Stock dipped at the starting bell, then quickly turned mixed Wednesday as the market felt for direction following Tuesday's slide. Netflix tumbled, dragging on early trade after reporting disappointing subscriber growth. A handful of medical sector stocks showed strength, with Edwards Lifesciences and Intuitive Surgical soaring on earnings. Nike led the Dow Jones today, rebounding from a tumble on Tuesday.
XThe Dow Jones Industrial Average opened lower, then fought to narrow gains as Nike (NKE) climbed and Johnson & Johnson (JNJ) pulled back after Tuesday's rally. The S&P 500 also recovered to trade flat. The Nasdaq Composite dropped 0.3% on the stock market today, hurt by Netflix's (NFLX) decline.
Netflix fell hardest among Nasdaq and S&P 500 stocks. Oilfield service heavyweight Halliburton (HAL) swooned more than 4%, homebuilder NVR (NVR) slumped 3.4%, after first-quarter earnings reports.
Among medical products makers, Edwards Lifesciences (EW) vaulted 4.7% higher after scoring solid first-quarter sales and earnings beats, and raising second-quarter guidance above analyst estimates. Shares ended Tuesday in a buy range above a double-bottom base buy point at 88.30, exiting that buy range in early trade.
Medical robotics innovator Intuitive Surgical (ISRG) also surged on earnings news, up 6.7% scoring a breakout from a double-bottom base. The stock soared beyond the buy range of 812.89 buy point.
IBD 50 stock ASML Holdings (ASML) rallied more than 3% higher after reporting a strong first-quarter performance.
Elsewhere, Switzerland-based TE Connectivity (TEL) jumped more than 2% on earnings, rising toward a 136.11 buy point. Citrix Systems (CTXS) popped 4.4%, topping a handle buy point at 144.08.
Dow Jones Today: UnitedHealth, Verizon
Nike grabbed an early lead on the Dow Jones today, rising 1.1%. A 4.1% dive on Tuesday left the stock testing support at its 200-day moving average.
UnitedHealth Group (UNH) rose 0.5% following an upgrade to buy, from hold, from Argus Research. The report cited strong membership growth in the company's managed care business and a healthy backlog in its Optum operation, as well as the company's industry-leading return on investment. The report set the stock's price target at 450, about 14% above where shares closed on Tuesday.
Verizon (VZ) slipped 0.2% as investors dug into its first-quarter results.
Johnson & Johnson stock backed down 0.9%, a day after rallying 2.3% on earnings, and on news that the Covid-19 vaccine developed by partner BioNTech (BNTX) would be rolled out in Europe, but with a warning label attached. Doses of the vaccine were halted after a small portion of recipients developed life-threatening blood clots. After study, the European Medicines Agency determined the benefits of the vaccine far outweighed the risks, and that the clotting should be considered a "very rare side effects of the vaccine."
Also on Tuesday, the U.S. Food and Drug Administration shut down operations at an Emergent BioSystems plant manufacturing the J&J vaccine, after contamination ruined millions of doses of both the J&J and AstraZeneca (AZN) vaccines.
Small Caps Flat As Welbilt, Owens & Minor Rally
Among small caps, the Vanguard Russell 2000 Index Fund ETFVTWO rallied 0.7% in early action.
At the top of the Russell 2000, food service equipment maker Welbilt (WBT) soared 23% after industry heavyweight Middleby (MIDD) agreed to buy the New Port Richey, Fla.-based outfit in a $2.93 billion deal. Middleby shares fell 2.6%.
Personal protective equipment maker Owens & Minor (OMI) rallied 2.7%, positioning the stock as a possible buy on a rebound from its 10-week moving average. Owens & Minor, the top-ranked stock in the Medical-Wholesale Drug/Supplies industry group, is one of the five manufacturers awarded contracts to supply N95 masks and other Covid-related protective gear.
Netflix Earnings
Netflix earnings topped views but subscriber growth of 3.98 million fell well short. The FANG stock sees only 1 million new streaming customers in the second quarter. Netflix faces a post-pandemic environment amid growing competition from Disney (DIS) and its Disney+ streaming service. Management said it would launch a $5 billion stock buyback program this quarter.
NFLX stock plunged more than 8% early Wednesday. That signaled a move below the 50-day and 200-day lines. A 0.9% dip on Tuesday left shares at 549.57, less than 2% below a 559.85 buy point from a tiny handle on a weekly chart.
Bitcoin Bobs, CoinBase Holds
Bitcoin prices were steady, bobbing between $55,000 and $56,000 early Wednesday, according to CoinDesk. The cryptocurrency ran up to a new high above $64,800 a week ago, ahead of the Coinbase Global (COIN) IPO. Shares dropped below $54,000 on Sunday, but Bitcoin remains up more than 90%, after starting the year just above $29,000.
Shares of cryptocurrency exchange Coinbase traded a fraction higher, after closing at 320.82 on Tuesday. The Coinbase IPO priced initially at 250. CAN SLIM rules advise against jumping into IPOs too early, amid all the initial offering speculation and excitement. It is better to sit and watch the new stock's chart. Waiting for it to form and break out from an IPO base helps limit downside risk.
Nasdaq Vs. Dow Jones Today: Tighter Tolerances
A two-day retreat has left the Nasdaq Composite hovering just above its 21-day exponential moving average, and set for a test of support. The S&P 500 and Dow Jones Industrial Average are pulled back from their record highs. Year to date, the Dow is up 10.5% and the S&P 500 has climbed 10.1%, while the Nasdaq has a 6.3% gain.
For the Nasdaq, a break of support at its 21-day line — which is also the level of the index's March highs — would point to a possible fallback to the 50-day/10-week moving average. The index is seeking some level of support at which to consolidate, before taking another run at the 14,000 mark.
For more detailed analysis of the current stock market and its status, study the Big Picture.
Nasdaq-tracker Invesco QQQ Trust ETF (QQQ) eased 0.7% on Tuesday, dropping narrowly back below its 338.29 buy point, but holding support at its 21-day line. There was some clear deterioration in small cap indicators, as the Russell 2000 wheeled 2% lower, and the S&P Smallcap 600 punched below both its 21-day and 50-day lines of support.
The stock market remains in a confirmed uptrend, but the market is increasingly volatile. That uncertainty may work itself out, or become worse, as the March-quarter reporting season gathers momentum. For now, as noted in Ed Carson's early Stock Market Today update, investors should be rotating to cash as they get stopped out of stocks. It is a good time to tighten up stop-loss tolerances and take profits where feasible, particularly in stocks with earnings coming due.
Market Vital Signs: Oil, Copper, Bond Yields
Commodities were mixed after charting some losses on Tuesday.
West Texas Intermediate oil tubmled 2.8%, to below $61 a barrel. WTI climbed briefly on Tuesday above $64, its highest level since mid-March and up 10% from a late-March low. Prices then reversed, settling at $62.44. Copper added 0.6% to trade above $4.24 a pound. Prices struck an almost 10-year high at $4.30 on Feb. 24. Copper and oil prices are important indicators of economic sentiment, and drive moves in mining and energy stocks.
Stock Market ETF Strategy And How To Invest In The Current Uptrend
Bond yields hovered, with the 10-year yield edging up to 1.57%, after settling at 1.56% Tuesday, according to CBOE data. Yields last week experienced their worst week since July, declining to 1.53% on Friday. They skirted pre-pandemic levels late in March, climbing to almost 1.76% — the highest level since January 2020. Yields had started 2020 at around 1.8%, down from about 2.7% a year earlier, then dipped in August to record lows around 0.5%.
Find Alan R. Elliott on Twitter @IBD_Aelliott
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