Dow Jones Pares Gains, Nasdaq Turns Red As Stocks Falter On China Tension – Investor's Business Daily

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The Dow Jones Industrial Average was slightly higher in late afternoon trade Wednesday, as stocks pared gains amid heightened U.S.-China tension.

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The Dow Jones industrials and S&P 500 were up about 0.1% each, while the Nasdaq fell 0.2%. Small caps tracked by the Russell 2000 slipped 0.2% in the stock market today. Volume was lower on both major exchanges vs. the same time Tuesday.

The U.S. State Department ordered China’s consulate in Houston to close “to protect American intellectual property and Americans’ private information.” China called the closure “an unprecedented escalation” and threatened to retaliate.

The stock market rally remains intact but has come under some selling. A resurgence in tech stocks has lifted the tech-heavy Nasdaq to a 19% year-to-date gain, while the S&P 500 is now up 1% and the Dow down 6% through Tuesday’s close. The Russell 2000 is still 11% underwater this year.

While the stock market has been in a confirmed uptrend since the April 2 follow-through day for the S&P 500, it’s had hiccups as Covid-19 cases resurge. (Read The Big Picture for a detailed analysis on daily market action.)

Covid-19 Update

Worldwide coronavirus cases have topped 15 million, with more than 621,000 deaths, according to Worldometer. In the U.S., confirmed cases climbed past 4 million, with the death toll now over 145,000.

U.S. Stock Market Today Overview

Index Symbol Price Gain/Loss % Change
Dow Jones (0DJIA) 26888.98 +48.58 +0.18
S&P 500 (0S&P5) 3262.37 +5.07 +0.16
Nasdaq (0NDQC ) 10661.13 -19.23 -0.18
Russell 2000 (IWM) 147.72 -0.31 -0.21
IBD 50 (FFTY) 36.49 +0.24 +0.66
Last Update: 2:24 PM ET 7/22/2020

Since the U.S. economy started to reopen, several states are experiencing record levels of new Covid-19 cases and hospitalizations as case counts rise. Texas, Florida and California are among the hardest-hit states.

As the rush for a coronavirus treatment or vaccine continues, Pfizer (PFE) led the Dow Jones index with a 4% pop in heavy volume. Shares are closing in on a 39.32 buy point of a cup base, according to MarketSmith chart analysis.

The U.S. government announced a $2 billion deal to buy 100 million doses of Pfizer and partner BioNTech‘s (BNTX) Covid-19 vaccine, with the option to acquire up to 500 million additional doses. BioNTech soared 10% in fast trade, on track for a new closing high.

Dow Jones Winners

Among other blue chips, IBM (IBM) and McDonald’s (MCD) gained 2% and 3%, respectively. That helped IBM reclaim its 200-day moving average. On Tuesday, IBM ended slightly lower after rising nearly 5% on its late Monday earnings and sales beat. The stock is approaching a 135.98 buy point of a cup with handle.

McDonald’s rose 3% to move further above its 200-day line, which it closed above on Tuesday for the first time since early June. Analysts expect Q2 earnings to fall 64% to 74 cents a share, according to FactSet, when the fast food giant reports Tuesday.

Microsoft (MSFT) advanced nearly 0.1% ahead of its fiscal Q4 results due out after the close. The IBD Leaderboard and IBD Long-Term Leader stock is 2% away from an all-time high. Analysts forecast earnings will climb 0.7% to $1.38 a share on 8.5% higher sales of $36.59 billion.

Chipotle Heats Up

Outside the Dow, Leaderboard member Chipotle Mexican Grill (CMG) rose 1% to a new record high, ahead of Q2 results due after the close. Shares are extended from a 1,087.10 buy point of a flat base. Wall Street expects EPS to fall 90% to 38 cents and revenue to dip 7% to $1.33 billion.

Homebuilders, hospitals and select retail groups led the upside among IBD’s 197 industry groups. But department store, oil and gas, and bank stocks lagged.

The homebuilder group surged nearly 10%. Existing U.S. home sales in June leapt 20.7% vs. May, the National Association of Realtors said. While that’s down 11% year over year, it marked a strong rebound from May’s 9.7% drop.

NVR (NVR) soared 10% to break out past a 3,619.36 buy point of a cup with handle in heavy trade. It remains in buy range, which goes up to 3,800.33. The Reston, Va.-based homebuilder delivered mixed Q2 results.

Homebuilders led sector ETFs as iShares U.S. Home Construction (ITB) and SPDR S&P Homebuilders (XHB) rose about 3% each.

The Innovator IBD 50 ETF (FFTY) advanced 1.1%, thanks to big gains from chipmaker Advanced Micro Devices (AMD), Medical Properties Trust (MPW) and Palomar Holdings (PLMR).

Follow Nancy Gondo on Twitter at @IBD_NGondo

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