The stock market witnessed a series of fluctuations early Monday. Dow Jones futures saw a slight decline, while S&P 500 futures remained flat and Nasdaq futures rose modestly. This upward movement was buoyed by Tesla, and Nvidia (NVDA) earnings loom large. The stock market Trump trade faced setbacks last week, with major indexes falling sharply, especially on Friday, testing or undercutting key levels. Many leading stocks suffered losses or downside reversals, often related to earnings.

Navigating the Stock Market with Tesla and Nvidia

Dow Jones Futures and Market Sentiment

Dow Jones futures fell by 0.2% compared to fair value. S&P 500 futures showed little change, while Nasdaq 100 futures climbed 0.2%. The 10-year Treasury yield rose to 4.48%, approaching Friday's five-month intraday highs. Crude oil futures also edged higher. Bitcoin rose above $90,000 but retreated from overnight highs. It's important to note that overnight action in Dow futures and other markets doesn't always translate into actual trading in the next regular stock market session.

These fluctuations in Dow Jones futures and other market indicators reflect the complex nature of the stock market. Investors need to closely monitor these trends to make informed decisions.

Nvidia Earnings and Market Impact

Nvidia earnings are due late Wednesday. Analysts expect earnings to jump 87.5% to 75 cents a share, with revenue increasing 83% to $33.09 billion. This would mark the end of a five-quarter string of triple-digit growth for the AI chip giant. However, the focus will be on guidance and the ramp-up of Blackwell production. The next-generation AI processor is expected to start shipments in the current quarter, and the speed of this process will be crucial.

Nvidia stock fell 3.8% to 141.98 last week, with most of the decline occurring on Friday. Shares tested but held the 140.76 consolidation buy point and the 21-day moving average. However, early Monday saw a nearly 3% drop, indicating a clear move below these key levels. The new Blackwell GPUs overheat when used in older server racks, as reported by The Information. Nvidia has urged customers to use different racks to avoid this problem.

Stock Market Rally and Its Challenges

The stock market rally suffered sharp losses in the latest week, especially on Friday. The Dow Jones Industrial Average shed 1.2%, the S&P 500 index slumped 2.1%, and the Nasdaq composite lost 3.15%. The small-cap Russell 2000 tumbled 4%. The Nasdaq, S&P 500, and Russell 2000 have undercut the lows of the Nov. 6 postelection gap-up day. The Nasdaq fell below its 21-day moving average, and the S&P 500 finished just below this key short-term level, while the Russell 2000 held on.

The key indexes are around natural areas of support. Holding and rebounding from these levels would signal the continuation of the bullish trend. However, breaking lower from here and moving toward the 50-day line would be highly negative. The 10-year Treasury yield jumped 12 basis points to 4.43%, although it closed flat on Friday after hitting a five-month high intraday of just over 4.5%. The two-year yield climbed 4.5 basis points to 4.3%. Fed chief Jerome Powell's signal on Thursday that the Fed is in "no hurry" has led markets to expect a modest rate cut on Dec. 18.

Other Market Players and Their Performances

Among growth ETFs, the iShares Expanded Tech-Software Sector ETF (IGV) dipped 0.1%, with Palo Alto stock being a notable holding. The VanEck Vectors Semiconductor ETF (SMH) dived 7.5%. Nvidia stock is the dominant SMH holding, along with Broadcom and Taiwan Semi stock. ARK Innovation ETF (ARKK) gave up 1.15% last week, and ARK Genomics ETF (ARKG) plunged 12.6%.

SPDR S&P Metals & Mining ETF (XME) skidded 6.1% last week. SPDR S&P Homebuilders ETF (XHB) retreated 2.6%. The Energy Select SPDR ETF (XLE) advanced 1%, and the Health Care Select Sector SPDR Fund (XLV) sold off 5.55%. The Industrial Select Sector SPDR Fund (XLI) retreated 2.1%, and the Financial Select SPDR ETF (XLF) rose 1.4%.

What Investors Should Do Now

The stock market rally, which seemed so strong just a few days ago, is now facing a key test. The major indexes and leading stocks could quickly rebound, but investors need to be aware of the potential character change. This is not a good time to be buying stocks. Several stocks that flashed buy signals last week faltered by Friday's close. Few stocks are in buy zones, and not many more are setting up after the large Trump gains followed by significant losses.

Investors may want to reduce their exposure, especially if they are on margin. Avoiding new buys and paring losers and round-trip stocks will help reduce the overall portfolio. Partial profits can also be taken or successful positions can be exited, depending on individual investing styles and convictions. Keep working on watchlists as a pullback should create buying opportunities. Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.

Please follow Ed Carson on Threads at @edcarson1971 and X/Twitter at @IBD_ECarson for stock market updates and more.