Stocks launched into uneven losses Tuesday as Tesla buffered the Nasdaq, while the Dow and S&P 500 backtracked after leaping to new highs on Monday. Tesla spiked toward a buy point on news it would join the S&P 500. The Dow Jones today came under pressure from several directions: Walgreens skidded to the bottom of the index following Amazon’s launch of pharmacy and home drug delivery units. Home Depot and Walmart also weighed on the Dow, losing ground after quarterly results.
The Dow industrials pulled back 385 points, about 1.3% at the open. The S&P 500 dropped 0.9% on the stock market today.
At the top of the S&P 500, Edwards Lifesciences (EW) powered up more than 4%. Monster gained 2% following an upgrade to neutral, from sell, with an 85 price target, by UBS. Small caps were under some pressure, with the Russell 2000 down 1.3% and the Vanguard Russell 2000 Index Fund ETF (VTWO) off 1.9%, despite strong early moves from Tupperware Brands (TUP) and chip materials manufacturer AXT (AXTI).
Gear up for Tuesday’s market action by reading IBD’s Investing Action Plan.
Earnings News: Joyy, Co-Diagnostics, Evoqua
China internet stock Joyy (YY) popped more than 12%, setting up for an early breakout. The company topped analysts’ third-quarter earnings and sales estimates, and announced Baidu (BIDU) would buy its video-based social media platform for $3.6 billion. Baidu shares dropped 3.2%, after reporting third-quarter results late Monday.
Biotech Co-Diagnostics (CODX) crashed 15% lower after massive gains in third-quarter sales and earnings came in well short of analyst estimates. The company said it received European Commission approval for its Logix Smart ABC and Logix Smart SARS-CoV-2 multiplex tests, which identify and differentiate between influenza A, influenza B, and SARS-CoV-2, the virus that causes COVID-19.
Evoqua Water Technologies (AQUA) reversed premarket gains and dropped 5.5% after reporting narrow wins for its fiscal fourth-quarter revenue and earnings. Evoqua is a recent IBD Stock Spotlight listing. The stock was up 23.7% in November at Monday’s closing bell, and extended 12% above a 25.29 buy point.
Dow Jones Today: Walgreens, Home Depot, Walmart
Walgreens Boots Alliance (WBA) collapsed 8.7%, diving to the bottom of the Dow Jones today, on news that Amazon had launched home delivery of prescription drugs from its new online Amazon Pharmacy store. Other pharmacies also reacted, with CVS Health (CVS) down 7.5% and shares of Rite Aid (RAD) tumbling 13.6%.
Amazon.com shares rose 0.9% in early trade. That could potentially move Amazon stock back above its 10-week moving average at the starting bell.
Home Depot (HD) shares dropped 2.8%, despite a third-quarter report delivering sales and earnings growth that was well above forecasts. Comparable store sales surged more than 24%. Management said it was transitioning what had been temporary Covid-19 employee support and compensation programs into a permanent benefits program, which would translate to $1 billion in incremental compensation on an annualized basis.
Home Depot stock has been trading sideways and building a base since late August. Shares ended Monday less than 5% from a 293.05 buy point.
Walmart (WMT) landed on the Dow’s downside, losing 1.5% despite reporting a 16% jump in earnings and a 5% revenue. Both numbers were above analysts’ third-quarter targets, but sales showed a slowing trend over the past three quarters. Walmart stock ended Monday in a buy zone, above a 51.43 buy point.
Coronavirus Update: California, New Mexico, N.J. Shutdowns
Coronavirus cases recorded worldwide since the beginning of the pandemic rose to more than 55.46 million on Monday. Virus-related deaths topped 1.33 million.
In the U.S., the running tally for coronavirus cases hit 11.54 million, with deaths above 252,000.
New U.S. Covid cases were above 162,000 so far on Monday. Coronavirus cases in the U.S. have topped 100,000 every day since Election Day, Nov. 3. California is stepping up restrictions in more parts of the state, with Los Angeles County already there. Several states and cities are tightening restrictions, as cases and hospitalizations soar.
The rise in cases prompted states that had resisted mandatory masking rules, including Utah, North Dakota, Iowa and West Virginia to reverse course and announce statewide requirements. California Gov. Gavin Newsom announced Monday that the state was “pulling the emergency brake” on its reopening and reinstating broad restrictions, according to the New York Times. New Mexico launched a two-week lockdown. New Jersey imposed limits on gatherings, with its court system suspending criminal and civil jury trials, and moved in-person grand jury sessions online.
IBD 50, Leaderboard: Futu, Tesla, JD.com
Futu Holdings (FUTU) slipped 0.1% on the IBD 50 list, threatening to snap its nine-day rally. Futu ended Monday extended, up 6.7% from a 41.09 buy point in a cup base. The top Chinese online broker was featured in last week’s IPO Leaders column.
Generac Holdings (GNRC) led the IBD 50 list in early trade, tising 1.3%.
Tesla easily topped the IBD Leaderboard roster, soaring more than 12% on news it would be added to the S&P 500 index on Dec. 21. That would leave Tesla stock just short of a 466 handle buy point in its 12-week base. Remember that premarket moves can often increase or disappear entirely at the start of regular trade.
China e-commerce giant JD.com (JD) jumped 2.2% in premarket trade, looking for a rematch after Monday’s 7.4% decline. The slip sent shares back below a cup-with-handle buy point at 85.48. The breakout remains in play, and the stock is up 4.6% so far for November, with a year-to-date gain of 142%.
Small Caps Rule In November
In an unusually strong post-election November, the Dow Jones today is sitting on a 13% gain through Monday. The Nasdaq was up 9.3% by the end of Monday’s session. The S&P 500 has a 10.9% gain.
Small caps, meanwhile, have outpaced the rebounding market. The Russell 2000 posted a 16.1% gain for the month through Monday. The S&P 600 has a 16.8% gain.
Last week, the Russell 2000 surged 6.1%, taking out its previous highs. First, it took out this year’s high from January. Then, it blew past the index’s record high set in August 2018.
Even with a modest pullback in futures, the Dow Jones today is set to open above what had been its prior, stubborn record high from February. The index finished Monday with a 4.9% gain for the year, and looking as though it might squeeze a positive finish from what has been a historically brutal year.
The S&P 500 also popped to a fresh high, up 12.3% on the year. Both are still eating the Nasdaq’s dust. The Nasdaq had a year-to-date gain of 32.9% through Monday. However, the tech-saturated index is now wrestling with resistance at the 12,000 level.
Dow Jones Today: Sector Rotation
There has been a fair amount of recent discussion of sector rotation, and investors should study up and get a handle on what that means. At its most basic level, it means many of the market’s leading stock opportunities are in flux. The pandemic year’s gap between the Nasdaq and the rest of the market appears to be narrowing.
Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.
But while rotation among leading industries and segments of the market may be underway, the charts of leaders such as Tesla, Amazon, Apple (AAPL), Microsoft (MSFT) and Facebook (FB) are far from broken down. Tesla may be poised for a breakout today, and the rest are basing. Alphabet stock is sitting in a buy zone, after clearing a 1,726.20 cup base buy point the day after the election.
Meanwhile, the stock market status remains in a confirmed uptrend, and a strong portion of the market has now pushed to new highs. The Nasdaq, however, is still wrestling. Whatever happens next, the best bet for investors is to trust their charts and fundamental research. Don’t be afraid to buy and increase exposure, but respect your sell rules and keep up your defenses when it comes to protecting capital.
Find Alan R. Elliott on Twitter @IBD_Aelliott
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