Dow Jones Futures: Cisco, Nvidia Move On Earnings; Key Recession Signal

Dow Jones futures rose slightly overnight, along with S&P 500 futures and Nasdaq futures, with Nvidia and Cisco earnings in focus.

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The stock market rally retreated amid weak Target (TGT) earnings and holiday guidance, as well as Micron Technology (MU) cutting memory chip production plans. The bond market is flashing brighter recession risks with the 10-year Treasury yield continuing to tumble while short-end rates hold up high.

EV giant Tesla (TSLA) retreated, showing the weakest recent performance among the megacap stocks.

Earnings

Nvidia (NVDA), lithium giant Sociedad Quimica y Minera de Chile (SQM) and Cisco Systems (CSCO) headlined Wednesday night earnings.

NVDA stock climbed modestly in overnight trade, following mixed earnings and guidance.

CSCO stock rose 4% in extended action as Cisco topped fiscal Q1 views and guided up on revenue. Cisco stock dipped 1.1% on Wednesday, trading between its 50-day and 200-day lines. IBD Leaderboard stock Arista Networks (ANET) rose slightly on the Cisco earnings.

SQM earnings are still due tonight. SQM stock fell 2.6% on Wednesday, down more than 10% this week amid lithium price concerns. The Chilean lithium-and-fertilizer giant is in a cup base with a 115.82 buy point. It could be working on a handle.

China e-commerce giant Alibaba (BABA) and U.S. department store chains Macy’s (M) and Kohl’s (KSS) are due early Thursday. BABA stock fell modestly Wednesday, but after soaring 11% on Tuesday. Macy’s and KSS stock tumbled Wednesday on Target’s holiday warning.

Dow Jones Futures Today

Dow Jones futures rose 0.2% vs. fair value. S&P 500 futures climbed 0.2%. Nasdaq 100 futures gained 0.35%. CSCO stock is a Dow Jones, S&P 500 and Nasdaq component, but Nvidia is a bigger weight on the S&P 500 and Nasdaq.

Republicans have retaken control of the House, according to multiple media outlets. But it will be a wafer-thin majority, far less than expected before Election Day.

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 lost ground Thursday, with small caps and techs leading the decline.

The Dow Jones Industrial Average dipped 0.1% in Wednesday’s stock market trading. The S&P 500 index gave up 0.8%. The Nasdaq composite slid 1.5%. The small-cap Russell 2000 retreated 1.8%.

U.S. crude oil prices fell 1.5% to $85.59 a barrel. Natural gas futures rose 2.8%.

Treasury Yield Curve Flashes Recession Risk

The 10-year Treasury yield tumbled 11 basis points to 3.69%, the lowest since early October and down from 4.15% just one week earlier. The benchmark Treasury yield is now below the current fed funds rate range of 3.75%-4%, with the Fed expected to hike rates by 50 basis points to 4.25%-4.5% next month.

The two-year Treasury yield, more closely tied to Fed policy, was flat at 4.36%, while the three-month rate is at 4.23%. The steepening yield curve inversion between the three-month and 10-year Treasuries is the highest since a brief period in late 2019. That points to rising recession risks, or at best negligible economic growth in 2023.

Fed chief Jerome Powell and some of his colleagues have signaled that a recession may be necessary to bring inflation under control, though other policymakers see a decent chance of a soft landing.

The ever-inverted yield curve comes amid still-robust labor markets and a strong retail sales report for October.

ETFs

Among the best ETFs, the Innovator IBD 50 ETF (FFTY) fell 1.7%, while the Innovator IBD Breakout Opportunities ETF (BOUT) lost just over 1%. The iShares Expanded Tech-Software Sector ETF (IGV) lost 2.1%, with many cloud software names having a bad session. The VanEck Vectors Semiconductor ETF (SMH) slumped 3.6%, with Nvidia stock and Micron major components.

SPDR S&P Metals & Mining ETF (XME) slid slightly more than 2% and the Global X U.S. Infrastructure Development ETF (PAVE) fell 0.5%. U.S. Global Jets ETF (JETS) gave up 2.4%. SPDR S&P Homebuilders ETF (XHB) retreated 1.4%. The Energy Select SPDR ETF (XLE) declined 2% and the Financial Select SPDR ETF (XLF) dipped 0.5%. The Health Care Select Sector SPDR Fund (XLV) ended just below break-even.

Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) tumbled 5.15% and ARK Genomics ETF (ARKG) 3.7%. Tesla stock remains a major holding across Ark Invest’s ETFs.

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Nvidia Earnings

Nvidia earnings missed Q3 views, but revenue fell less than feared. Data-center chip demand remained strong. Gaming revenue plunged, but not quite as badly as feared. The chip giant guided slightly lower on Q4 sales.

Nvidia stock rose more than 1% in active overnight trade. Shares declined 4.5% to 159.10 on Wednesday. But NVDA stock has surged since hitting a bear-market low of 108.13 on Oct. 13, on hopes that…