Stocks jumped into early gains Wednesday, as markets moved to extend Tuesday’s bullish rebound. Chipotle Mexican Grill, ASML Holdings and Travelzoo led the names rallying on earnings news, while Netflix skidded after its report. On the Dow Jones today, Boeing and Coca-Cola led as more than 20% of the index rose more than 2%.
X
Dow Jones Industrial Average scrambled 0.8% higher, up more than 250 points, with Coca-Cola (KO) out front in early trade. The S&P 500 rallied 0.6%, confirming Tuesday’s rebound from 50-day support.
The Nasdaq Composite strengthened to a 0.4% advance, held back partly by Apple (AAPL), which sagged under uncertain impact from flooding in China. ASML Holdings (ASML) and Nvidia (NVDA), both IBD Leaderboard listings ran at the head of the Nasdaq 100.
Nvidia rallied after Oppenheimer adjusted its price target to 235, after the stock’s 4-for-1 split on Tuesday. The new price target is 23% above where shares traded early Wednesday. Nvidia is in a buy zone following a rebound from 10-week support.
Chipotle Mexican Grill (CMG) ran hot on the S&P 500, rising more than 8% after reporting results late Tuesday. Halliburton (HAL) rallied 3.8% after its earnings report, and as Goldman Sachs upgraded the stock to buy, from neutral.
Vaccine maker and IBD 50 stock Moderna (MRNA) dropped 3.1%, entering its first day as an S&P 500 listing.
Netflix (NFLX) plowed 4.2% lower after its Q2 report late Tuesday topped views for subscriber growth, but missed the mark on earnings.
Beyond earnings, NeutroMetrix (NURO) spiked 88% in opening trade. The stock soared 210% on Monday, after the Food and Drug Administration conferred “breakthrough designation” status to the company’s Quell Device for treating fibromyalgia in adults.
Dow Jones Today: Coke, Verizon, J&J Earnings
Boeing (BA) and Coca-Cola set the pace on the Dow Jones today, up 2.8% and 2.3%, respectively. Apple stock dropped 0.7%, possibly affected by concerns over flooding in central China. CNBC reported that contract manufacturer Foxconn, Apple’s largest supplier, affirmed that its massive Zhengzhou assembly plant had not so far been affected by the floods. The city of 10 million has reportedly seen intensive flooding.
Coke stock scaled up 2% after scoring a solid sales and earnings beat, and raising its full-year earnings guidance above analyst views. The premarket gain suggested a starting bell breakout past a 56.58 buy point in a five-week flat base.
J&J reversed its premarket gains on the Dow Jones today and dropped 0.3%, despite easily clearing second-quarter expectations and raising full-year earnings and revenue guidance above analyst views. The stock ended Tuesday just below a 171.28 entry in a nine-week cup-with-handle base.
Global Stock Markets
Action was mixed across worldwide markets on Wednesday. Hong Kong’s Hang Seng Index closed 0.1% lower, extending its slide to three days as widespread floods displaced an estimated 200,000 people in central China. In Japan, Tokyo’s Nikkei 225 climbed 0.6%, ending a five-session decline just as the Summer Olympic Games are about to get underway.
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Stocks moved higher in Europe. In afternoon trade, London’s FTSE 100 climbed 1.6% gain. The CAC-40 in Paris rallied 1.4%. Frankfurt’s DAX traded 1% higher.
Vital Signs: Bond Yields, Oil Prices, Bitcoin
Bonds eased, sending yields higher after a sharp reversal on Tuesday. The 10-year yield rose to 1.26% early Wednesday, after settling just below 1.21% on Tuesday. Yields on Tuesday briefly fell to their lowest level since Feb. 2, and are now below support at their 200-day moving average.
The last time the 10-year yield broke below the 200-day support line was in December 2018. That began a nine-month slide that ended just ahead of the Covid-19 pandemic.
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Oil prices bounced Wednesday, with U.S. benchmark West Texas Intermediate up 1.6% to $68.27 a barrel. WTI reversed from early losses on Tuesday, following Monday’s 7.5% dive — the worst single-day drop since September. Prices began to slide after the Organization of Petroleum Exporting Countries and partners led by Russia, typically called OPEC+, agreed Sunday to a strategy to return production to pre-pandemic levels by 2022.
Monday’s loss left oil prices tracking toward a third-straight weekly decline, on the heels of a six-week rally. Prices on July 6 reached $76.98, their highest level since October 2014.
Bitcoin rallied 6% to above $31,500, after dipping to $29,327 on Tuesday. The cryptocurrency had traded above $36,000 in late June, and touched a record high near $65,000 in April.
Earnings News: ASML, ISRG, Chipotle
In addition to the three blue chips reporting earnings on the Dow Jones today, Travelzoo (TZOO), Lithia & Driveway (LAD), Harley Davidson (HOG), Interpublic Group (IPG) and Qualtrics International (XM) all surged higher after their reports.
ASML Holdings sparked 2.7% higher to trade high on the Nasdaq 100. The Netherlands-based chip equipment maker reported mixed second-quarter results, but raised its third-quarter revenue guidance. The stock is technically in a buy zone on a rebound from support. But IBD Leaderboard cautions that “Investors should not think of buying unless the stock regains the (705.90) buy point.”
Intuitive Surgical reversed its premarket advance and dropped 3%, despite reporting triple-digit earnings growth and a double-digit sales increase for its second quarter. Shares are extended from a late-June breakout from a base-on-base pattern.
Chipotle bolted 8.8% higher after easily topping analysts’ second-quarter profit targets. The gain sent shares beyond a buy range above a 1,579.62 buy point in what IBD MarketSmith analysis charts as an 11-week cup base. Chipotle initially topped the entry on July 7, then pulled back for a test of support at its 21-day exponential moving average.
After the close, Texas Instruments (TXN), Discover Financial (DFS), Whirlpool (WHR) and Mastercard (MC) are among the companies scheduled to report.
Nasdaq, S&P 500, Dow Jones Today
Results on Tuesday told a strong story of support across the three big benchmarks. The Nasdaq retook support at its 21-day exponential moving average. The S&P 500 rebounded gracefully from a test of support at its 50-day line. And the Dow industrials regained 50-day support, ending the session just even with the index’s 21-day line.
As a result, ETFs tracking the Dow Jones today are back near buy points. The SPDR Dow Jones Industrial Average ETF Trust (DIA) is 1% below its 348.75 entry. The leveraged ProShares Ultra Industrials (UXI) is 3% below its buy point at 34.07.
In addition, the SPDR S&P 500 ETF Trust (SPY) is in a buy zone on its rebound from its 50-day/10-week moving average.
Small caps skipped the support story. But both the Russell 2000 and the S&P Smallcap 600 turned in big gains for the day, rallying 3% and 2.9%, respectively. In both cases, that ended five-day declines. But both indexes remain well below recent highs and have repair work to do.
Market Status: Uptrend Under Pressure
Tuesday’s gains were a bullish follow up to Monday’s dive, with money flowing back into a broad range of sectors. However, a glance at IBD’s Market Pulse shows the stock market’s status remains “Uptrend Under Pressure.”
That leaves the door open to purchases of leading stocks breaking out past buy points. But it also cautions investors that the market remains volatile, with a number of indicators suggesting possible further consolidation.
For more detailed analysis of the current stock market and its status, study the Big Picture.
With earnings season fully underway, there are bound to be the usual quarterly successes and failures. HCA Healthcare (HCA) and AutoNation (AN) are among this week’s winners.
It is a good time to study up on pyramiding, and on earnings season options trades. These offer different approaches to limiting exposure while making purchases during earnings season.
Find Alan R. Elliott on Twitter @IBD_Aelliott
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