Stocks thrashed out a mixed open Friday, as optimism toward a potential coronavirus vaccine countered global reaction to China’s imposing a rising authority over Hong Kong. Biotech Moderna leapt in early trade. Splunk, Palo Alto Networks and Nvidia advanced on earnings. China stocks were under early pressure. Procter & Gamble jumped to lead the Dow Jones today.
The Dow industrials opened down 0.4%, the S&P 500 pared its early loss to 0.2%. The Nasdaq fell 0.3%, then reversed to a 0.2% gain as the stock market today breaks tradition on a usually quiet day of trade ahead of the three-day Memorial Day weekend.
The tightening of restrictions in Hong Kong by Chinese authorities sent global markets lower ahead of the open. China names were hardest hit among Nasdaq 100 stocks, with NetEase (NTES), Baidu (BIDU) and JD.com (JD) taking the hardest early hits.. Hewlett Packard (HPE) traded at the bottom of the S&P 500, down 7.8% after an earnings miss.
Data analytics leader Splunk (SPLK) jumped 5.1% to lead the Nasdaq 100 as Mizhuo raised the stock’s price target, despite mixed first-quarter results and weak second-quarter guidance late Thursday. Nvidia (NVDA) trimmed its early gain to 0.1%, also receiving a price target hike, after a healthy first-quarter earnings beat.
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Vaccine Comments Lift Moderna; China Stocks Slip
Biotech Moderna (MRNA) rallied 3.1% at the open. The boost apparently came on positive comments from Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, regarding the company’s coronavirus vaccine now in human clinical trials. Fauci said he was “cautiously optimistic” regarding the performance of the vaccine’s apparent ability to generate antibody responses to the virus in a small number of patients.
Moderna shares had pulled back sharply from a May 18 high, but remain up 45.8% in May, with a year-to-date gain of 242%.
China names were under clear early pressure. JD.com (JD) dropped 3.7%, Baidu (BIDU) fell more than 6%. Iqiyi (IQ) and GSX Techedu (GSX) each dropped more than 3%. Huya (HUYA) dumped 6.5%. NetEase (NTES) unraveled more than 7% after reporting earnings. Alibaba Group Holdings (BABA) shed its early gain and collapsed 4.5%, also after releasing its fiscal fourth-quarter results.
Earnings News: Splunk, Palo Alto, Alibaba
Splunk blased past a lot of question, rising more than 8% after reporting weaker-than-forecast first-quarter revenue and earnings, and guiding its second-quarter revenue below analyst targets. A price target hike from Mizhuo, to 195 from 170, helped provide some early lift. The move lifted shares beyond a buy range above a cup-with-handle buy point at 161.90. The chase zone ran to 170.
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Palo Alto Networks (PANW) punched up 4.9% on a strong fiscal third-quarter win. Mizhuo also raised Palo Alto’s target, to 265, from 240. The stock is closing in on its ninth-straight weekly advance, ending Thursday about 9% below a cup base buy point at 251.20.
China’s Alibaba dropped 4.4%, facing some tough cross-currents after its fiscal fourth-quarter report. Earnings and revenue topped forecasts for the quarter, although guidance came in just below expectations. Alibaba has been attempting to breakout above a 216.20 buy point in a cup-with-handle base.
China Imposes Authority Over Hong Kong
Stocks in Hong Kong plummeted as Chinese leadership tightened its authoritarian grip over the city, enacting rules to limit dissent among residents. The move was seen as bringing the autonomous region’s 7.5 million residents under full Chinese control.
Hong Kong’s Hang Seng Index toppled 5.6% on Friday, while the mainland’s Shanghai Composite sloughed off 1.9%. The declines rippled into Japan, with Tokyo’s Nikkei 225 closing down 0.8% on Friday. Markets in Europe turned mixed in afternoon trade, with the DAX in Frankfurt and Paris’ CAC-40 up about 0.4% apiece. London’s FTSE 100 dropped 0.35%.
Oil prices reacted sharply, with West Texas Intermediate futures diving more than 3%. Safe haven assets advanced, with gold up 1%, to trade above $1,739 an ounce. Bonds gained, trimming the 10-year yield by 2 basis points, to 0.65%. The dollar traded briskly higher.
Coronavirus Update: Testing Surge Continues
The global cumulative total for confirmed cases in the coronavirus pandemic topped 5.2 million on Friday, with another 5,000 deaths raising the death count 1.5% to 333,997. Russia, Brazil and the U.S. continue to generate the highest number of new cases.
Cases in countries of the European Economic Area fell to less than 26% of the global total, but the region still accounted for nearly 48% of virus-caused deaths worldwide, based on data from the European Center for Disease Prevention and Control.
The case count in the U.S. rose above 1.6 million, 31% of the global total. U.S. deaths rose by 1,422, up 1.5%, topping 96,000 and representing not quite 29% of those killed by the virus worldwide.
The number of new tests conducted in the U.S. ramped above 400,000 over the past two days, boosting the 10-day average for testing above 371,000, up from around 226,000 at the end of April.
Coronavirus News: Michigan’s Restart
On Thursday, the growth rate of new infections and deaths in New York continued to hold at less than 0.5%. In New Jersey, confirmed infections rose by 0.7%, while deaths increased 1.5%. California’s growth rates are steady near 2.5%.
Minnesota, Wisconsin and New Hampshire continued to see new cases rising at around 4%, the highest in the country. Deaths rose at the fastest rates in Nebraska and New Hampshire, where death rates remained above 4%, and in Arizona, where deaths jumped more than 6% on Thursday, according to Worldometer data.
Nearly all of the country is in some stage of reopening, as President Trump emphasized that resurgences of the virus would not lead to further, widespread lockdowns. “We’re not going to close the country — we’re going to put out the fires,” he said during a tour of a Michigan auto plant on Thursday.
Restaurants and bars reopen in some parts of Michigan today, although the state’s stay-at-home order remains in effect through May 28. Illinois, New Jersey and Delaware also remain under stay-in-place rules, according to the New York Times.
Dow Jones Today: Pre-Memorial Day Friday
The Dow Jones today heads toward the starting bell toting a 3.3% gain for the week. It’s a nice gain, but capped by the high mark set out on April 29, which is acting as a level of resistance for the Dow, the S&P 500 and the Russell 2000.
The Nasdaq and the S&P 500 each have 3% gains for the week. The Russell 2000 is up 7.2%. The resistance impasse blocking the other indexes began to take a toll on the Nasdaq, which saw some weakening in key areas on Thursday. That tension needs to break in order for the stock market’s confirmed uptrend to proceed.
Historically, the Fridays before Memorial Day weekends don’t generate the kind of volumes needed to break such a logjam. But 2020, so far, is the market’s most unusual year in at least a generation, so anything is possible. The Stock Trader’s Almanac reports the Dow has slipped in 11 of the past 20 pre-Memorial Day Fridays.
The Dow has more than enough kindling set aside for a move higher. Intel (INTC), Apple (AAPL), Microsoft (MSFT), Visa (V), Pfizer (PFE) and UnitedHealth Group (UNH) are all below valid bases or in buy ranges. Apple and Microsoft are IBD Leaderboard listings.
For more detailed analysis of the current stock market and its status, study the Big Picture.
Find Alan R. Elliott on Twitter @IBD_Aelliott
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