Stocks launched in the red Tuesday, paralleling afternoon trade in Europe after Asia’s markets closed out a strong two-day rally. Match Group was an early leader, rising on S&P 500 changes. Netflix jumped on a big price target hike, while Dynavax Technologies surged among IBD 50 stocks. Financials scrambled to the head of the Dow Jones today as bond yields surged.
The Dow industrials dropped more than 200 points, down about 0.55% shortly after the starting bell. The S&P 500 opened to a 0.3% loss. The Nasdaq Composite dipped at the open, then battled into tight gains on the stock market today, as biotechs came under early pressure, and top China stocks rallied.
Netflix (NFLX) stock also traded high on the S&P 500, up nearly 2% early Tuesday. Atlantic Securities hoisted the stock’s price target 13%, to 780. A three-week rally lifted Netflix shares almost 15%, briefly topping what IBD MarketSmith analysis sees as a 593.39 entry in an eight-month consolidation. Premarket action suggested Netflix stock would retake that buy point at the starting bell.
Match Group (MTCH) led the Nasdaq 100, bolting more than 8% higher. Standard & Poor’s announced late Friday the stock would join the S&P 500 index starting Sept. 20. Match stock is set to retake support at its nearly converged 10- and 40-week moving averages.
Dynavax Technologies (DVAX) rallied high on the IBD 50 list, up 2.3% in premarket trade. The stock is five weeks into an eight-week hold rule, following a fast-rising breakout on Aug. 5. The stock presents investors with a balancing act, up more than 69% from its buy point, while trading more than 100% above its 200-day moving average.
Dow Jones Today: Visa, Apple Rise; J&J, Amgen Downgraded
Visa (V) led the Dow Jones today, rallying 1.1% in heavy trade as it looks to extend its rebound from 200-day support. Amgen (AMGN) tumbled 1.1%, after Morgan Stanley downgraded the stock to equal weight from overweight, and pared its price target to 251, from 280.
Johnson & Johnson (JNJ) dropped 0.4%, after it received a Morgan Stanley rating cut to equal weight from overweight. Morgan Stanley left its price target on J&J stock unchanged at 187. That’s roughly 7% above Friday’s closing price. The brokerage also downgraded Vertex Pharmaceuticals (VRTX).
Dow Jones stocks Apple (AAPL) and Microsoft (MSFT) remain listed on IBD’s Leaderboard lineup. Apple stock gained 0.4% Tuesday as it moves higher in a buy range that extends to $155.40. Microsoft remains extended a breakout in June.
China’s Markets Rally On Import/Export Data
China’s markets rebounded Monday and Tuesday, after a hard fall on Friday. Data released Tuesday showed import and export growth accelerated in August, easing concerns about impact from a rebound in coronavirus infections. The Shanghai Composite gained 1.1% Monday, and 1.5% on Tuesday. Hong Kong’s Hang Seng climbed 1% and 0.7%.
China’s General Administration of Customs reported exports rose 25.6% year over year, to $294.3 billion. That was up from up an 18.9% increase in July. Imports increased to $236 billion, up 33.1% from the previous month’s 28.7% gain.
Among China-based ETFs, the iShares MSCI China ETF (MCHI) jumped 1.9% in early trade Tuesday. The Xtrackers Harvest CSI 300 China A-Shares ETF (ASHR) added 2.2% in premarket trade. The KraneShares CSI China Internet ETF (KWEB) rallied 3.4%.
Europe’s markets were mostly lower heading into afternoon trade. Frankfurt’s DAX slipped 0.2%. London’s FTSE 100 dropped 0.2%, while the CAC-40 in Paris managed to trade flat. The SPDR Portfolio Europe ETF (SPEU) was inactive. The fund continues to trade a fraction below a 44.06 entry in what IBD MarketSmith analysis marks as an 11-week flat base.
Vital Signs: Bond Yields, Oil Prices, Bitcoin
A bounce in bond yields accelerated, following a big jump on Friday. The 10-year Treasury yield added 5 basis points early Tuesday, rising to 1.37% — testing an Aug. 12 high — and jumping past recent resistance at its 200-day moving average. The yield settled just above 1.32% on Friday, after trading as low as 1.12% in August.
Oil prices have been testing resistance around the $70 level for the past three sessions. Prices on Tuesday shifted lower after Bloomberg reported on Sunday that Saudi Arabia had rolled back its prices to Asian markets by more than twice the expected amount in a bid to expand its market share in the region.
A three-week rally has left prices up 10% from a late-August low, but the rally stalled at the $70 level. West Texas Intermediate futures on Tuesday were down 0.9% to just above $68 a barrel.
Meanwhile, Bitcoin is holding above the $50,000 level. The cryptocurrency dipped slightly to trade around $50,930 in early action, according to CoinDesk. It traded as high as $52,912 and as low as $50,577 over the past 24 hours.
Nasdaq, S&P 500, Dow Jones Today: The Growth Stock Rally
The Dow Jones today is waiting for input. The index has been hovering comfortably above its short-term 21-day line, and less than 1% from its record high set Aug. 16. That is not the case with the Nasdaq, which climbed in 10 of the past 12 sessions, knocking out new highs on seven of those days. The S&P 500 has been maintaining a solid margin above its rising 21-day moving average, and repeatedly racking up new highs in the process.
Year-to-date, the Dow is up 15.6%, the Nasdaq has a 19.2% gain and the S&P 500 has climbed 20.8%.
Growth stocks are the market’s hot ticket right now, with the Innovator IBD 50 ETF (FFTY) easily outrunning the market with a 5.4% gain last week. The index clocked an 8.4% advance in August, more than double that of the Nasdaq Composite.
The advance left the fund on Friday in a buy range, above a 50.06 buy point in a 28-week consolidation. That is a positive, because it shows the growth stock tracker coming up for air for the first time since February.
But there has also been a lot of leggy action within the gains, leaving many IBD 50 stocks extended well into profit-taking zones. The market remains squarely in “confirmed uptrend” status. There has been a recent increase in distribution days — selling by large institutions, but the distribution day count remains at comparatively low levels on both the Nasdaq and S&P 500.
Still, almost 20% of the current IBD 50 last are trading more than 20% above recent buy points. That is an unusually high number. Investors should be clear on how to recognize climax topping behavior, including exhaustion gaps and upper channel line breaks, and should review the other chart signals that suggest a stock may be becoming too extended.
3 Top Stocks To Watch: Generac, Atkore, Copart
Generac Holdings (GNRC) is a stock to watch this week, with the impact of Hurricane Ida driving additional demand in for emergency generators. The stock closed on Friday less than 1% below a 457.10 buy point in a six-week cup base.
Atkore (ATKR) traded low in a buy range, above a 90.18 entry in a 13-week cup.
Copart (CPRT), the top-ranked stock in the auto retailers industry group, is in a five-week flat base ahead of its late-Wednesday earnings report. The buy point is at 149.16, 2% above where the stock ended on Friday.
Please follow Alan R. Elliott on Twitter @IBD_Aelliott
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