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Apple broth and JPMorgan Chase (JPM) highlights this weekend’s watchlist featuring five Dow Jones stocks close to buying points. In addition to Apple (AAPL) and JPM stock, the group includes Goldman Sachs (GS), Visa (V) and Home deposit (HD).
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As the Dow Jones hit an all-time high on Friday, Goldman and JPM shares were the two biggest winners among the 30 constituents, while Visa was slightly above average. Meanwhile, HD and Apple shares both closed lower.
Friday’s stock action, driven by the strong jobs report and a rebound in the 10-year Treasury yield, could prove to be a turning point for market leadership. Since mid-May, when the 10-year Treasury yield began to decline 14 weeks from around 1.7% to less than 1.2%, big tech and growth stocks have led the way. But if Friday’s rebound marks the start of a sustained rebound in the 10-year Treasury yield, which seems very possible, the witness could be seen as the next step in the current stock rally.
Higher Treasury yields: good news for GS and JPM Stock
The drop in yields came amid an unexpected wave of Covid and a drop in Treasury issuance, thanks to Federal Reserve asset purchases and a cash withdrawal from the Treasury. While the outlook for Covid is uncertain, the upsurge in cases and hospitalizations is leading to an increase in vaccination. Meanwhile, the sharp increases in hiring and wages seen in Friday’s jobs report could cause the Fed to start cutting back on asset purchases later this year.
Prospects for solid earnings gains, boosted by the big infrastructure bill approaching the finish line, could provide more fuel to financial and industrials earnings. A strong economy should boost lenders, stimulating demand for additional credit after a period of moderate borrowing. GS and JPM stocks are also expected to reap higher net interest margins as the yield curve steepens, widening the gap between the short-term rates that banks borrow and the long-term rates they lend to. .
Wells Fargo, part of the elite portfolio of the IBD rankings, was the IBD action of the day on Friday as it entered a buy zone.
While these favorable economic winds will benefit all Dow Jones stocks on this week’s watch list, a higher 10-year Treasury yield could weigh on growth stock valuations. For Home Depot, higher Treasury yields will translate into higher mortgage rates, which would add to affordability issues for homebuyers.
Apple broth
Apple’s massive second-quarter earnings report had some analysts aiming for targets that would take the iPhone maker to a valuation of $ 3 trillion in the years to come. All facets of his activity seemed to change. Higher interest rates, if they happen, won’t change that, but could be a barrier to higher valuations.
Apple stock fell 0.6% to 146.14 on Friday, up 0.2% for the week. Shares are extended slightly from a buy point of 137.17 on a cup base with handle within a larger consolidation.
But a weekly chart shows Apple stock is in an entry range of 145.19 from a larger consolidation going back to late January.
Since hitting a record 150 on July 15, AAPL stock has moved sideways within a fairly narrow range. It’s not tight enough to be considered a tight three-week pattern, but investors could use 150.10 as an alternate buy point.
Still, Apple’s relative strength line, the blue line in the charts provided, shows that it only kept pace with the S&P 500 last year.
JPM actions
JPM Stock, along with Goldman, is part of the Banks-Money Center group which is ranked 36th out of 197 industry groups, based on stock performance and momentum. Strong investment banking activity offset weak credit demand and low net interest margins.
JPM’s profit more than doubled to $ 3.03 per share, excluding a 75-cent gain related to the release of excess credit reserves, even as earnings fell 10% from to last year.
On Friday, JPM stock jumped 2.8% to 157.50 to resume its 50-day moving average, capping a weekly advance of 3.8%. JPM stock is around 6% below a buy point of 167.54 on a stable 9-week basis, according to an analysis by MarketSmith. However, aggressive investors could seize the passage beyond its 50 days as an early entry point.
JPM stock has underperformed the S&P 500 since mid-March, as evidenced by its relative downside strength line. Still, JPM stock has outperformed 77% of stocks in the past year. It has a strong IBD Composite Score of 82, a unique score combining technical and fundamental factors.
GS stock
Compared to the JPM share, Goldman Sachs had other equipment. In the second quarter, EPS rose 71% to $ 15.02, as revenue rose 9% to $ 16.7 billion, fueled by investment banking and asset management.
On Friday, GS stock sprinted 3.5% to 397.89, erasing a buy point of 393.36 from a high volume flat base. The buy zone extends to 413.93. Goldman Sachs shares jumped 6.1% on the week.
With Friday’s move, the RS line for GS stock is now just below the multi-year high for May. The GS stock commands an excellent IBD composite rating of 96. The biggest stock market winners often hit a composite rating of 95 or higher before they started their big runs.
Visa stock
Visa stock rose 0.5% to 241.40 on Friday. This added to Thursday’s 1.5% advance, which pushed V-share above its 50-day moving average. The payments giant fell to the 50-day line earlier in the week and fell another 2% for the week.
Visa stock, which entered and exited the buy range over the past six weeks, is now back in the buy range. The V share has a buy point of 237.60 on a seven week fixed basis.
V share peaked at 252.67 when it reported earnings on July 27. The report was strong, with EPS up 41% to $ 1.49 on revenue growth of 27% to $ 6.13 billion.
However, the V stock fell amid the surge in Covid cases, which could dampen international travel, a key driver of profitability. The slow return of cross-border transactions largely explains the delay in performance of the Visa share. Its relative strength line, although shifting sideways this year, is not far from a multi-year low.
Still, analysts like Visa’s positioning, highlighting the rapid growth of its Visa Direct push payments platform and its opportunity in cross-border B2B payments.
Home deposit
HD stock was one of the early winners in the pandemic, as the housing market was one of the fastest sectors of the economy to rebound and then take off. Then, after consolidating for over 6 months, the HD stock had another surprising run starting in mid-March, peaking at 345.69 on May 10.
After defying the rising rate environment, HD stock consolidated as the fall in the 10-year Treasury yield pushed mortgage rates down. Housing-related stocks like The Home Depot have started to look stronger in recent weeks.
On Thursday, the HD action just hit a purchase point of 333.55 cups with a handle with below-average volume.
However, Friday’s surge in Treasury yields has put an end to the party for now. HD stock broke out of a buy zone on Friday, slipping 1% to 329.84.
Home Depot is expected to release its second quarter results before it opens on August 17. IBD recommends an options strategy to manage risk before opening results.
Even with Thursday’s short-lived breakout, the relative strength of HD stocks has only managed to move sideways in the past two months. Over the past year, however, HD stock has lagged behind.
Please follow Jed Graham on Twitter @IBD_JGraham for coverage of financial markets and economic policy.
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