Dow Jones futures fell slightly Wednesday morning, along with S&P 500 futures and Nasdaq futures.

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The stock market rally closed mixed Tuesday, but leading stocks such as Nvidia came off highs while some new breakouts fizzled.

The Nasdaq initially powered higher, as Nvidia (NVDA) and other AI stocks kept running Tuesday morning, as did Tesla (TSLA). The composite gave up all its gains by midafternoon before closing modestly higher.

The rest of the market was lackluster throughout the session, with the S&P 500 flat and the Dow Jones slightly lower.

Not many stocks were actionable Tuesday, and some of those quickly flopped, including Life Time Group (LTH) and ON Semiconductor (ON). Others looked extended.

PC and printer giant HP Inc. (HPQ),  Hewlett Packard Enterprise (HPE), Ambarella (AMBA) and Box (BOX) reported Tuesday night. Box stock rose modestly, while HPQ, HPE and especially AMBA stock fell on results or guidance.

Salesforce.com (CRM) looms Wednesday night along with cybersecurity plays Okta (OKTA) and CrowdStrike (CRWD). Meanwhile, white-hot artificial-intelligence play C3.ai (AI) may offer a heat check for AI stocks, including AI stock.

The video embedded in this article highlights Tuesday’s market action and analyzes Life Time Group, ON Semiconductor and FLNC stock.

Tesla rival Fluence Energy (FLNC) was Tuesday’s IBD Stock Of The Day.

Dow Jones Futures Today

Dow Jones futures fell 0.1% vs. fair value. S&P 500 futures declined 0.2% and Nasdaq 100 futures lost 0.1%.

The 10-year Treasury yield slipped 5 basis points to 3.65%.

Crude oil futures sank more than 2% early Wednesday after tumbling Tuesday.

China’ official manufacturing purchasing managers’ index edged down 0.4 point in May to 48.8, further below the neutral 50 level and defying views for an uptick to 49.4. It’s the latest sign that China’s economic bounce from the end of Covid regulations is waning.

Hong Kong’s Hang Seng index fell 1.9%, continuing to slide since late January.

At 10 a.m. ET Wednesday, the Labor Department will release the April JOLTS survey. Job openings, which have come down sharply but remain high, should fall to 9.35 million from March’s 9.59 million. On Friday, Labor’s April jobs report is due.

Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.

Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live

Stock Market Rally

The stock market rally, after the long holiday weekend, treated the tentative debt-ceiling deal as a nonevent. A positive open quickly turned mixed, with the Nasdaq coming well off highs.

The Dow Jones Industrial Average edged down 0.15% in Tuesday’s stock market trading. The S&P 500 index was essentially flat. The Nasdaq composite rose 0.3%. The small-cap Russell 2000 fell 0.3%.

U.S. crude oil prices tumbled 4.4% to $69.46 a barrel.

The 10-year Treasury yield fell 12 basis points to 3.7%.

ETFs

Among growth ETFs, the iShares Expanded Tech-Software Sector ETF (IGV) rose 0.8%. CRM stock is a top IGV holding, with AI stock also in the ETF. The VanEck Vectors Semiconductor ETF (SMH) climbed 0.5%. NVDA stock is a major SMH holding, with Onsemi also a component.

Reflecting stocks with more speculative stories, the ARK Innovation ETF (ARKK) popped 1.8% and ARK Genomics ETF (ARKG) edged up 0.1%. Tesla stock is the top holding across Ark Invest’s ETFs.

The SPDR S&P Metals & Mining ETF (XME) fell 1.8%. U.S. Global Jets ETF (JETS) ascended 0.55%. The SPDR S&P Homebuilders ETF (XHB) climbed 0.2%. Energy Select SPDR (XLE) fell 1%, and the Health Care Select Sector SPDR Fund (XLV) dropped 0.6%.

The Financial Select SPDR ETF (XLF) closed just below break-even. SPDR S&P Regional Banking (KRE) dipped 0.2%

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Tesla Stock

Tesla popped 4.1% to 201.16, just clearing the 200-day line. Shares hit 204.48 intraday. TSLA stock is working on a 207.89 buy point from what’s either a cup base or a double-bottom consolidation.

Tesla edged lower in the premarket.

Tesla CEO Elon Musk is in China for the first time since before Covid, meeting with top government officials. He’ll likely tour the Tesla Shanghai plant.

AI Stock

C3.ai (AI) stock spiked 33% to 43.95 to an 18-month high on the eve of earnings. AI stock has more than doubled since C3.ai on May 15 reported preliminary Q4 revenue that was slightly above prior targets and roughly flat vs. a year earlier.

AI stock fell modestly early Wednesday, as a number of AI plays pulled back somewhat.

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Market Rally Analysis

The stock market rally remains divided with narrow leadership.

The Nasdaq started strong, rising as much as 1.4% and almost clearing its August peak. But the composite erased all of that before closing modestly higher. The Nasdaq 100 also pared gains, as Nvidia, Tesla stock and others came off highs. It’s now 9% above its 50-day line after topping 10% at one point intraday Tuesday.

The S&P 500, which hit a fresh nine-month high intraday, ended flat.

The Dow Jones drifted toward its 200-day, but traded in a narrow range. The Russell 2000 continues to test its 50-day after last week’s reversal from the 200-day.

The First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW) initially broke out to a 52-week high but reversed for a fractional loss.

The Invesco S&P 500 Equal Weight ETF (RSP) dipped 0.2% and is still stuck below moving averages.

Decliners modestly outpaced advancers.

AI stocks generally advanced Tuesday, though a few reversed lower and many like Nvidia came well off early highs. C3.ai was a notable exception.

A few names cleared official buy points Tuesday morning, with mixed results. Life Time and Onsemi stock broke out, but soon reversed lower.

On the plus side, Arista Networks (ANET) entered a buy zone, but is 13% above the 50-day line after surging 23.5% over three sessions. FLNC stock triggered an early entry and finished just below an official buy point, but it is 24% above the 50-day line.

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What To Do Now

A split market rally is not a great situation, and there were few reasons or even opportunities to add exposure Tuesday.

Not many stocks are working, and most of those winners are extended, such as Nvidia. A decent number of stocks are near buy points, though some are extended from moving averages.

In recent weeks, many promising stocks have staged fakeout-or-shakeout breakouts, such as LTH stock on Tuesday. That makes it hard to make headway or to build up positions.

At some point buying opportunities will work more consistently, as the market rally shows broader breadth and leadership. But that probably won’t be immediately obvious. So investors should be cautious about new buys, and quick to cut losses.

If you do own some red-hot artificial-intelligence plays such as Nvidia or AI stock, enjoy the ride. They could keep running, but significant pullbacks would not be a surprise in the coming days. NVDA stock, which briefly had a $1 trillion valuation Tuesday, is 103% above its 200-day line. C3.ai is 148% above that long-term level.

You might wait for a big, heavy downside reversal before starting to exit or paring holdings. Obviously, the size of your AI-related exposure, your conviction in the theme and individual stocks as well as your own investing style will factor greatly in your decisions.

Keep working on your watchlists.

Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.

Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.

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