Stocks traded lower Wednesday after disappointing July hiring data and as concerns rose regarding coronavirus infections and impact. Vaccine maker BioNTech rallied on FDA news. Advanced Micro Devices extended its breakout rally. Earnings news sent Paycom Software and DaVita past buy points. And on the Dow Jones today, Home Depot and UnitedHealth traded just below buy points.
The Dow industrials sloughed off 225 points, down 0.6%, as oil prices dived, while bond yields pared losses after a disappointing July hiring report from ADP. The S&P 500 shed 0.4%. The Nasdaq Composite surrendered its thin early gain and dropped 0.2%, as earnings news sent Match Group (MTCH), Kraft Heinz (KHC) and Amgen (AMGN) to the bottom of the Nasdaq 100.
IBD 50 stock Advanced Micro Devices (AMD) surged 4.7%, to the head of the Nasdaq 100, as it aimed to extend its five-day rally. The chipmaker has climbed following reports last week that U.K. regulators may block Nvidia’sNVDA proposed acquisition of Softbank (SFBY) unit Arm Holdings. AMD stock has gained more than 20% in fewer than two weeks, triggering the eight-week hold rule.
Paycom Software (PAYC) vaulted 8.3%, leading the S&P 500. The human resources software developer reported better-than-expected sales and earnings for the second quarter, and raised its guidance. The early move sent shares past a 404.87 double-bottom base buy point.
Delta variant concerns and news reports of a possible full approval from the Food and Drug Administration sent BioNTech (BNTX) up 3.6% to lead the IBD Leaderboard list. BioNTech is in the third week of an eight-week hold rule. IBD 50 stock Moderna (MRNA) opened to a 0.9% gain Wednesday.
In some of the morning’s more dramatic moves, four-day-old Robinhood Markets (HOOD) scrambled 54% higher. The stock finished trade on Tuesday more than 41% above Thursday’s initial offering price. Biotech BeyondSpring (BYSI) spiked 153%, after reporting positive Phase 3 trial results of a lung cancer treatment.
Dow Jones Today: Boeing Test Flight Delayed
Amgen slumped 2.9%, to the bottom of the Dow Jones today, after reporting second-quarter sales and earnings that beat views. But management trimmed its full-year earnings guidance.
Boeing (BA) dropped 1.1% after further delays to a test flight of the company’s autonomous, reusable space capsule. Boeing stock is attempting to add a third week to its advance off a mid-July low.
Home Depot (HD) — a stock that has benefited during periods of tighter Covid restrictions — edged a fraction lower. Home Depot stock rose 1.4% on Tuesday, ending less than 1% below a 333.55 entry, also in a 12-week cup with handle.
Econ Data: Hiring Fades In July, PMIs Mixed
ADP launched the ramp-up to Friday’s July payrolls report from the Labor Department with its July National Employment Report. The report showed U.S. nonfarm private employers added 330,000 workers in July. That was less than half of June’s 692,000-job increase, and was less than half expectations for an increase of 700,000.
Oil prices and bond yields turned lower after the ADP report. West Texas Intermediate futures tumbled more than 3%, moving below $69 a barrel. The 10-year yield held dipped four basis points to 1.13%, after settling just below 1.18% on Tuesday.
IHS Markit’s final composite purchasing managers index dropped to 59.9 for July, down sharply from June’s 63.7 tally, but above projections for a pullback to 59.7. The services index also came in at 59.9, also narrowly beating forecasts.
The Institute for Supply Management reported its services index jumped to 64.1 in July. That was up from June’s 60.1 reading, and well above forecasts for a 60.4 final number.
Weekly petroleum inventories data are set for release from the Energy Information Administration at 10:30 a.m.
Earnings News: Donnelly, DaVita Head For Buy Points
Dialysis treatment leader DaVita (DVA) jumped 7.8%, scoring an early breakout past a 124.98 buy point in a double-bottom base. Investors could use a breakaway gap buying strategy, which would place an entry at 129.10.
Video game developer Activision Blizzard (ATVI) gained 2.7%. The company reported second-quarter earnings late Tuesday. Activision has been rattled by an employee walk-off and executive shake-ups tied to a lawsuit alleging widespread sexual harassment and discrimination within the company.
On the downside, in addition to Amgen on the Dow Jones today, General Motors (GM) tumbled 7.7%, despite beating its second-quarter targets, as annual per-share earnings guidance stopped short of expectations.
China Ramps Up Covid Restrictions
China’s markets took a healthy bounce on Wednesday, with the Shanghai Composite and Hong Kong’s Hang Seng index each jumping 0.9%. That put the Shanghai Composite up 2.4% for the week as it rebounds from last week’s 4.3% dive. The Hang Seng ended Wednesday up 1.8%, vs. the prior week’s 5% fall.
The positive market action came even as China on Wednesday imposed “massive travel restrictions,” with a large number of airports and rail travel canceled, according to state-run media agency Xinhua.
Widespread Covid testing regimens have also been implemented, and Beijing imposed strict entry and exit controls on Sunday. CNBC reported early Wednesday that China’s National Health Commission said it confirmed 96 Covid cases on Wednesday — the third straight day it reported 90 cases and above. Of the newly confirmed cases, 71 were locally transmitted, said the health commission.
The question of how far China will have to go to lock down the new spread of the Delta variant coronavirus comes as a broadening regulatory crackdown left China’s markets reeling. Stocks began selling off aggressively on July 23, as authorities rolled out a series of reforms that reframed regulations for education companies, food delivery operations and companies listing on exchanges outside of China.
Tech and internet stocks fell hard Tuesday, on fears that online gaming would be the next sector on which the government would focus its broadening crackdown.
Tracking Global Stock Markets
Among China gauges in the U.S. early Wednesday, the iShares MSCI China ETF (MCHI) rose 1.8%, and the Xtrackers Harvest CSI 300 China A-Shares ETF (ASHR) gained 0.9. Technology tracker KraneShares CSI China Internet ETF (KWEB) rebounded 2.9% in early trade. The ETF fell 4% on Tuesday.
In Europe on Wednesday, stocks defended narrowed gains in afternoon trade. The CAC-40 in Paris pared back to a 0.3% advance. Frankfurt’s DAX swung 0.5% higher. London’s FTSE 100 mustered a 0.1% gain. The SPDR Portfolio Europe ETF (SPEU) added 0.5%.
IBD 50 Earnings: Roku, HubSpot, Innovative
At least a dozen IBD 50-listed companies have reported or will report earnings this week. Of the companies due to report, Roku (ROKU), HubSpot (HUBS) and Innovative Industrial Properties (IIPR) are among those near buy points.
Roku gained 0.2% in early trade, angling to avoid a fourth straight decline. The stock had dropped below its 21-day exponential moving average on Monday, finishing Tuesday about 10% below a 463.09 buy point in a cup-with-handle base. Roku reports after Wednesday’s close.
HubSpot shares were down 0.2% Wednesday, testing support at their 21-day average. HubSpot stock remains in a buy range above a 574.93 buy point in a cup base. Its pullback to the 10-week line didn’t trigger the automatic sell rule. So the breakout remains in play. The buy zone extends to 603.68. The company reports after today’s close.
Nasdaq, S&P 500, Dow Jones Today
The stock market gave the U.S. economy a vote of confidence Tuesday, with the major indexes all rebounding from short-term support. The gains came even as concerns and restrictions increased, due to what appears to be the accelerating spread of the coronavirus Delta variant in the U.S.
As a result, the S&P 500 and Nasdaq Composite closed narrowly off record highs. The Dow Jones today also opens near its record high, and back above the 35,000 level, which has acted as a cap on its progress since May.
For more detailed analysis of the current stock market and its status, study the Big Picture.
August is generally treated as a sleepy month for the market, a month in which traders take vacations before the kids head back to school. But for the past decade, August performances have been erratic. The Dow and S&P 500 have posted moves up and down of more than 1.5% in seven of the past 10 years. The Nasdaq has seen such moves in eight of the past 10 years.
IBD’s Big Picture cautions that “after rising in eight of the past nine months, a stock market pullback would not come as a surprise. For now, though, there’s no clear sign of such a pullback.” Distribution days are somewhat elevated, particularly on the S&P 500. But Tuesday’s action showed institutional buyers remained engaged. And there has not been any new distribution for the past two weeks.
The stock market’s status remains in “confirmed uptrend.”
Find Alan R. Elliott on Twitter @IBD_Aelliott
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