Stocks jumped into Monday’s open, then turned mixed as the Dow and S&P 500 moved to end multi-day declines. Analyst action powered a number of the largest early moves as IBD Leaderboard member Snap gained after Goldman Sachs initiated coverage, and IBD 50 stock Asana jumped on a price target hike. On the Dow Jones today, Intel surged to an early lead, while supply chain issues led to a Nike downgrade.
The Dow Jones Industrial Average surged 200 points at the starting bell, rising 0.6%. The S&P 500 climbed 0.3%. Both indexes are sitting on five-day declines. The Nasdaq Composite opened higher, then quickly dropped to a 0.1% decline as Moderna (MRNA) and Dexcom (DXCM) dived to the bottom of the Nasdaq 100.
Oil stocks packed the top of the S&P 500, as U.S. oil prices rose past $70 a barrel. EOG Resources (EOG), Marathon Oil (MRO) and APA (APA) led the pack, all up more than 4%. Etsy (ETSY), Generac Holdings (GNRC) and Twitter (TWTR) traded near the bottom of the list with losses of around 4%.
Small caps ran strong, with the Russell 2000 up 0.5%. At the top of the index, Regenxbio (RGNX) was an early leader, soaring 27% after announcing an eye therapy partnership with AbbVie (ABBV). Wisconsin-based auto components supplier Mayville Engineering (MEC) rallied 22%, following a mention in a Barron’s article on Saturday.
Potential market-moving events this week include Apple’s introduction of its latest iPhone and Apple Watch iterations on Tuesday. In Washington, Democrats are pushing to wrap up this week of a viable version of what was proposed to be a $3.5 trillion social infrastructure spending bill.
Software heavyweight Oracle (ORCL) reports earnings after today’s close.
Dow Jones Today: Apple Rises, Nike Downgraded
IBD Leaderboard stock Apple (AAPL) gave up its early lead on the Dow Jones today to Intel. Still, Apple shares gained 0.7%, dived 3.3% on Friday, following a key ruling in the company’s ongoing battle with Epic Games, regarding restrictive App Store policies.
Apple stock is now working to end a three-day decline, and to retake support at its 21-day exponential moving average, dropping on Friday to less than 1% from its 50-day line. Shares ended Friday 5.3% off their Sept. 7 high. The stock is in a buy range through 155.40.
Nike (NKE) slumped to the bottom of the Dow, down 1.2%. BTIG downgraded the stock from buy to neutral, with no price target, after research indicated factory shutdowns in Vietnam as the country manages its Covid-19 outbreak have caused “severe supply channel disruptions” since the company’s prior report on the matter in July.
Nikkei Asia reported Monday that Ho Chi Minh City, Vietnam’s southern commercial hub, is experiencing the highest coronavirus death rates in the region.
Other stocks taking early hits included IBD Leaderboard stock Avantor (AVTR), which dropped 3.7% after announced a 750-share follow-on stock offering. IBD 50 highflier Dynavax (DVAX) toppled more than 10%, hurt by news that the U.K. was canceling its supply agreement for Covid vaccine. IBD 50 peer CrowdStrike (CRWD) slipped 1.5% after Goldman Sachs downgraded the stock to neutral, from buy, leaving its price target unchanged at 305.
Stocks To Watch: Crocs, Mercado Libre, Snap, HubSpot
Argentina-based Mercado Libre (MELI) ended Friday not quite 3% below an 1,899.43 entry in a 31-week cup-with-handle base, after briefly topping that entry at the start of September. The IBD Leaderboard stock starts Monday poised in a test of support at its 21-day exponential moving average.
Snapchat owner Snap (SNAP) is in a buy range that runs to 77.37. Goldman Sachs initiated coverage on the stock Monday, assigning a buy rating and a price target at 90, about 21% above where shares finished on Friday. Also a Leaderboard stock, Snap has been loitering in its buy zone for eight weeks, long enough to form a new flat base, with a buy point at 80.95.
HubSpot (HUBS) is in a buy range above a three-weeks-tight entry at 679.29. Shares consolidated after a mid-June breakout. The growth stock has now gained more than 18% from the buy point. Its relative strength line is just off record highs.
The Innovator IBD 50 ETF (FFTY) is on the week’s watchlist. A 1.8% pullback last week hauled the fund back below the buy range above a 50.06 entry in what IBD MarketSmith analysis charts as a 28-week consolidation. Aggressive investors may have bought at alternative, early entries at either 46.98 or 48.32. The fund is still in a buy range above the 48.32 entry.
Vital Signs: Oil, Bond Yields, Bitcoin
West Texas Intermediate futures rose 1.1% in early trade, to $70.55 barrel. U.S. oil prices have been testing resistance around the $70 level since Sept. 2. WTI is now up 15.2% from a late-August low.
The 10-year Treasury yield continues to press against resistance at its 200-day moving average. The yield eased 1 basis point to 1.33% Monday. The 10-year yield had jumped past recent resistance at its 200-day moving average and cleared an Aug. 12 high last Tuesday. It traded as low as 1.12% in August, and hit a high for the year above 1.76% on May 30.
Bitcoin traded near $44,600, down almost 3% according to CoinDesk. It traded in a narrow range, as high as $46,417 and as low as $456,214, over the past 24 hours. The cryptocurrency touched a high above $63,500 on April 13.
Nasdaq, S&P 500, Dow Jones Today
After losing its grip on support at its 50-day moving average over the past two sessions, and undercutting lows from August, the question for the Dow Jones today is whether it will end or deepen its five-day slide. For the time being, the chart looks very similar to the index’s five-day pullback in June.
The total decline early that month — 4.5%, from the June 1 high to the June 18 low — reversed with a 1.8% rally on June 21, preventing a sixth-straight decline. The Dow has not seen a six-day retreat since the initial selloff as the pandemic hit in February 2020.
The S&P 500 has also logged five straight losses, sending the index below its 21-day exponential moving average.
The 21-day is a short-term gauge. A stock or index holding support above that line is showing strength. But breaks of the 21-day are not unusual. It sends an alert, not necessarily a warning.
But so far this year, a cut below the 21-day has been an indicator of a test of 50-day support. The S&P 500 has dropped below its 21-day line seven times during its uptrend since March. In all but one of those pullbacks, it has also dropped to test its 50-day line. The index closed less than 1% above its 50-day line on Friday.
The Nasdaq’s three-day pullback has left it in a test of its 21-day moving average, and 2% from its 50-day line. The S&P 500 has been more orderly, and the Nasdaq more sloppy, in their breaks and tests of support this year. The Nasdaq saw messy breakdowns below 50-day support in March and May. The S&P 500 suffered only one real brief dip below its 50-day level, in March.
A pullback to the Nasdaq’s 50-day would leave the index 3.8% below its record high from Sept. 7.
Overseas: China Mixed, Europe Rallies
China’s markets were mixed to start the week. Hong Kong’s Hang Seng Index dropped 1.5%, while the Shanghai Composite added 0.3% in its third straight advance, pressing further into its highest levels since August 2015.
President Joe Biden spoke with Chinese President Xi Jinping on Thursday, boosting markets on Friday with their first conversation since February. The two discussed cooperative opportunities in Covid prevention, economic recovery and on major international and regional issues, according to CNBC. Chinese regulators have continued to pump support into the economy, counter-balancing the impact of the country’s tightening of regulations against tech, internet and social media companies.
In Japan, the Tokyo’s Nikkei 225 gained 0.2%, after rallying 1.3% on Friday.
Among China-based ETFs, the iShares MSCI China ETF (MCHI) slipped 1.1%. The Xtrackers Harvest CSI 300 China A-Shares ETF (ASHR) moved 0.5% lower. The KraneShares CSI China Internet ETF (KWEB) carved a 2.4% decline.
Europe’s markets remained firmly higher in afternoon trade. Frankfurt’s DAX advanced 0.95%. London’s FTSE 100 traded up 0.75%, and the CAC-40 in Paris rallied 0.8%. The SPDR Portfolio Europe ETF (SPEU) jumped 0.9%, following a five-day decline.
Find Alan R. Elliott on Twitter @IBD_Aelliott
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