Stocks flattened after a weak start Wednesday, as disappointing retail sales clipped some early optimism for a possible federal coronavirus relief bill, and as investors awaited an afternoon Federal Reserve announcement. Marijuana stock Tilray soared on merger news. Twitter nailed an early breakout. Meanwhile, Microsoft stepped up to lead the Dow Jones today.
XThe Dow Jones Industrial Average opened to a 70-point drop, then trimmed its decline to less than 0.1% as Chevron (CVX) and UnitedHealth Group (UNH) dropped to the bottom of the list. The S&P 500 struggled to hold a fractional gain, while the Nasdaq also reversedan early loss and added less than 0.1% on the stock market today. China stocks Baidu (BIDU) and NetEase (NTES) ran atop the Nasdaq 100, up about 4% apiece.
Small caps remained positive, with the Russell 2000 flattening to a 0.1% gain, as Castle Biosciences (CSTL) and Overstock.com (OSTK) trading high in the mix.
Marijuana stock Tilray (TLRY) soared 20%, and Aphria (APHA) added 1.5%, after announcing a merger that would create a pot powerhouse with combined equity value of around $3.9 billion. The ETFMG Alternative Harvest ETF (MJ) gained 0.9% early Wednesday.
Twitter (TWTR) darted 4.7% higher, leading the S&P 500 and sending shares past what MarketSmith chart analysis determines to be a 53.03 buy point in a seven-week cup base. Morgan Stanley upgraded the stock to overweight, from neutral, and slapped on a 65 price target.
Automotive voice recognition leader Cerence (CRNC) opened to a 1.5% gain. Shares are trading just below a 95.02 buy point in a three-weeks-tight pattern.
Tool maker Stanley Black & Decker (SWK) rallied nearly 4%. Management cranked up the outfit's Q4 organic growth guidance to 10%, from a 3% to 5% range. It also projected free cash flow for the year of $1 billion, vs. prior guidance for $800 million. Stanley shares are attempting to regain support at their 10-week moving average, and remain extended after a flat base breakout in October.
Gear up for Wednesday's market action by reading IBD's Investing Action Plan.
Stimulus Deadline Approaches
Congressional leaders were near to an agreement on a coronavirus relief package totaling around $900 billion. The Washington Post reported that a deal could be reached before the end of the week. The deal would be part of a federal spending package that must be passed by midnight on Friday in order to avoid a government shutdown.
Retail Sales Disappoint, Fed Policy Announcement On Deck
Retail sales fell 1.1% in November, the Commerce Department reported, in a release that also revised October's final retail sales tally to a 0.1% slip, from the 0.3% gain originally reported. November's 1.1% drop was far beyond the 0.3% decline projected by economists.
The Federal Open Market Committee wraps its two-day meeting this afternoon with a rate policy announcement that has a habit of changing a day's market action. The announcement is scheduled for 2 p.m. ET, followed by a press conference with Fed Chair Jerome Powell at 2:30 p.m. ET.
Wall Street is unsure what outcome to expect, but for the first time since the coronavirus lockdown last spring, odds of an immediate adjustment in policy look pretty good. Enhanced quantitative easing guidance and a shift to buying longer-dated bonds are both possibilities. If the Fed does shift bond purchases toward the "long-end" of the yield curve, the effect on the Dow Jones today, as well as the overall market, would likely be positive.
Other economic data due out on Wednesday includes a preliminary composite purchasing managers index reading from Markit and the National Association of Home Builders' December gauge of builder confidence.
Dow Jones Today: Microsoft Gets Buy Rating
Microsoft (MSFT) moved up to an early lead on the Dow Jones today, rising 1%. Bank of Amewrica reinstated coverage, with a buy rating and a price target at 256.
Walt Disney (DIS) shed its premarket advance and slipped 0.1%. Deutsche Bank hoisted the stock's price target from 163 to 185. A big move on Friday sent Disney stock past what MarketSmith chart analysis plotted as a 153.51 buy point in a year-long cup base. A daily chart also showed a breakout from an earlier, 136.51 buy point in a double-bottom base. The stock is extended above both buy points.
EV Makers: Baidu Set To Extend Rally, Tesla A 2021 Influencer
China's Baidu (BIDU) added another 2.8%, leading the Nasdaq 100. Reuters reported on Tuesday the search engine giant was exploring plans to expand into electric vehicle production. Baidu's Apollo unit already develops autonomous driving technologies for EV makers. The company is planning to roll out an Apollo Go autonomous taxi service in several major Chinese cities. A Briefing.com analysis noted that "entering the EV market would represent a transformative development for BIDU."
Baidu stock is extended after an October breakout, and a November rebound from 10-week support.
Among other EV makers, Tesla (TSLA) was under some mild early pressure Wednesday, down 0.2%. A Tuesday note from Deutsche Bank said Tesla stock would hold strong sway over market behavior in 2021, particularly following the stock's addition to the S&P 500 index on Dec. 21. The note pointed out that Tesla's market valuation is now more than the next five largest automakers combined.
Tesla, an IBD Leaderboard stock, is extended and up more than 30% since clearing a 466 buy point in a cup-with-handle base on Nov. 18.
China's Nio (NIO) and Xpeng (XPEV) each added about 2% early Wednesday. Ford Motor (F) gained 0.6%, after the company began delivering its all-electric Mustang Mach-E to dealerships on Tuesday.
Brexit Talks Hit Crucial Period
Global markets were almost unanimously positive early Wednesday, boosted by Tuesday's news of Apple's production increase and by a jump in Germany's manufacturing PMI to a three-year high. Near mid-session, Frankfurt's DAX jumped 1.5%, the CAC-40 in Paris lodged a 0.6 % gain, and London's FTSE 100 traded 1% higher. Britain and the EU are entering what negotiators describe as a decisive few days in the Brexit trade talks.
European Commission President Ursula von der Leyen told the BBC Wednesday, "As things stand, I cannot tell you whether there will be a deal or not. But there is a path to an agreement now. The path may be very narrow, but it is there."
The U.K. voted in a 2016 referendum to exit the EU. The U.K. is scheduled to stop following EU trading rules on Dec. 31.
Mining, Oil: Exxon, Marathon, Freeport
Refiners in China and India have amped up purchases of spot market oil, according to Bloomberg, helping drive global oil prices to their highest levels since early March. West Texas Intermediate oil shed early gains and dipped a fraction Wednesday, holding above $47 a barrel. Exxon Mobil (XOM) and Marathon Oil (MRO) traded near the top of the S&P 500. Goldman Sachs upgraded Exxon to buy from neutral with a 52 price target. Marathon received an upgrade to overweight from Wells Fargo, with a price target at 11.
The United States Oil Fund (USO) reversed early gains and slipped 0.1% higher Wednesday. It is up 5.2% in December, after a 22.7% rally in November, but is still down more than 68% year to date.
Stock Market ETF Strategy And How To Invest In The Current Uptrend
Copper prices, considered a leading economic indicator, have rebounded to their highest levels since 2013. They gained 0.5% Wednesday morning, to trade above $3.56 a pound. Among mining stocks, Freeport McMoRan (FCX) pared its advance to 0.7% in premarket trade. Freeport shares are up 3.9% so far in December, following a November rally of 34.9%.
The United States Copper Index Fund (CPER) traded 0.6% higher Wednesday. The fund has gained 2.9% since the start of December, on top of a 21.3% advance for November. The fund has a gain of 25.1% so far in 2020.
Nasdaq, S&P 500 Retake 10-Day Lines
The stock market's status remains confirmed uptrend, and Tuesday's gains lifted the Nasdaq and S&P 500 back above their short-term, 10-day moving averages. The change snapped a brief period of weakness, shifting IBD SwingTrader's market view from sideways trade to "Market in Uptrend." This dialed up investor exposure levels from 75% to 90%.
IBD 50 Growth Stocks To Watch Right Now
Small Cap Rally Continues, Russell 2000 Extended
The Russell 2000 small cap gauge is now in the seventh week of a rally off 10-week support, launched on the day of the U.S. presidential election. The index, which had lagged the market through October, turned positive for the year in mid-November and had a year-to-date gain of 17.4% at the end of Tuesday's session.
The Russell's move continues to show strength. IBD's Big Picture on Tuesday pointed out that Russell 2000 stock Daqo New Energy (DQ) broke out to form a base on Tuesday. It also noted Innovative Industrial Properties (IIPR), an IBD Leaderboard stock, is gaining ground above a recent buy point.
For more detailed analysis of the current stock market and its status, study the Big Picture.
But the advance has also left the Russell 2000 extended 31.6% above its 200-day moving average on Tuesday. That is just shy of the index's widest margin above its 200-day line in its history. Extension above the 200-day is one warning signal of a rising stock becoming overheated. It can also act as a warning for indexes. The Russell's largest gap above its 200-day line was a 31.9% gap on March 10, 2000.
IBD 50/Leaderboard: Logitech, Novacure
Logitech (LOGI) rose 1.2% to lead the IBD 50 list after Morgan Stanley notched up the stock's price target to 106, from 100. Morgan Stanley expects tech hardware stocks to continue outperforming the S&P 500 in 2021.
Logitech shares have been hugging their 10-week line following an abrupt pullback in early November. The stock has technically formed a seven-week cup base, although the buy point remains a distant 95.81. Aggressive investors could mark an early alternative buy point at 90.46. Shares were positioned to clear that entry at Wednesday's starting bell.
Leaderboard listing Novacure (NVCR) climbed 2.2% in premarket trade. The cancer treatment developer pulled back sharply Monday and Tuesday, leaving shares down 8.5% so far for the week. It was still extended about 11% above a 140.99 buy point late Tuesday.
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