Stocks let early gains slip away Tuesday as bond yields and oil prices turned lower, while earnings news stirred some busy early trade. Israel-based SolarEdge scored a breakout. Translate Bio soared on merger news. Home Depot rallied to the top of the Dow Jones today.
XThe Dow Jones Industrial Average struggled to hold a 0.1% gain. The S&P 500 wrestled almost 0.1% higher. American Express (AXP) dragged at the bottom of the Dow. Earnings sent IPG Photonics (IPGP) and Clorox (CLX) lowest among S&P 500 stocks.
The Nasdaq Composite slumped 0.3%, as China-based online gaming leader NetEase (NTES) dived almost 10% to the bottom of the Nasdaq 100. Atlassian (TEAM) led the Nasdaq 100, up 2.8%, trading just below new highs after a powerful rebound from 10-week support.
IBD Leaderboard stock Enphase Energy (MU) traded high on the S&P 500, up 9.4% after competitor SolarEdge Technologies (SEDG) reported a Q2 earnings win. Israel-based SolarEdge soared 17.9%, breaking out past a 291.29 buy point. Also on the S&P 500, researcher Gartner (IT) spiked 8.7% on its earnings report.
IBD 50 stock Atkore (ATKR) rallied 7% after its fiscal third-quarter report.
Also on the IBD 50 list, Translate Bio (TBIO), a specialist in Messenger RNA (mRNA) technology used in vaccines, bolted 29% higher after France's Sanofi (SNY) sealed a deal to acquire the biotech for $3.2 billion. Sanofi shares slipped 0.2%.
Also on the merger docket, China-based Hollysys Automation Technology (HOLI) surged 23%, after reporting a buyout offer at 23 a share. The bid came from a group of investors led by company founder Changli Wang.
Dow Jones Today: Goldman, UnitedHealth Buy Points
Home Depot (HD) paced the Dow Jones today, rising 1.1% as it approaches a 333.55 buy point in a cup-with-handle base.
Goldman Sachs (GS) also remains on breakout watch, although it pared a 3.5% gain to 0.9% on Monday. Shares are 4% below a 393.26 buy point in a nine-week flat base. UnitedHealth Group (UNH) is also on the breakout watch list, trading just below a 422.63 cup-with-handle buy point.
Honeywell International (HON) dropped back below its 234.12 buy point after a brief breakout on Monday.
Amgen (CVX) reports its second-quarter results after today's market close.
Leaderboard: Square, DXC Near Buy Zones
Infotech consultant DXC Technology (DXC) edged up 0.3% after BMO Capital upgraded the stock to outperform and raised its price target to 50, from 43. The IBD Leaderboard listing ended Monday in a buy zone, above a 41.85 buy point in a seven-week flat base. The buy range runs to 43.94.
Square (SQ) reversed premarket gains and dropped 2.6%, as analysts upgraded and raised price targets on the stock following news Monday the company would pay $29 billion for Afterpay, an Australian fintech specializing in buy-now-pay-later services. The digital payments leader also released second-quarter results ahead of Thursday's scheduled date. Square was added to the IBD Leaderboard list on Monday. Tuesday's slip sent shares back below an alternative handle buy point at 267.87.
Earnings News: TravelCenters Breaks Out
Among the early reports on Tuesday, petroleum giant BP (BP) climbed 5.7%, and International Game Technology (IGT) dropped 1.6%. Ralph Lauren (RL) leapt 8% following its fiscal first-quarter results.
Stocks moving on earnings reports from late Monday include a 6.8% gain from ZoomInfo (ZI).
TravelCenters Of America (TA) rocketed 19% higher on earnings news. The move lifted shares past a 32.44 buy point in what a IBD MarketSmith analysis identifies as a 31-week cup-with-handle base.
Global Markets: China Slips, Europe Climbs
Monday's rebound in China was short-lived, as markets posted another slip Tuesday. The Shanghai Composite dropped 0.5%, Hong Kong's Hang Seng Index shed 0.2%. Both indexes remained on positive ground after steep drops last week.
In Japan, Tokyo's Nikkei 225 slipped 0.5%, leaving most of Monday's 1.8% gain untouched.
Tech and internet stocks fell hard in China after criticism in a state-owned media outlet raised fears that gaming would be the next sector on which the government would focus its broadening crackdown. China's markets began selling off aggressively on July 23, as authorities rolled out a series of reforms that reframed regulations for education companies, food delivery operations and companies listing on exchanges outside of China.
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Regulators broadened the crackdown on Friday, with the Ministry of Industry Information Technology ordering a series of stringent reviews and corrections to 25 of the country's largest internet and hardware companies, including Alibaba Holdings (BABA) and Tencent Holdings (TCEHY). Tencent was among the hardest hit China stocks early Tuesday, trading down more than 7%. Alibaba slipped 3.1% after reporting mixed first-quarter results.
In the U.S. early Tuesday, the iShares MSCI China ETF (MCHI) was down 1.8% after falling 4.8% last week. The Xtrackers Harvest CSI 300 China A-Shares ETF (ASHR) showed a fractional decline. Technology tracker KraneShares CSI China Internet ETF (KWEB) slumped 4.7% in premarket trade. The ETF lost 8.7% last week, and rebounded 2.4% on Monday.
In Europe on Monday, markets turned mixed in afternoon trade. London's FTSE 100 shed its early gains and slipped a fraction into the red. The CAC-40 in Paris maintained a 0.5% advance. Frankfurt's DAX dropped 0.3%.
Oil Prices, Bond Yields Reverse Lower
Oil prices continued lower after erasing a three-day advance on Monday. West Texas Intermediate futures dropped 1% early Tuesday, holding above $70 a barrel, after Monday's 3.6% pullback. That left WTI still up more than 45% for the year, and down from a a July 6 high of $76.98 a barrel — its highest price since November 2014.
Monday's selloff appeared to be on a combination of concerns. First, an accelerating spread in China and the U.S. of Delta variant Covid-19 infections, and PMI data that showed slowing manufacturing activity in both countries during July. Also, worries of global oversupply as the Organization of Petroleum Exporting Countries and its partners increase output, as Covid threatens to hinder demand.
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Concerns over the Covid spread and manufacturing slowdown also hit the 10-year Treasury bond yield, which dropped more than 5%, settling just above 1.17%. Yields held above their lows from July 20, but now are headed for their 10th decline in the past 11 weeks.
The 10-year yield surrendered early strength and fell to 1.16% early Tuesday. Yields in the recent past have climbed as high as 3.24% in October 2018, and fell as low as 0.01% during the pandemic low in April 2020.
IBD 50 Earnings: Roku, HubSpot, Innovative
At least a dozen IBD 50-listed companies are due to report earnings this week, with Atkore reporting early Tuesday. Of the companies due to report, Roku (ROKU), HubSpot (HUBS) and Innovative Properties (IIPR) are among those near buy points.
Roku dipped 0.1% in early trade, looking to snap a three-day decline. The stock had dropped below its 21-day exponential moving average on Monday, putting it about 9% below a 463.09 buy point in a cup-with-handle base. Roku reports after Wednesday's close.
HubSpot shares were down 2%Tuesday, riding support at their 21-day average. HubSpot stock ended Friday in a buy range above a 574.93 buy point in a cup base. Its pullback to the 10-week line didn't trigger the automatic sell rule. So the breakout remains in play. The buy zone extends to 603.68.
Nasdaq, S&P 500, Dow Jones Today
Progress for the Dow Jones today remains capped by the 35,000 mark. The index has slipped in four of five recent sessions, but continues to find support at its short-term 21-day moving average.
The Dow, the Nasdaq Composite and the S&P 500 are all holding above their 50-day and 21-day moving averages. The Russell 2000 small cap gauge dropped back below its 21-day line on Monday. The S&P Smallcap 600 continued to find support at its 21-day line.
For more detailed analysis of the current stock market and its status, study the Big Picture.
Monday's early gains/late losses playbook is the opposite of what you'd expect to see in a bullish market. But IBD's Big Picture notes that signs of institutional selling remain muted, and the stock market remains in its "confirmed uptrend" status.
As earnings continue to roll out, investors will be closely watching the ramp up to Friday's July payrolls report from the Labor Department. That ramp-up begins Wednesday, with the National Employment Report from ADP (ADP).
In the U.S. Senate, Minority Leader Mitch McConnell slowed the roll of Democrats anxious to push through this week a $1 trillion infrastructure spending bill, saying the compromise was a "good and important jumping-off point," but would face vigorous floor debate.
Find Alan R. Elliott on Twitter @IBD_Aelliott
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