Stocks headed for another round of losses Wednesday, as bond yields surged after an April inflation gauge rose more than expected. Some banks, biotechs and oil-related stocks rallied. Earnings news lifted MasterCraft Boats and Darling Industries toward buy points. On the Dow Jones today, Chevron led, while JPMorgan and Goldman Sachs both rose near buy points.
XThe Dow industrials drilled 200 points lower at the open, down 0.6% and seriously testing support at its 21-day moving average. The S&P 500 dropped 0.8%. The Nasdaq Composite slumped 1.2% on the stock market today, with Lam Research (LRCX) and Zoom Video (ZM) diving to the bottom of the Nasdaq 100.
NortonLifeLock (NLOK) rallied 5.8% to lead the S&P 500 list, after a double upgrade, to buy, from Bank Of America. Norton spiked 10.8% Tuesday on earnings news. Eight of the other top 10 early gains on the S&P 500 came from oil stocks.
Citigroup (C) also traded high on the S&P 500, up 0.9% with bank stocks moving up alongside rising bond yields. Citigroup stock was just below a 76.23 buy point in an eight-week flat base.
Biotechs Incyte (INCY), Regeneron Pharmaceuticals (REGN) and Alexion Pharmaceuticals (ALXN) gained more than 1% apiece, leading the Nasdaq 100.
Stocks to watch for Tuesday, according to IBD's Investing Action Plan, include MarineMax (HZO), which is back below a 64.09 entry. Deere (DE) is pulled back to test support below a 392.52 buy point. Deere is an IBD SwingTrader stock. Both Deere and MarineMax are IBD 50 listings. Jefferies Financial (JEF) is near a 34.96 buy point, and has also pulled back below an earlier 33.68 entry.
Dow Jones Today: Banks Eye Buy Points
Chevron (CVX) surged 1.2% to the top of the Dow Jones today. Energy stocks in general rallied as oil prices climbed above $66 a barrel.
JPMorgan (JPM) gained 0.7%, Goldman Sachs (GS) jumped 1%. Goldman Sachs was rising in a buy range above a cup base at 356.95. JPMorgan is toying with a flat base buy point at 161.79.
Apple (AAPL) dropped to the bottom of the Dow, down 0.6% in early action, as the company's federal court contest is set to continue, against antitrust allegations brought by Epic Games. Apple stock staged a touchback to test support at its 200-day line on Tuesday.
Apple's first actual touch of its 200-day/40-week line in more than 12 months could mark a turning point for the stock. The handle on what had been a cup-with-handle base is no longer valid, with the midpoint of the handle now dropped well below the midpoint of the overall base.
April Consumer Price Data Surges
Consumer prices jumped more than expected in April, with the Labor Department reporting its Consumer Price Index surged 0.8% for the month, and 4.2% on a year-over-year basis. The jump — the index's largest since 1982 — was up from March's 0.6% rise, and multiples above the 0.2% increase projected by economists. Economists had projected a 3.6% jump, on a year-over-year basis.
Minus food and energy, prices jumped 0.9%, vs. a 0.3% rise in March and expectations for another 0.3% gain.
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Fast-rising prices for everything from corn to iron ore and copper to oil and gold — along with strengthening bond yields — have fueled broad concerns for a rising battle with inflation. The Federal Reserve generally expects the increases to be temporary, as a rebounding economy pinches various supply chains before ultimately evening out.
China Stocks: Alibaba, 360 Digital Rise
China-based stocks faded from early gains, which were fed by Hong Kong's benchmark Hang Seng Index rebounding after taking a steep dive on Tuesday.
Alibaba Group Holdings (BABA) edged up 0.5%, a day after JPMorgan initiated coverage on the stock with an overweight rating.
China-based 360 Digital (QFIN) led the IBD 50 list in early trade, rising 3.8% as the stock attempts to stem a three-week slide.
Nearly all of the China-based issues are broken down below critical levels of support. That sets the stage for a value-investor rebound, but the stocks will need to do some repair work on their charts before offering valid buy points.
However, the Xtrackers Harvest CSI 300 China A-Shares ETF (ASHR) has been posting tight weekly closes and holding support above its 200-day moving average. The fund traded 0.3% higher early Wednesday.
Earnings News: Electronic Arts, MasterCraft, Kontoor
Several recent initial public offerings logged big early moves following earnings reports. Upstart Holdings (UPST) surged 17%. FuboTV (FUBO) clocked a 15% gain.
MasterCraft Boat Holdings (MCFT) jumped 3.5%, trading just below a 30.50 buy point in a cup-with-handle base. MasterCraft holds a 92 Composite Rating from IBD.
Electronic Arts reversed a premarket gain and dropped 2.4% on the heels of its fiscal fourth-quarter report. Growing popularity of the Apex Legends game helped boost fourth-quarter results. The recent acquisition of Glu Mobile and its Battlefield game franchise is expected to help bolster performance in the coming year.
EA stock ended Tuesday less than 4% below a 146.82 buy point in a cup-with-handle base.
Animal byproducts recycler Darling Industries (DAR) bolted 5.3% higher after reporting a strong first-quarter earnings beat. Shares moved to within 2% of a 79.75 buy point in a nine-week flat base. Darling has a Composite Rating of 90 from IBD.
Wrangler jeans manufacturer Kontoor Brands (KTB) advanced 0.6%. The Greensboro, N.C.-based outfit reported a broad first-quarter sales and earnings beat, and lifted its full-year revenue guidance above analyst expectations.
Kontoor shares are extended, up 35% after breaking out from a double-bottom base in March.
Colonial Pipeline/Gasoline Prices
Pipeline operator Colonial Pipeline reported Tuesday it continued to restart operations along its 5,500-mile conduit after a ransomware attack forced it to shut down the line late Friday. The pipeline runs from Houston to Linden, N.J., with spurs feeding fuel into Tennessee and the Carolinas. It feeds approximately 45% of the gasoline supply to Northeast markets.
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Retail gas prices had jumped 6 cents a gallon vs. the prior week, the AAA reported.
RBOB gasoline futures — or reformulated blendstock for oxygenate blending, the price benchmark for U.S. gasoline products — rose 0.2% early Wednesday to above $2.14 a gallon. Like oil, RBOB futures have been rising since March. Prices briefly jumped above $2.21 a gallon on Monday, their highest mark since May 2018.
Vital Signs: Oil, Copper, Bond Yields
West Texas Intermediate oil prices gained, rising 1.2% Wednesday to above $66 a barrel — narrowly below the $66.76 high from last week, and nearing the 33-month high of $67.98, recorded on March 8.
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Copper added 0.5% higher to traded in new record territory above $4.78 per pound. Copper broke past its previous record, set in February 2011, on Wednesday.
Bonds gained after the April CPI data, with the 10-year yield rising to 1.65%, up from Tuesday's settle at 1.62%, according to CBOE data. The 10-year yield jumped back above its 50-day moving average on Tuesday, following its longest period — five days — below that level of support since August. Yields skirted pre-pandemic levels late in March, climbing to almost 1.76%, the highest level since January 2020.
Dow Jones Today: Checking The 12-Month Tally
Levels of support at the issue in question for Wednesday's session. The Dow Jones today opens sitting neatly at its 21-day line, a level of support it has maintained since a brief drop to test 50-day support in early March.
The S&P 500 is just below its 21-day, after its first close below that line since March 24. If the Dow holds, and the S&P 500 move back above, the 21-day line, that is a positive day. If the Dow falls below, and the S&P 500 remains or moves further below its 21-day, that's suggests more consolidation is in order.
For more detailed analysis of the current stock market and its status, study the Big Picture.
The Nasdaq closed for a second day below its 50-day moving average. It is holding well above its lows from March, but still up less than 4% so far this year as it meets clear resistance around the 14,000 level.
But it is good to keep in mind the index has logged a 45.7% gain over the past 12 months, so some consolidation is well deserved. It also shows the Nasdaq still outpacing its peers over that 12-month period. The Dow's 12-month tally at the end of Tuesday's session was 41.5%, the S&P 500 had posted a 41.7% advance.
Find Alan R. Elliott on Twitter @IBD_Aelliott
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