A mixed opening fell quickly on Friday, but an initial boost in January consumption data led to mixed action amid the general decline. A recovery in bond yields has been halted and oil and copper futures contracts have declined from recent highs. News of earnings has raised Etsy and Monster Beverage dramatically. Today, at Dow Jones, Johnson & Johnson’s shares traded lower, as its vaccine candidate Covid-19 faced a review by the FDA committee.
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The Dow industrial index fell 350 points, down 1.1%, as Dow’s shares were widely mixed at the start of the negotiations. UnitedHealth Group (UNH) and Home Depot (HD) rose more than 1%. Salesforce.com (CRM) and Chevron (CVX) fell to the bottom of the list.
The S&P 500 gave up on its initial gains and fell 0.5%. Nasdaq Composite rose 1.4% and then moved back to negative stock market trading today, with Letter (CHTR) and Monster drink (MNST) taking the lead, and a handful of chip stocks trailing behind.
Monster was up 3% on solid fourth quarter results. On top of the S&P 500, IBD 50 stock Etsy (ETSY) rose more than 6% in earnings. Goldman Sachs increased its target share price to 286 from 178.
Energy weighed heavily on the S&P 500 in early trading. Texas-based utility NRG Energy (NRG) fell 3.5% after rescheduling the fourth quarter’s reporting date on Thursday due to problems related to Texas-related energy outages. Oil-related stocks held five of the ten heaviest initial losses for the S&P 500 in the premarket.
Twitter (TWTR) rose 4%, with the goal of adding to Thursday’s 3.7% gain. Half a dozen analysts raised their stock price targets after the company revised its revenue forecast on Thursday.
Small caps also got lower. The Russell 2000 fluctuated to a loss of 0.8%, although Select Doctor (SEM) marked an early breakout er / WallStreetBets target GameStop (GME) shot up 16% at the beginning of the trade.
Stimulus vote, January expense / revenue jump
Personal income soared 10% and consumer spending increased 2.4% in January, the Commerce Department said. Both figures were above economists’ expectations and well above the 0.6% increase in income and the 0.2% drop in expenses recorded in December.
Inflation, the main concern as the economy recovers, remained weak in the month, with the PCE Price Index rising 0.3%. This was slower than the 0.4% increase in December and in line with expectations. However, basic prices – which eliminate volatile food and energy costs – rose 0.3%, despite a 0.3% increase in December, but above the 0.1% increase forecast.
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In Washington, House legislators prepared a vote on Friday over the $ 1.9 trillion stimulus package set to include $ 1,400 relief checks for many Americans, although an effort to include a minimum wage increase to $ 15 has suffered a setback in the Senate on Thursday. Democrats are trying to get the bill through to the presidential signature before supplemental unemployment benefits expire in mid-March.
Abroad, China’s markets were hit by losses overnight, causing Hong Kong’s Hang Seng index to fall 3.8% and the Shanghai Composite to drop 2.1%. In Europe, the benchmarks in Paris and Frankfurt remained at less than 1% in afternoon trade. The FTSE 100 in London fell 1.6%.
Dow Jones Today: Salesforce vs. Caterpillar
Salesforce.com was the first anchor to drag the Dow Jones today, down 3.5% after its fourth quarter earnings report on Thursday. The quarter’s earnings and revenues were easily offset by analysts’ projections. The same happened with the quarter’s reserves, a line closely observed, as well as the orientation for the current quarter. The problem was in the earnings orientation for the entire management year, which fell below analysts’ consensus.
Piper Sandler reduced its target share price from 242 to 240, and kept its rating neutral.
The initial slide led Salesforce’s stock to open below its 10-week moving average. This line has not been the solid level of support for Salesforce that it has for other first-rate stocks, but it would mark another sip placed on the scale, weighing against Dow.
Salesforce’s stock has fluctuated repeatedly over its 50-day line during its five-month consolidation. Dow Jones Microsoft (MSFT) is also testing support, below a purchase point of 232.96. Apple (AAPL) and Nike (NKE) cut below their 10-week lines. Microsoft is a current list on the IBD Leaderboard.
Meanwhile, Dow shares Caterpillar (CAT), JP Morgan (JPM) and Goldman Sachs (GS) are flexing some cyclical muscles, rising sharply during the week and trading at or near new highs. All three shares traded lower on Friday.
Bond bounce, copper slips; Oil remains close to 13-month high
Bonds jumped, causing the 10-year yield to drop 3 basis points to 1.49%, still rising from lows around 0.50% in August. Yields started 2020 at about 1.8%, down from about 2.7% a year earlier. Federal Reserve Chairman Jerome Powell on Tuesday reaffirmed the Fed’s commitment to near-zero interest rate targets in testimony to Congress this week. It is not yet clear whether the Fed will be able to maintain that position as market rates soar.
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Oil prices lost ground, with West Texas Intermediate oil reverting more than 1%, to less than $ 63 a barrel. WTI is still hovering close to its highest level since 8 January 2020, and on Thursday released its highest settlement price since May 2019. The European Brent oil benchmark has also declined, but has remained above $ 66 Copper and silver futures contracts fell sharply, with copper falling 2.5%, but staying above $ 4.15 per pound, just before a 10-year high.
Bitcoin slump continues, support for PayPal testing
Bitcoin traded lower on Friday, strengthening to around $ 47,000 after swinging to near $ 44,000 and above $ 52,000 in the past 24 hours, according to CoinDesk. The cryptocurrency rose to a record high above $ 58,000 on Sunday.
Among Bitcoin-related actions, Marathon Patent Group (MARA) reversed pre-market losses and jumped 4.4%. MicroStrategy (MSTR) and the ETF Amplify Transformational Data Sharing (BLOK) both have become closely positive
IBD Leaderboard Stock PayPal Holdings (PYPL) shook off pre-market losses and jumped 2%. PayPal’s shares have been influenced by Bitcoin price fluctuations since October, when the company launched a cryptocurrency trading service that trades Bitcoin. The shares are trying to recover from the 10-week support. The stock has not fallen below its 10-week line since late November.
Dow Jones today: a matter of balance
Nasdaq failed its stress test on its 21-day line on Thursday, falling below support in its 50-day moving average. It was Nasdaq’s first result under 50-day support since November 3, the day before the US presidential election.
The charts for the other major indices are in a stronger position. The S&P 500’s light touchback for its 50-day / 10-week line was similar to its move in late January, which led to a six-day recovery to new highs. The Dow Jones opens today just above support at its 21-day short-term moving average.
For a more detailed analysis of the current stock market and its status, study the big picture.
The Russell 2000 ended on Thursday just below its 21-day line, but well above its 50-day line. Russell has so far behaved well at the post-election rally, staging small setbacks in his 21-day line and then recovering to new highs. The 3.7% drop on Thursday could mark an inflection point, prefacing a deeper retreat, or could set the stage for another jump.
If the Dow Jones today maintains support on its 21-day line, the S&P 500 remains above its 50-day line and Russell rebounds above its 21-day average, that would provide some sense of stability while Nasdaq works through of your consolidation and support issues. If these other indices started to reduce support, Nasdaq could return to 13,000 or more, and it would be a good time to bend for a more serious market price correction.
Find Alan R. Elliott on Twitter @IBD_Aelliott
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