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Stock futures moved closer and slipped early Monday, following overseas action, as coronavirus concerns, Chinese trade news and an OPEC + oil production decision hammered in global markets. Qualcomm and Moderna were among the few precursors of the pre-market. The Dow Jones lost more than 500 points today, with nearly 20% of the index falling more than 2%.
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Dow Jones futures fell 1.5%, suggesting the benchmark would open again below its 21 and 50 day moving averages. Futures contracts on S&P 500 fell 1.2%. Futures on the Nasdaq 100 were down 1%. Early declines suggested the Nasdaq and S&P 500 would hold well above their 50-day support.
Small caps were particularly under pressure, with Russell 2000 futures down 2.4% and heading for a fifth consecutive decline.
Among the stocks of IBD 50, the vaccine manufacturer Modern (MRNA) was a lonely early bird on Monday, up 0.4%. Biotechnology has won in six of the last seven sessions, recording a 23% lead last week. CrowdStrike (CRWD) fell the hardest among names in the IBD rankings, down 3.2% at the start.
SPX stream (FLOW) increased by 24% after Ingersoll Rand (IR) has agreed to buy the beverage industry equipment maker for $ 3.6 billion.
Shares plunged in Hong Kong as US Treasury Secretary Janet Yellen criticized the effectiveness of the Trump administration’s tariffs against China. Investors in tech stocks are worried about growing regulation in Hong Kong, as well as oversight limiting the registration of Chinese stocks in US markets. Hong Kong’s Hang Seng Index lost 1.8%. In Japan, Tokyo’s Nikkei 225 closed down 1.25%.
Inventories in Europe have fallen even more sharply, in response to the spread of the delta variant of Covid-19, as well as the impact of a historic period of flooding in Germany. Around noon, the Frankfurt DAX and the Paris CAC-40 were down more than 2%. London’s FTSE 100 posted a loss of 1.9%.
Dow Jones Today: Chevron Leads the Slide
Boeing shares plunged 2.4% and Chevron (CVX) fell 2.5%, leading the first dips in the Dow today. The 30 Dow Jones quotes lost ground.
IBM (IBM) releases second quarter results after market close.
Don’t let knowledge blind you to stock corrections
S&P 500, Nasdaq: Qualcomm, Zoom Video, Tesla
On the S&P 500, oil stocks posted five of the top ten biggest losses. Western Oil (OXY) feel the hardest, down more than 4%. Airlines and cruise lines were also on the injured list.
Qualcomm (QCOM) recorded the only rapid advance among stocks on the S&P 500 and Nasdaq 100. It gained 0.6% after Goldman Sachs upgraded the chipmaker to neutral, from the sell-off. It also raised Qualcomm’s price target to 148 from 136.
China-based names have fallen to the bottom of the Nasdaq 100. JD.com (JD), Pinduo (PDD) and Baidu (BIDU) all fell by more than 2%. Zoom video (ZM) and ASML Holdings (ASML) has also been hit hard.
When to sell growth stocks: this could be your # 1 rule
Zoom Video shares fell 2.2% after the company agreed to pay $ 14.7 billion to the customer contact software maker Five9 (FIVN). Five9 shares rose 8.4%.
ASML fell 1.2%, penalized by a Wall Street Journal report that the Biden administration pressured the Dutch government to prevent sales of high-end chip equipment to China.
You’re here (TSLA) fell 1%, as it leaned towards a fifth consecutive day of decline.
Vital signs: oil prices, bond yields
Oil prices retreated after the Organization of the Petroleum Exporting Countries and its Russia-led partners, commonly referred to as OPEC +, agreed on Sunday to a planned increase in production.
West Texas Intermediate slumped 3.7% to just over $ 69 a barrel. Oil prices have now fallen for two weeks, on the heels of a six-week rally. July 6 prices hit $ 76.98, their highest level since October 2014. They are now positioned for a test of support at their 50-day moving average.
Join the IBD experts as they analyze the exploitable stocks in the stock market rally on IBD Live
Bonds rallied, sending yields sharply lower on Monday morning. The 10-year yield fell to 1.22%, down from 1.30% and 1.42% on Tuesday. Yields have fallen in eight of the past nine weeks and are ready for a test of support at their 200-day moving average. The last time the 10-year yield fell below the 200-day support was in December 2018. It started a nine-month drop that ended just before the Covid-19 pandemic.
Dow Jones Today: Blue Chip Basics, Profits
The Dow Jones settles today for a week in which nine of its constituents, 30% of the index, report profits. Four of them are located in bases or near points of purchase.
IBM reports Monday afternoon. Travelers (TRV) releases its second quarter results early Tuesday. Coke (KO), Verizon (VZ) and Honeywell International (HON) report Wednesday morning.
Coca-Cola is the only one with technical and fundamental indicators eligible for CAN SLIM investors. Its composite IBD index of 80 ranks it # 1 among non-alcoholic beverage manufacturers.
Coca-Cola shares finished just a fraction below a 56.58 buy point on Friday in a flat base. Coke’s relative strength rating is lagging behind. But its line of relative strength is a striking distance from the six-month high reached in March.
Market conditions: protecting capital
The deterioration in market action, including the Nasdaq sliding below its 21-day exponential moving average on Friday, is warning investors to be on the defensive. Protecting capital – locking in even small gains and limiting exposure – is the rule of the game right now. Usually, this is the time to create watchlists rather than making purchases.
For a more detailed analysis of the current stock market and its state, study the big picture.
As the earnings season heats up, investors may be tempted to snatch up leading stocks that are about to pass buy points on earnings reports. Those who do should study their options strategy for the earnings season, in order to limit the risk.
Find Alan R. Elliott on Twitter @IBD_Aelliott
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