widespread decline or sector rotation.

Overall declines create a tough environment, where individual leaders may hint at buy signals, but market headwinds can inhibit sustained increase. As the Fed's rate outlook is on the horizon, investors should exercise caution in the near term. If compelled to initiate new positions, be prepared for quick exits if needed.

Nevertheless, numerous stocks are forming bases or handles while trading closely to their 21-day lines or retreating to their 50-day lines. Should the market shift upward, various buying opportunities could become available.

For continual updates on market direction and leading stocks, it is advisable to read market analyses regularly.

stocks, tesla, nvidia