Stocks spun out a mixed open, then turned higher Monday as resource-based issues led a rebounding Dow and the Nasdaq shook off early losses. Growth stocks Pool and KKR jumped toward buy points. Moderna rallied on an improved outlook for its Covid-19 vaccine supply. And Caterpillar rallied on the Dow Jones today, trying to stem a slide of more than 13% since the start of June.
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The Dow Jones Industrial Average rallied 275 points at the starting bell, up 0.8% as it aims to snap a five-day sell-off. The S&P 500 gained 0.4%, narrowly retaking support at its 50-day moving average.
Meanwhile, the Nasdaq Composite reversed its opening losses and bounced 0.25%. Peloton (PTON), Zoom Video Communications (ZOOM) and Nvidia (NVDA) were trading at the bottom of the list.
Vaccine maker Moderna (MRNA) skipped up 3.4% to the lead the Nasdaq 100 and the IBD 50 list. The company announced changes in manufacturing that it expects to increase its Covid-19 supply by 50%.
Smith & Wesson (SWBI) bolted 7.3% higher to the top of the IBD 50 list. That moved the stock out of buy range above a 22.60 buy point in a cup-with-handle base.
Anavex Life Sciences (AVXL) surged more than 21%, lifted by positive trial results for its Rett Syndrome treatment. A five-week rally has lifted Anavex shares more than 100%.
Gear up for the week’s market action by reading IBD’s Investing Action Plan.
Dow Jones Today: A Big Week For Microsoft
Software giant Microsoft (MSFT) plans to announce updates for its Windows operating system on Thursday. Analysts expect the company to unveil Windows 11, the successor to Windows 10, which came out in July 2015. Media reports have indicated that Windows 11 will include a refreshed user interface and design. It also could sport deeper integration with Microsoft’s cloud services.
Microsoft stock gained 0.2% early Monday, after finishing Friday 1.5% below a 263.29 buy point from a shallow cup base. Microsoft has been stacking bases on top of each other since January. And the bases all have enjoyed support above their 50-day/10-week moving average, making for a bullish chart.
Small Caps: Raven, Lydall Acquired
M&A action helped energized small caps in early trade, with the Russell 2000 rallying 0.7%.
Diversified agricultural supplies vendor Raven Industries (RAVN) spiked 49% after U.K.-based CNH Industrial (CNHI) agreed to buy the outfit for $2.1 billion. In April, Raven acquired Jaybridge Robotics, an early innovator of automated agriculture technology. CNH shares, which are up more than 26% so far this year, rose 0.4% in premarket trade.
Automotive components maker Lydall (LDL) soared 81% in premarket trade. Unifrax, a specialty materials unit of private-equity firm Clearlake Capital Group, agreed to buy the Manchester, Conn., company for 62.10 a share.
Fed Speeches Preface Powell Testimony
Comments to the media from St. Louis Fed President James Bullard roiled markets on Friday. And while no significant data releases are due out on Monday, markets are braced for another week of busy Fed commentary. Bullard, Dallas Fed President Robert Kaplan and New York Fed President John Williams are all scheduled to speak on Monday. On Tuesday, Federal Reserve Chairman Jerome Powell goes before the House Select Subcommittee on the Coronavirus Crisis.
Stocks To Watch: Entergy, PayPal, IHS, KKR
IBD’s weekly Investing Action Plan singles out four stocks to watch this week. Entergy (ENTG) is in a cup base with a 126.51 buy point but could form a handle later. Pool (POOL) is in a flat base with a 449.54 buy point. Alphabet (GOOGL) is back below a 2,431.48 flat-base buy point. PayPal (PYPL) is back below a 277.96 early entry as well as an official buy point of 309.24.
On the SwingTrader list, IHS Markit (INFO) ended Friday about 1% below a 109.75 entry in a five-week, flat base-on-base pattern. Asset manager KKR & Co. (KKR) was 5% below a 59.25 buy point in a six-week flat base.
Vital Signs: Bitcoin, Bond Yields, Oil Prices
Bitcoin fell almost 5%, back below $33,000 after trading above $40,000 on June 15, according to CoinDesk. Bitcoin touched a record high above $64,800 on April 14. It is down a fraction since the start of June, with a year-to-date gain of just over 12%.
Time The Market With IBD’s ETF Market Strategy
Treasury yields are caught in their first four-week decline since July 2020, and facing firm resistance at their 50-day moving average. Still, the 10-year yield inched higher Monday, to 1.46% early Monday, after settling at 1.45% on Friday.
Oil prices dipped, with West Texas Intermediate narrowly lower and holding just below $72 a barrel. That is up above 17% from a May low, with a year-to-date gain nearing 48%.
Amazon Prime Day, Buy Point
Amazon.com‘s (AMZN) biggest sales event each year takes place Monday and Tuesday. Amazon does not release Prime Day sales figures, and the events don’t tend to have any direct impact on share price.
However, Amazon stock ended trade on Friday only 2% below a 3,554.10 buy point in what IBD MarketSmith analysis notes as a seven-week cup base.
Dow Jones Today: Changed Dynamic
The Dow Jones Industrial Average is up 8.8% for the year through Friday. The S&P 500 has climbed 10.9%. The Nasdaq Composite holds an 8.1% gain. But the dynamics of the market have changed sharply. Over the past five weeks, the Nasdaq has advanced 7.9%. The S&P 500 rose 2.7%.
The Dow reversed its advance on June 7, falling in seven of the next 10 sessions. That marked its deepest break below 10-week support since October. Small caps, gauged by the Russell 2000 and S&P 600, have behaved similarly to the Dow.
The S&P 500 has also broken support, though much more narrowly.
For more detailed analysis of the current stock market and its status, study the Big Picture.
The question for the Dow Jones today is whether it can snap its five-day losing streak. For the S&P 500, a quick recovery above support would continue the trend of prior tests in January, February, March and May. A deeper dive below the line could signal problems.
For the Nasdaq, the challenge is in holding the 14,000 level. That level has capped its progress since February. Losing this battle would further solidify that resistance. But converting it to a level of support would mark an important shift for the index.
Friday’s Big Picture article discussed in detail the change in market dynamics. For the time being, investors should “avoid most stock purchases and be quick to heed sell signals. Taking some profits to reduce exposure is smart, too.”
Find Alan R. Elliott on Twitter @IBD_Aelliott
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