Dow Jones Fall, IBD 50 China Name Sells Off; This Industrial Sector Seeks To Lead The Market – Investor's Business Daily

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Major indexes, after catching their breath on Tuesday, struggled to hold on to early mild gains in Wednesday-morning trading.


Soft U.S. retail sales for February (down 0.1%, vs. the Econoday forecast for a 0.4% pickup), however, did not spur widespread selling.

At 11 a.m. ET, the Nasdaq composite was barely higher after opening with a gain of nearly 0.4%. The S&P 500 edged up 0.1% lower and the Dow Jones industrial average fell 0.3%.

Agricultural operation, meat, computer networking, movie, internet content, educational software and auto retailing stocks paced the upside with gains of 1% or more.

As noted in The Big Picture column, the major indexes on Tuesday logged a fresh distribution day, or bout of intense professional selling, as the Nasdaq fell 1% in higher volume vs. the prior session. The S&P 500 dropped 0.6% as NYSE turnover edged higher. But with most leading stocks acting all right and the two key indexes now having retaken their respective 50-day moving averages, the market’s current outlook remains at “Confirmed uptrend” for now.

Steel makers haven’t made much headway in the wake of historic tariffs of 25% set on steel imports by President Trump, although the White House has set exemptions for Canada and Mexico amid three-party talks to rethink the NAFTA trade treaty. However, the highly rated members of the group are still generally holding up and are beating the S&P 500.

U.S. Steel (X) fell more than 2% and is headed for a fifth down day in a row. Watch to see if institutional buying support can prevent a severe undercut of the stock’s rising 50-day moving average.

U.S. Steel holds a 92 RS Rating on a scale of 1 to 99. Shares are up 13% since Jan. 1, beating a 3.3% lift by the S&P 500.

Wall Street expects U.S. Steel, which has a $7 billion market value and is thus a midcap firm, to increase earnings by 98% this year to $3.84 a share, then boost earnings by 17% in 2019 to $4.50.

Tenaris (TS), part of IBD Leaderboard, and Steel Dynamics (STLD) are also group leaders, rising mildly after successful tests of support at their 50-day moving averages.

Tenaris is slightly below a 36.43 buy point in a long, deep cup with handle.

This week’s pullback looks normal so far, given that Tenaris has rallied nicely for four weeks in a row.

Notice on a MarketSmith weekly chart how in the week ended Feb. 9, while IBD’s current outlook shifted to “Market in correction” in The Big Picture column, how Tenaris respected its 40-week line. That’s bullish.

The Street sees the expert in oil and gas well steel pipes increasing earnings 43% to $1.10 a share this year and another 47% in 2019.

Meanwhile, China Lodging (HTHT) dropped more than 10% to 131.70 in heavy turnover and gave back all of its year-to-date gains and then some. But the stock is trying to hold near the 130 level, where it found institutional buying support during the early February market sell-off. The stock is also trading above its long-term 200-day moving average for now.

The hotel chain operator late on Tuesday notched an 86% jump in Q4 profit to 52 cents a share, accelerating from EPS gains of 19% and 58% in the prior two quarters, on a 42% rise in revenue to $340.1 million, the second highest for any quarter.

After-tax margin jumped 290 basis points to 11.2%.

Through Tuesday’s close, China Lodging ranked No. 10 in the IBD 50. Shares had already made a stunning climb, rising more than 400% from a first-stage breakout from a cup without handle at 33.10 during the week ended March 18, 2016.

This year, the midcap firm formed a new cup with handle, but it was a late stage base (meaning the risk of failure was greatly elevated) and the stock hadn’t yet broken out ahead of Q4 results.

In other markets, crude oil was drifting near break-even after a report showed weekly U.S. inventories rose to 5 million barrels in the week ended March 9. WTI slipped 0.1% to $60.64 a barrel.

The yield on the benchmark U.S. Treasury 10-year bond fell to around 2.83%, off from a Feb. 21 high of around 2.94%. The Federal Reserve meets on interest rates on March 20-21 and is widely expected to increase the fed funds rate by a quarter point to a range of 2.25%-2.5%.


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