Chips Lead Nasdaq To All-Time High; Nvidia, Rio Tinto, Wabtec In Focus

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0:40Ken Shreve:Good afternoon, everyone, and welcome to Stock Market Today for Tuesday, May 6th. It's Alyssa Coram here. And more new highs for the stock market today. The Nasdaq composite with a huge gain. Joining me now to discuss what's driving the action in the current market rally is my colleague, Ken Shreve. Ken, it's always great to see you. What do you have for us today? Good to see you too, Ali. Yeah, 2 % gain for the NASDAQ. Looks like a close up near session highs. And yeah, what a day. Let's take a look at NVIDIA, a really bullish move for that stock today. So we'll start by taking a look at NVIDIA.

1:19Also a good day for a lot of the mining and metals stocks. So let's take a look at Rio Tinto, ticker RIO. And then the final stock is going to be a good day for transportation sector stocks. So let's take a look at Wabtec, W-A-B.

1:36Ken Shreve:Okay, we will do that. But first, let's take a closer look at the major indexes. So the NASDAQ today up 2%. Meanwhile, the S &P 500 up 1.5 % on the day. Also, the Dow up 1.2 % and the Russell 2000 with a gain of 1.5%. So Ken, it's really feeling like all systems go on top of a market that's already been super hot and continuing to see just honestly jaw-dropping strength at this point. Yeah, it has been jaw-dropping. And we're seeing a NASDAQ composite that's getting quite a bit extended from its 50-day moving average. But we're also seeing a market that is optimistic about lower oil prices. I came in today, oil was down 11%.

2:40I mean, it was all the way down near$90,$91 a barrel. It paired those losses quite a bit. I think it ended around$95 a barrel, something like that, down about 6 % or 7 % on the day. But bond yields were also lower. They were down about nine basis points early in the session. They ended up down about six basis points or so to around 4.35 percent. So they had those two things working for them. And then it was just another, you know, great day for semiconductor stocks. You know, the SMH, I mean, that rally looks a lot like the NASDAQs. I mean, you really can just kind of overlay those two charts and they look almost exactly the same.

3:27So, you know, at some point, SMH and the NASDAQ are going to take a breather here and pause and digest gains. But it's been an incredible market rally. And, you know, we're going to pause at some point. And when we do, you know, we'll just take a look and see how the market pauses. Is it going to just pause and, you know, digest gains in calm, orderly fashion? Or are we going to see, you know, a flurry of distribution days at the top and see signs of institutional selling? Market is going to give us clues about, you know, what the pullback is going to look like. But for now, you know, I think the market is, you know, pricing in a very, very favorable earnings environment for a lot of these chip companies, a special, a lot of these chip companies that have a lot of exposure in the artificial intelligence space and the data center space.

4:26Obviously, advanced micro devices, that was a big, big earnings mover today. These companies are raising their outlooks, you know, for the second quarter and for the full year. So there's, I think, some multiple adjustments going on here. Advanced micro devices did not soar by accident today. They gave a very, very positive outlook on their data center business, just like, you know, NVIDIA has been doing and a lot of other chip companies. So, you know, tremendous move by AMD and, you know, SMH was a huge gainer today and a big reason why, you know, the NASDAQ was up 2 % and enjoyed the gain that it did.

5:07So that lifted the S &P 500 to an all-time high today as well. And we're even seeing the Dow Jones getting up close to an all-time high as well. I think it's, yeah, it's not quite there yet, but getting very close to that 50 ,000 level. Look at that round number. It's getting very close to. So Dow 50 ,000, that's a pretty neat level. We'll see if it can get through that level tomorrow.

5:36Ken Shreve:Yeah, I mean, chip stocks absolutely a place to be. SMH up 5.2 % on the day. So for a broad-based ETF to see that kind of single-day gain, an unleveraged one, right, that is quite impressive there. But it's not just chip stocks. It's not just the tech sector. Here's a look at RSP. Of course, the gain here of eight-tenths of a percent, not up as much as the S &P 500's gain of one and a half percent, but trying to get to new high territory here as well. So, Ken, what would be your advice for getting on the right horses in this market at this point? A lot of the chip names are extended. So hopefully traders got into that theme in one way or another around the follow through day.

6:37Ken Shreve:We were talking about perhaps some other names in the group like an ASML breaking out today. We'll look at NVIDIA, but it does seem like a lot of stocks are extended after making big moves. So in terms of new buys, how should investors be thinking about where to put their money to work? Yeah, well, that's sort of the$100 ,000 question right now. So if you go back, we obviously had a very powerful follow-through day on the 8th. Maybe you can point that out when the S &P 500 gapped right up to the 50-day moving average. That was the follow-through day, and that was sort of when IBD turned on the green light, and we increased our exposure, and that was really the green light to buy.

7:30That was when the uptrend sort of gave the green signal turned positive. And really right around that time, there were stocks starting to break out a day or two before the follow-through day. The stocks started to break out after that follow-through day. I remember on leaderboard, we put on analog devices, ADI that was breaking out of a base right around April 8th at the time of the follow-through day. So it just really underscores the importance of paying attention when indexes follow through and they mark the start of a new uptrend, just being prepared and being ready to put money to work. And even if you're late, even if you're not buying on or around the follow-through day, you have time to put money to work.

8:18But now we're a month after the follow-through day. You still are finding buy opportunities. We found a couple today on leaderboard, but it is getting more and more difficult. And so if you're still looking to put money to work now and you're a little bit late, it is getting more difficult. And I think investors are making the mistake now. They're chasing some of the big leaders and they're buying extended. So you want to be careful of doing that. And if you're looking at stocks that are setting up now and consolidating and building bases, you first of all want to be very, very careful of looking at stocks that have lagging relative strength lines.

9:01And that's a common situation that you'll find right now. Stocks that are building bases that haven't participated in this month-long rally, they may be kind of lagging the market. I think ASML is a good example of that. You know, it's a stock that, you know, had a great move today. You know, relative strength rating of 79, you know, relative strength line is lagging a little bit. Nonetheless, it did make a nice move today. So you want to, you know, want to pay attention to that. So it's just, it's tricky now. So you just want to keep going through the growth screens. Just pay attention to that relative strength line.

9:46I still think that you're probably better off looking to buy the leaders on pullbacks at this point. Probably better at the 21-day moving average, although some of the big leaders, it's going to be a while until they pull back to the 21-day line. But I would just suggest keep going through the growth screens. Pay attention to stocks whose relative strength lines are up near highs. and be patient in looking for the new buys. But above all else, just be careful you're not looking at the real laggards or the lower quality stocks in an industry group.

10:25Ken Shreve:Absolutely. Makes sense. Okay, a couple more ETFs to take a look at. So let's go over to IYT. You wanted to take a look at the transportation average here. Ken took a dive a couple sessions ago, but bouncing back today up 3.6%. Yeah, dove right down to the 50-day moving average, firmed up yesterday, and I was encouraged by the move today. I mean, it did make an explosive move back above the 10-day moving average, and there was some nice volume behind the move today as well. You can see volume picked up the pace quite a bit from yesterday and the prior session. And we are going to take a look at WAB in just a little bit in the transportation sector.

11:09that made a nice move. So, you know, the rally has broadened out quite a bit. It was, you know, fiber optic and chip stocks, but it's nice to see the transports participating here as well. So I thought that the move in IYT and transport stocks in general today was encouraging and, you know, nice move by IYT today. So I wanted to point it out.

11:34Ken Shreve:Yes. Another notable area, international. So here's a look at the Vanguard total international stock ETF up 2.7 percent today, getting to a new high. So a lot of money flowing here. ASML, one of the top holdings in this. Ken, your thoughts about the rotation to international stocks? Yeah, ASML, a Dutch chip equipment firm. And, you know, international stocks obviously working as well here. This is a classical, just a classic technical breakout here over the 85 level for this ETF. So again, broad-based leadership here, you know, still actionable here. That big blue shaded area here, just showing you that it's still in the 5 % buy zone from that recent high.

12:27So great move from this ETF as well, just indicating good broad-based leadership in this market.

13:03Ken Shreve:Mm-hmm. Indeed Sponsored Jobs. All right, next on our list, let's go to NVIDIA. Chip sector was hot today. Here's a look at NVIDIA up 5.7%. This was a tricky stock recently, Ken, because it got to new high territory only very briefly before pulling back to a cup buy point, perhaps today offering investors a second chance or an add-on opportunity here if they already bought shares at a lower cost? Well, my colleague Dave Chung and I were looking at NVIDIA today after IBD Live. And believe me, We were looking at the relative strength rating here of 63, and we just got done looking at ASML, which has definitely been lagging in the chip equipment group.

14:04And NVIDIA has been a laggard in the chip design group for quite some time. It's been moving sideways. It was below its 50-day moving average not that long ago, and then it started to come back to life, and then it broke out. And then, you know, boom, it just came right back down. But we thought the move today above the 10-day moving average with some volume was encouraging. And we took the opportunity to put it back on the leaderboard. A bit of an unconventional buy for us just because, obviously, NVIDIA is not a true leader at this point because of the relative strength rating of 63. But the technical move today we thought was quite bullish.

14:57We liked the decisive move back above the 10-day moving average. It's still technically inside this long consolidation, still below that high from several weeks ago. So it's going to go up. It looks like it's ready to retest its all-time high here. So we took a little nibble today. We just like the way the NASDAQ is acting. We like the way the chip stocks are acting. NVIDIA obviously still has a very, very compelling growth story. For whatever reason, the market has not been respecting the growth story, which has stayed bullish for many, many quarters now and still looks good going forward. So we took another shot with the stock today, thinking that it's ultimately going to be able to fully break out of this long consolidation.

15:47So we liked how the stock closed today. Again, we liked the volume that came into the stock today. It didn't soar to above average, but it came in nicely higher than from prior sessions. So we'll see how it works here. There was some interesting news with NVIDIA that we talked about earlier today on IBD Live. They did announce a partnership with Corning. Corning is opening three state-of-the-art factories in the U.S. Some are going to be in North Carolina. Some are going to be in Texas as well that are going to be devoted entirely to optical technologies for NVIDIA alone. So a big partnership between the two.

16:34Financial terms weren't disclosed, but Corning made a big move today. This is a stock that I do own personally, Corning. I also own NVIDIA as well, I should say. But, you know, financial terms weren't disclosed in terms of, you know, the arrangement between the two. But the market did like the sound of it. And both stocks, you know, rallied nicely on the news.

17:03Ken Shreve:Yes, indeed. Thanks for that analysis there, Ken. Let's head on over to Rio Tinto. The mining stocks had quite a day today. Rio up 5%. For the last couple of weeks, Ken, it's been trading in a sideways range, more or less around that round number of 100, but a bit of power today. And zooming out, we did have a really solid prior uptrend here for the stock from September to February, a powerful advance over that time. And now another buying opportunity here today. Yeah, this was, you know, again, the market is still, you know, delivering, you know, breakouts here. Another example, not perfect because the relative strength line is still a little bit off highs, you can see.

17:57Not terribly off highs, but typically when a stock breaks out, you want to see the relative strength line either leading the stock into new high ground or at least in new high ground. So you don't have that with Rio Tinto, not a complete deal breaker. The breakout was very powerful. Nice, strong breakout, over 100. There were a lot of breakouts in this group today. I think the ETF is XME, if you want to try and call it. XME is the mining and metals ETF. And you can see this ETF had a beautiful, clean breakout today over the 120 level as well. Also actionable still in a buy zone here. BP is, I think BP is another stock in the, no, it wasn't BP, shoot.

18:51BHP, is it BHP? Yeah, yeah, yeah. Yeah, yeah. BHP, I think, was the stock. I hope I have that. Yes, BHP was another stock in the group that broke out. So good broad-based strength in the mining and metals group. But back to Rio Tinto, this is a stock that is mostly known for iron ore. They sell a lot to China. More than half of their business is with China selling iron ore. They also do aluminum, copper, and also some lithium as well. But a mining giant and beautiful breakout today and a buy candidate for those who chose to partake. Mm-hmm.

19:34Ken Shreve:Let's also go to Wabtech. In the transportation group, like you mentioned, Ken, clearing a trend line and getting back above a 266 buy point from a flat base. Yes, transportation sector stock. And again, transportation stocks had a good day today. Again, relative strength rating of 79, so it's not your TML, not a true market leader. But it did give a buy signal today after a pullback to the 50-day moving average. Closed a little bit off highs, but it was a little breakout over a trend line today. We'll see if this can eventually break out over the 273 level. This is a company that makes equipment for trains, locomotives, just equipment in the transportation, rail industry.

20:34Wabtec is an acronym for Westinghouse Air Brake Technology. It's a big, long, big, long word. But, you know, they've been around for a long time. But you can see the weekly chart here is, you know, nice, nice setup. Almost the look of a base-on-base type pattern, but right near the top of a tight sideways pattern here. Really great long-term record of earnings and revenue. You can see just not too many blemishes, just consistent, steady earnings and revenue growth. So nice early buy signal today if transportation stocks can continue to outperform. I think WapTech has a chance of working here. So we'll see if we can get some follow through tomorrow and see if this can ultimately break out to break out to new highs.

21:23Ken Shreve:Sounds like a plan. OK, let's check in on some of the key earnings reports out after the closing bell. In the chip sector, it looks like another winner here, Ken. Arm holdings as of now up 10 percent. And heading into the report, it was up almost 14 percent on the day. So the hot streak continues for chip sector earnings. Yes, Arm Holdings. This is a unique business model. Arm Holdings makes a lot of their money from licensing. They license a lot of their chip designs, but they just had new news recently. They're going to start making their own chip in-house. So that's kind of new news from Arm Holdings.

22:11But, you know, interesting name in the chip space. But, yeah, the earnings reports in the chip sector in recent weeks have just been outstanding. Not surprising to see ARM delivering the goods here. The number of double-digit percentage gainers after earnings in the chip sector, it's hard to keep track of them all. The earnings have just been sensational in the semiconductor space.

22:38Ken Shreve:Incredible. Okay, let's go on over to Coherent. This is in the Electronic Parts Group, another AI stock. It looks like as of now, shares down a little over 6%. This is a stock that's made a big move over the last year or so, Ken. And so we'll have to see what the reaction is like tomorrow. Overnight action doesn't necessarily always translate to the following regular session, but seeing a down move here as of now. Yeah, this is kind of fiber optic related, not in the same industry group as Sienna and Lumentum. But, you know, Lumentum had earnings today, another stock that has just been on a tear ahead of earnings.

23:24But Lumentum sort of had a sell-the-news situation today after reporting earnings. So Coherent had just been on a tear ahead of the numbers. And you can see the growth has just been spectacular at Coherent. So probably just consolidating after a strong pre-earnings rally. So we'll see how it trades tomorrow. But probably ready to consolidate after a huge pre-earnings rally.

23:53Ken Shreve:Yeah, to the upside, we'll keep an eye on 350. And then to the downside, we'll keep an eye on that 21 day and the 300 level. Okay, fastly. I think this one's taking a hit. Yep, down 25 % here. Let's take a look at yesterday's move. It was up 17.7%. So this move here, it's not a boring topic, but nonetheless, I yawn here, Ken. The 50-day line is around 25.5 % here. As of now, a 25.5 % decline would put shares below that level. This is a high multiple stock, a very, very fast-growing stock, and the market will often give stocks like this a high multiple, selling at a triple-digit P.E. So, you know, if the results aren't up to snuff, it is going to get a haircut.

24:57So obviously the results were probably really good, but they need to be beyond great when you're selling at a high multiple. So we'll see how the stock trades tomorrow. Take a look at the numbers, but obviously under some pressure. And those were the three big ones. I know people still follow App. AppLovin APP. You know, this has been lagging a little bit. That's probably under, that one has come off highs quite a bit. I don't know, that's not moving too much in after hours. What was the other one? Oh, Dutch Brothers. Yeah, delivering pretty good revenue growth in recent quarters.

25:40Ken Shreve:This is MKSI that I have pulled up here. Yeah, MKSI and the Chip Equipment Group. Yep, Red Hot Group. MKS has been a nice performer in the chip equipment group and Dutch Brothers. Not seeing too much action here for Dutch just yet. But yeah, what I was going to say for Fastly is with this kind of stock, you can see the personality here, right? Where it had that move from 35 down to 20 in just a couple of days. So this is one that could have been up 25 % or down 25%. So in terms of risk management, if you're going to play something like this, you just have to know that heading into it. Yep. Yep.

26:26No doubt about it. And I remember that three-day pullback down to the 50-day moving average. People were saying, oh, can we buy it off the 50-day? And it was kind of a sharp, quick pullback. So that's just an example of the market heat and you got to know what you own and, you know, good growth story there, but very volatile.

26:48Ken Shreve:Yeah. Okay. Well, I know it'll be a topic of discussion on IABD Live tomorrow morning. We'll see how the team is handling that one and more, all of these chip movers and other interesting stocks to watch. Ken, we'll have to leave it there, but thank you so much for your thoughts today. And thanks everyone for tuning in. That's it from us for today, but live at 5 p.m. Eastern. Check out the Investing with IBD podcast with host Justin Nielsen. This week's guest is our very own chief content officer, Chris Gessel. He's going to be talking about a key technical indicator that he uses that's been a game changer for his portfolio.

27:32Ken Shreve:So tune in to find out all the details. And you can go to investors.com slash podcast to listen to recent episodes. But once again, live at 5pm Eastern on our YouTube channel and then available at investors.com slash videos on demand afterwards as well. Again, that's it from us. We'll see you tomorrow morning on IBD Live, investors.com slash IBD Live for those details. And then we'll see you right back here tomorrow after the close.

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