Stocks stammered into a mixed open Wednesday, amid a blitz of earnings news, and ahead of the Fed’s afternoon rate policy announcement. Earnings news boosted Alphabet, Microsoft and pot stock Tilray, among other names. China-based stocks rebounded briskly from their three-day decline. And on the Dow Jones today, Boeing rallied while McDonald’s dipped after delivering early morning reports.
The Nasdaq Composite shed its early loss and climbed 0.45%. Earnings news sent Starbucks (SBUX) to the bottom of the Nasdaq 100, while rebounding China stocks — led by Pinduoduo (PDD) and NetEase (NTES) — notched four of the top five early gains on the Nasdaq 100.
The S&P 500 pared its opening loss to less than 0.1%. The Dow Jones Industrial Average traded down 0.2%. All of the big-three indexes had lost ground on Tuesday, cooling a bit after five-day rallies.
Google parent Alphabet (GOOGL) rumbled 3.8% higher as analysts hustled to raised price targets on the stock following a strong quarterly report late Tuesday. Susquehanna weighed in with a 3,600 price target, a full 36% above where shares finished on Tuesday. The IBD 50 and IBD Leaderboard stock is extended following a July 22 breakout.
Advanced Micro Devices (AMD) reversed a premarket gain and slipped 0.3% after reporting a 240% surge in second-quarter earnings and a 99% sales increase. Rosenblatt raised the stock’s price target to 150, nearly 65% above Tuesday’s closing price. AMD stock ended Tuesday less than 5% below a 95.54 buy point in a cup-with-handle base.
Dow Jones Today Boeing Rallies, McDonalds Dips
Boeing (BA) thundered up 5.1%, leading the Dow Jones today, after reporting a surprise profit during the second quarter — its first since 2019. McDonald’s (MCD) dropped 2.4%, despite reporting a 40.5% increase in global comparable-store-sales for its second quarter. U.S. same-store-sales gained 25.9%, above expectations.
McDonald’s stock is threatening to snap a six-day rally that lifted shares almost 9% from a July 19 low. The rally passed what IBD MarketSmith analysis charts as a 238.28 buy point in a flat base. Shares are now just narrowly extended, just above the buy zone that runs to 239.80.
Bond Yields, Fed Meeting, Econ Data
Earnings powered the market’s early trade on Wednesday. But the Federal Reserve’s rate policy announcement, on the heels of the two-day Open Market Committee meeting, is likely to influence the session’s outcome. The announcement is set for 2 p.m. ET, followed at 2:30 p.m. ET by a press conference with Fed Chairman Jerome Powell.
No rate policy or stimulus strategy changes are expected, but investors are hoping for some signaling on the outlook for the Fed’s aggressive bond-buying initiative. The bank has, since June 2020, been gobbling up $80 billion a month in Treasury bonds and $40 billion in mortgage-backed securities.
Bond yields rose to 1.26%, after settling on Tuesday just above 1.23%. Yields have fallen sharply for the past 10 weeks, after touching a high above 1.76% in April.
A raft of early data Wednesday showed the trade deficit expanded on rising imports and a better-than-expected increase in retail inventories, while wholesale inventories contracted more than expected. Weekly petroleum inventories data are due at 10:30 a.m. ET.
China’s Selloff Slows, ETFs Rebound
Hong Kong’s Hang Seng Index bounced 1.5%, stubbing out a three-day selloff. The Shanghai Composite slowed to a 0.6% loss, adding a fourth day to its decline. For the week, the Shanghai index is down 5.3%. Hong Kong’s benchmark is off 6.8%.
China’s markets fell hard beginning on Friday, after authorities launched a series of reforms reshaping regulations that govern education companies, food delivery operations and companies listing on exchanges outside of China. Bloomberg reported the three days of selling had wiped $1.5 trillion in market value off the Shanghai and Hong Kong markets.
In the U.S., the iShares MSCI China ETF (MCHI) ended Tuesday with a 9.4% loss so far this week. It moved up 4.3% early Wednesday. The Xtrackers Harvest CSI 300 China A-Shares ETF (ASHR) had fallen 8.2%, and bounced 3.6% in premarket trade Wednesday.
Technology tracker KraneShares CSI China Internet ETF (KWEB) had tumbled 13.8% through Tuesday’s close. The ETF rebounded 7.7% in premarket trade on Wednesday.
Markets in Europe gained in afternoon trade. The CAC-40 in Paris climbed 0.8%. Frankfurt’s DAX and the FTSE 100 in London showed gains of 0.1% and 0.3%, respectively. The SPDR Portfolio Europe ETF (SPEU) slipped 0.2%.
Bitcoin Peeks Above $40,000
Bitcoin eased its early advance to 3% Wednesday, after moving in early trade above $40,400 — its highest mark in more than two months. The cryptocurrency is on course for its eighth-straight advance, potentially its longest rally so far this year. Bitcoin traded generally below $34,000 in July, after touching a record high near $65,000 in April.
Stocks To Watch: Pool, Icici, Discover, CarMax
The four names pinpointed as stocks to watch this week by IBD’s Investing Action Plan remained near their buy points early Wednesday.
Pool has climbed to the top of its buy range from its 449.54 buy point. The swimming pool services and supplies leader retook the entry Friday, after pulling back to test support at its 50-day moving average. The buy zone runs to 472.02.
Tuesday’s market losses left India-based Icici Bank narrowly below an 18.27 cup-with-handle buy point. Its buy range runs through 19.18.
Discover Financial held steady Tuesday, less than 1% below a 125.48 flat-base buy point. The stock has posted a couple of strong-volume dives below its 50-day line recently. But its relative strength rating remains a strong 93, and its relative strength line is hovering near new highs.
Auto retailer CarMax is trading very tight, just below a cup-with-handle base with a 137.63 buy point.
Dow Jones Today: Apple, Microsoft Earnings
The Dow’s heaviest reporting day of the season on Tuesday ended with Apple (AAPL), Visa (V) and Microsoft (MSFT) turning in late-day reports. Apple and Visa dropped less than 1% early Wednesday. Microsoft rallied 1.2% to the top of the Dow Jones today.
Apple earnings topped expectations for its fiscal third quarter. However, Chief Financial Officer Luca Maestri told investors that the company’s revenue growth would be slower in the current quarter.
Microsoft earnings also easily cleared analysts’ targets, wrapping up its fiscal year with total earnings above $60 billion. Management raised guidance for the current quarter. By early Wednesday, four analysts had raised their price targets on the stock. Citi came in the highest, raising from 378 to 411 — almost 44% above Tuesday’s closing price.
Visa earnings delivered a solid beat with wins in data processing and international transaction revenues, and with a 34% rise in payment volumes. Susquehanna hoisted its price target on the stock to 290, from 265, early Wednesday — 16% above Tuesday’s closing price.
Visa, Apple and Microsoft are all extended above recent buy points.
Find Alan R. Elliott on Twitter @IBD_Aelliott
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