Dow Jones Futures: Market Runs Into Fed Decision; GME Skyrockets Late, First Republic Tumbles

The Dow Jones futures, as well as futures on S&P 500 and Nasdaq, were not affected overnight. After the close, GameStop (GME), and Nike (NKE), reported. Investors are already focusing on Wednesday's Federal Reserve rate increase decision.

Strong gains were seen in the stock market Tuesday after Janet Yellen, Treasury Secretary, signaled more support for banks. First Republic Bank (FRC), which led the rebound Tuesday, fell overnight because FRC stock was struggling to find a way forward.

On Holding, a Swiss company that makes athletic shoes (ONON), EV-chip play Aehr Test System (AEHR), and Google parent Alphabet(GOOGL) all offered purchasing opportunities for news. ONON suffered a loss in earnings. Aehr rallied for new orders, and Google reached a critical level with its AI chatbot.

Tesla stock made a bullish movement Tuesday in an emerging bottoming base as Tesla (TSLA), China sales continue to pick-up and Moody's upgraded their credit rating.

Dow Jones Futures Today

Dow Jones futures fell compared to fair value. NKE stock was a drag. S&P 500 futures tipped higher, while Nasdaq 100 futures tipped lower.

Crude oil futures declined slightly

Do not assume that overnight Dow futures or other actions will translate into trading in the regular stock market session.

Fed Meeting

On Tuesday, 87% of the odds of a quarter point rate increase rose to 87%.

Markets expect a quarter point Fed rate hike in May. However, rates will be cut starting in the summer.

The Fed will also release guidance on interest rate hikes and economic projections along with its rate decision. Key words: His comments on inflation risks, the economy, and the banking crisis.

Key Earnings

Nike revenue and earnings exceeded expectations, but gross margins were lower than expected. Nike stock rose 3.6% to 125.61 on Tuesday, surpassing the 50-day mark. MarketSmith analysis shows that the Dow Jones athletic shoe and apparel company is working to a 131.21 flat base buy point.

GME stock surged 48% overnight after GameStop reported a surprise profit, its second since 2021. Unexpectedly, revenue rose slightly. This suggests that the revenue of the video game retailer and memestock would rise above the 50-day mark and close to the 200-day mark. GameStop stock increased 4.6% Tuesday.

ONON Stock

ONON stock surged 26% to 27.26 in Tuesday's session. This is a huge jump from a cup-with handle buy point and a massive volume. Although earnings were light, revenue rose 92% due to the strong guidance provided by the upscale manufacturer of athletic shoes.

Google Stock and AI News

Google released Tuesday its AI chatbot Bard to be tested in the U.S.A and U.K. Google has been trying to catch up with Microsoft (MSFT), and its ChatGBT-4 AI tool.

Nvidia (NVDA), whose chips are used in a variety of AI functions, announced a host of AI-related announcements at its annual developer conference. This included partnerships with Google (NVDA), Microsoft (MSFT) and Adobe (ADBE), who are getting into the generative AI market.

Google stock rose 3.7%, to 104.92. This surpasses its 200-day line. It also offers an early entry into its cup-shape base. Nvidia stock rose 1.15% to an eleven-month high, following the AI buzz that has seen it surge in 2023. MSFT stock gained 0.6%, just above a buy point, after surging by 12% last week.

AEHR Stock

Aehr Test Systems has announced another large order on Tuesday. On decent volume, shares jumped 15% to 36.93. AEHR stock is near a 37.67 purchase point, but an early Tuesday morning entry was safer.

This is a market rally attempt and not an uptrend. While the Fed's Wednesday decision to raise rates is significant, banking worries remain high.

Nvidia stock is listed on Leaderboard IBD Long Term Leaders.

Bank Stocks

Before Tuesday's open, Treasury Secretary Janet Yellen stated that the U.S. government was ready to offer additional deposit guarantees for smaller banks if they are at "risk of contagion."

The Financial Select SPDR ETF, XLF, rebounded 2.5%. JPM stock is a significant XLF holding. The SPDR S&P Regional Banking ETF KRE bounced 5.8%. FRC stock is also part of the KRE.

FRC stock rose nearly 30% to 15.78 Tuesday, but still closed at highs. On Monday, shares crashed 47%. Stocks of First Republic are down 87% since March.

FRC stock dropped 9% in the meantime.

Bloomberg reported Tuesday night that U.S. officials and banking giants are in talks about possible government backing to help First Republic. This could mean that the government would take on First Republic assets with unrealized loss to help investors or buyers. The Wall Street Journal reported Tuesday night that the bank, which is based in California, has appointed McKinsey and Lazard as advisers. They join JPMorgan Chase.

Stock Market Rally

Tech-led gains led to modest stock market rallies Tuesday. Volume was low heading into Wednesday's Fed Rate hike decision.

In Tuesday's stock exchange trading, the Dow Jones Industrial Average rose 1%. FRC stock, Monday's worst performer, saw the S&P 500 index jump 1.3%. The Nasdaq composite jumped 1.6%. 1.9% grew in the small-cap Russell 2000.

U.S. crude oil prices rose by 2.75% to $69.50 per barrel. Copper futures rose 1.1%

The 10-year Treasury yield rose 13 basis points to 3.6%. The 2-year Treasury yield jumped 25 basis points to 4.175%. This is its largest one-day jump in almost 14 years.

ETFs

The Innovator IBD 50 (FFTY), a growth ETF, rose 2.1%. The iShares Expanded Tech Software Sector ETF (IGV), climbed 1.8%. Microsoft stock and Adobe are important IGV components. VanEck Vectors Semiconductor ETF, SMH, edged up 0.3% NVDA stock is a key SMH holding.

Reflecting more-speculative stocks, ARK Innovation ETF(ARKK) jumped 5.55% while ARK Genomics ETF(ARKG) rebounded 3.8%. Ark Invest's ETFs include a significant holding of Tesla stock.

SPDR S&P Homebuilders (XHB) climbed 1.4%. The Energy Select SPDR ETF XLE jumped 3.5%, while the Health Care Select Sector SPDR Fund XLV climbed 0.6%.

Tesla Stock

TSLA stock rose 7.8% to 197.58. It bounced from the 50-day mark and retook the 21-day moving mean. The 200-day line is the bottoming point, which is not good. However, a breakout of the potential 217.75 buypoint would also mean reclaiming 200-day line.

A bold investor might have seen Tuesday's movement as a chance to buy TSLA stock. The 200-day line is a key resistance. Shares are now up from 50 days.

Tesla stock soared as China registrations increased for the fourth consecutive week. Moody's Investors Service upgraded Tesla's credit rating from junk to good.

Market Rally Analysis

Although the volume was low, Tuesday's stock market rally saw strong price gains. The Nasdaq was led by Tesla stock, and Google. It moved above its March 6 levels.

After reclaiming Monday's 200-day line, the S&P 500 moved higher than its 21-day level. It has surpassed the 4,000 mark and is just short of the 50-day line.

The Dow Jones crossed above its 200-day mark but encountered resistance at the 21 day line. Although the Russell 2000, which is heavily influenced by financial and energy issues, bounced Tuesday, it's still quite a ways from its 200-day, and particularly 50-day lines.

Many chip stocks began Tuesday strong, but volume was often low. Many stocks lost ground or reversed their losses. AEHR stock was a notable exception.

ONON stock and Aehr Test Systems were Tuesday's major winners.

Stocks would need to be able to fix the damage done in the last few weeks.

What to do now?

Over the last week, a number of stocks flashed buy signals. Many of these have worked. The market rally is on the rise. Investors could be able to justify a modest exposure.

Be cautious. This is still a market rally attempt and not an uptrend. While the Fed meeting is imminent, banks remain a major question mark.

Investors should be prepared to increase their exposure gradually. Your watchlist should be focused on stocks that can be taken seriously or are close to it.

To stay on top of market direction, leading stocks, and other sectors, read The Big Picture each day.