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Dow industrials quickly plunged 300 points on Tuesday, as earnings news, weak retail sales data and new regulations in China sparked complex trading at first. The earnings news raised IBD 50 Sea Ltd. stock. Warren Buffet’s Berkshire Hathaway boosted Organon and Krogers. Retailers received first place on the Dow Jones today, as Walmart and Home Depot released their second quarter results.
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The Dow Jones Industrial Average opened 0.7% lower, while the S&P 500 slipped 0.6%. The Nasdaq Composite erased 0.65%, with China-based stocks ranking low on the list.
Vaccine manufacturer Modern (MRNA) reversed its pre-market declines and jumped 3% to dominate the Nasdaq 100 and S&P 500. Regeneron Pharmaceuticals (REGN) and BioNTech (BNTX) also rebounded, up more than 1% each.
You’re here (TSLA) fell 2.3%, heading for a third consecutive decline and a possible test of support for the stock’s 10- and 30-week converged moving averages.
Home deposit (HD) traded near the S&P 500 low, down 4.5% after its second quarter report. The surf caught Lowe’s (LOW), dragging it down by more than 4%. IBD Ranking Stock DXC Technologies (DXC) fell more than 5%, after JPMorgan downgraded to an underweight position.
Grocery chain Kroger (KR) climbed 2.9% and June new issue Organon (OGN) added 1.1%. Warren Buffet’s Berkshire Hathaway reported in a regulatory filing Monday that he held nearly 1.6 million shares of the Merck (MRK) Organon spin-off. The record also indicates that Berkshire increased its position in Kroger from 10.7 million shares, to 61.8 million at the end of June.
Singapore based web content provider Sea Ltd. (SE) jumped 3%. IBD 50 stock closed in a buy range on Monday, above an entry of 285.10 in a 16 week consolidation. The buy zone extends to 299.36.
IBD 50 shares Global-e online (GLBE) rose 5.5% to lead the IBD 50 list. The Israel-based e-commerce software developer posted mixed results in the second quarter, with a much higher-than-expected revenue increase of 92% .
Dow Jones Today: Walmart, Home Depot
Home Depot fell 4.5% and Walmart reversed its initial decline and rose 0.8% on the Dow Jones today after releasing quarterly results.
Home Depot reported better-than-expected second-quarter sales and profits, but its same-store sales figures were unclear. The first move implied stocks would fall back below a buy point of 333.55 in what IBD MarketSmith analysis presents as a 12 week handle cup base.
Walmart topped second-quarter sales and profit estimates and raised its third-quarter and full-year guidance above analysts’ expectations. Walmart shares are sitting on an eight-week lead, up nearly 12% from a mid-June low, and approaching an entry of 153.76 in an eight-month consolidation.
Boeing (BA) lagged 1.1%, indicating a fourth consecutive decline. A three-day drop took Boeing stock below its 50- and 21-day moving averages, setting it up for a test of support on its longer-term 200-day line.
Miss Retail Sales, Production Hops, Powell Town Hall on the Bridge
July’s retail sales figures are well below expectations, with the Commerce Department reporting a drop of 1.1% for the month. This reversed June’s 0.6% increase, disappointing views for a slowdown to minus 0.2%. Car sales were a big part of the shortfall, without which sales fell 0.4%, versus views for a 0.2% increase.
Today’s market action could impact a scheduled virtual town hall with Federal Reserve Chairman Jerome Powell at 1:30 p.m. ET. Hosted by the Federal Reserve, Powell plans to answer questions from attendees across the country.
The Federal Reserve also released its July industrial production report, showing an increase of 0.9% for the month. This was better than double the 0.4% gain in June, far exceeding expectations of a 0.4% increase. Manufacturing output jumped 1.4%, down 0.1% in June. Projections were for an increase of 0.5%.
Additionally, investors are closely watching the rebound in coronavirus infections. Five states saw their seven-day averages for new Covid-19 cases reach record levels until Monday. Florida, Louisiana and Mississippi are now reporting the highest number of new cases per capita in the United States, with a growing number of states starting to reimpose distance, masking and capacity requirements. Globally, Covid cases have now increased for eight consecutive weeks.
Vital signs: oil, bond yields, Bitcoin
Crude oil prices were heading for a fourth straight decline on Tuesday, but still held in a healthy range of $ 65 to $ 70. Data released on Monday showed refinery activity in China fell to its lowest level in 14 months, as independent refineries cut production due to tighter regulations. West Texas Intermediate traded down 0.3%, holding just above $ 67 a barrel. WTI prices have fallen about 9% so far for August and are heading for their first decline in five months.
The 10-year Treasury yield fell sharply to 1.23% after two days of steep declines settled just below 1.26% on Monday. Falling yields indicate strong bond buying activity, which is a safe haven and generally reflects the outflow of capital from stocks. The Wall Street Journal reported on Monday that Federal Reserve officials were on the verge of reaching a deal to begin reducing their $ 120 billion a month purchases of treasury and mortgage securities “in about three months.”
The 10-year rate hit its highest of the year, just above 1.76%, in early April.
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Bitcoin prices edged down, trading around $ 46,828, after hitting $ 47,712 and as low as $ 45,297 in the past 24 hours, according to Coindesk. Bitcoin peaked above $ 64,829 in mid-April.
Chinese Markets Slip As Online Rules Tighten
Chinese markets fell after the country’s Ministry of Industry and Information Technology released a set of draft rules governing competition among online platform operators. The Shanghai Composite closed down 2%. Hong Kong’s Hang Seng Index reduced its initial loss to 1.7%. In Japan, Tokyo’s Nikkei 225 slipped 0.4%, after taking a 1.6% hit on Monday.
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Among Chinese gauges in the United States on Tuesday morning, the iShares MSCI China ETF (MCHI) fell 2.6% in the morning action. The Xtrackers Harvest CSI 300 China A-Shares (ASHR) ETF fell 2%. The KraneShares CSI China Internet ETF (KWEB) technology tracker fell 3.1% at the start of trading.
European markets remained mixed in the afternoon trading. The FTSE 100 in London added 0.2%. The CAC-40 in Paris fell 5%, while the DAX in Frankfurt kept its losses at around 0.2%.
The SPDR Portfolio Europe ETF (SPEU) was inactive in pre-market trading, after losing 0.5% on Monday. A four-week lead has taken the ETF to 1.9% so far for August, just below a buy point of 44.06 on a stable nine-week basis.
Nasdaq, S&P 500 and Dow Jones today
The S&P 500 and Dow Jones are now at the top five days ahead, including Monday’s closing highs. The Nasdaq Composite once again confirmed support at its 21-day exponential moving average, closing less than 1% of its August 5 high.
Some falling data from China and the New York Federal Reserve weighed on the stock on Monday. These combined with the more broadly negative news environment coming out of the weekend, which included advancing Covid-19 infections and restrictions, an earthquake in Haiti, and gruesome imagery and the new political challenges produced by the final withdrawal of the Biden administration of US troops from Afghanistan.
For a more detailed analysis of the current stock market and its state, study the big picture.
Despite the magnitude of the negative news stacked against investor confidence, the market made a bullish reversal on Monday. This left the Dow Jones and S&P 500 at their new closing highs. The Nasdaq narrowed to a narrow loss, but the rebound confirmed 21-day support. The S&P 500 rocked a distribution day during the session, leaving it and the Nasdaq with four manageable distribution days each.
“It remains a difficult environment for stock picking,” IBD’s Big Picture Market commentary noted Monday. There is no shortage of bullish charts, but the recent behavior of the breakouts has been hit or miss. “It’s okay to nibble on bullish setups when they arise, just keep your initial buy small. The market will tell you soon enough if your timing was right.”
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Communities of the century (CCS) closed on Monday less than 3% below a buy point of 72.60 in a handle cup base. The Colorado-based builder has a composite IBD rating of 96, ranking it number one among shares in the residential homebuilders industry group. Stocks slipped 0.8% on Tuesday morning.
Chipmaker On semiconductors (ON) climbed 15.9% in the first week of August, topping a buy point of 44.69 in a 16-week cup base. The title fell just below this point of purchase. The base purchase range is 46.92.
A five-day advance has been lifted Arch Capital Group (ACGL) in a buy zone, just above an entry of 41.38 in a 15 week flat base. The buy zone peaks at 43.45.
Giant of maritime transport Matson (MATX) is working on adding a fourth week to its rally. The advance placed the shares about 6% below a buy point of 79.15 at Wednesday’s closing bell.
Supplier of industrial chemicals Element solutions (ESI) is trading just below a buy point of 24.80 in a very flat base. The base pattern hangs bullish on the chart’s 10-week moving average.
Find Alan R. Elliott on Twitter @IBD_Aelliott
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