Dow Jones, Nasdaq Fall As Janet Yellen, Jerome Powell Testify; Large-Cap Tech Stocks Outperform
The Dow Jones Industrial Average traded lower in today’s stock market as the major indexes all showed declines in afternoon trading. The S&P 500 and Nasdaq composite both reversed lower after briefly trading positive while the Dow traded near its lows of the day.
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About an hour before the market close, the small-cap Russell 2000 was down more than 3%, leading the market on the downside. At around 3:15 p.m. ET, the Nasdaq composite fell 1%. The S&P 500 lost 0.6%, while the Dow Jones industrials declined 0.8%. Volume was trading higher on the Nasdaq and on the NYSE compared with the same time on Monday.
On Tuesday, investors considered testimony from Fed Chief Jerome Powell and Treasury Secretary Janet Yellen. In a U.S. House Financial Services Committee hearing, Yellen and Powell made their first joint appearance to talk about the government’s Covid-19 relief efforts. Powell told lawmakers that the economic recovery has progressed more quickly than generally expected and looks to be strengthening. But he also said the recovery is far from complete.
Additionally, rising Covid-19 cases prompted Germany to announce a one-month extension on its stringent lockdown measures early Tuesday. However, over in the U.S., many states are relaxing restrictions, and there are signs of hope as vaccinations roll out and cases start to plateau and even fall in some states.
Cumulative Covid-19 cases worldwide have risen above 124 million, with more than 2.7 million deaths, according to Worldometer. In the U.S., cases are nearing 30.6 million with over 556,000 deaths. On the positive side, the number of new cases in the U.S. has slowed dramatically.
Large-Cap Tech Stocks Outperform
On Tuesday, oil and gas, retail and biotech stocks were lagging among IBD’s 197 industry groups. WTI crude oil futures slid more than 6% to $57.74 a barrel, according to OilPrice.com.
But several tech-related industry groups showed renewed strength. The few gainers included software, internet retail and movie-related stocks. Large-cap technology stocks like Netflix (NFLX), Amazon.com (AMZN) and Alphabet (GOOGL) all outperformed.
Netflix stock, featured in Tuesday’s IBD Live show, rose 3.5% in heavy trade as shares regained the 50-day moving average for the first time in nearly three weeks. Argus Research upgraded Netflix stock to a buy from hold with a 560 price target. The movie and TV show streamer is working on a shallow nine-week consolidation with a 593.39 buy point.
Meanwhile, Adobe (ADBE), which reports earnings Wednesday after the close, rose nearly 3% as it attempted to regain its recently converged 50-day and 200-day lines. Shares remain in a downtrend as the Relative Strength Rating has sunk to a low 19 out of best-possible 99. The RS line has also declined in recent months.
The Zacks consensus estimate is for adjusted profit of $2.79 a share, up 23% year over year, with sales up 22% to $3.77 billion.
As for growth stocks, the Innovator IBD 50 ETF (FFTY) declined more than 3%. The growth-focused index traded below support at the 50-day line after reclaiming this key area last week. Stocks leading the downside on Tuesday were Cowen (COWN), GrowGeneration (GRWG) and Ligand Pharmaceuticals (LGND) with losses of more than 5% each.
But a small handful of IBD 50 stocks initially bucking the decline included Zebra Technologies (ZBRA), PTC (PTC) and Vipshop (VIPS), up about 1% each. But the former two gave back gains. VIPS held on to a mild gain, up 0.6%.
Dow Jones Today
As for the Dow Jones, Proctor & Gamble (PG), Microsoft (MSFT) and Walmart (WMT) led the upside with gains of over 1% each. On the downside, shares of Dow (DOW) and Boeing (BA) were down 3.5% or more each.
Leaderboard stock Microsoft gained roughly 2% as it traded above the 50-day line. Microsoft is also an IBD Long-Term Leader stock. Shares climbed back above a 232.96 buy point, which puts the software giant in potential buy range that tops out at 244.61.
The stock is also approaching a 246.23 buy point of a new flat base, according to MarketSmith chart analysis. Microsoft stock is about 2% away from the entry.
Elsewhere, Intel stock lost nearly 3% on Tuesday as shares traded back below the 5% buy zone of a double-bottom base with a 65.21 buy point. Shares of Intel already broke out into the buy zone Monday but slipped back below the buy point. The buy zone tops out at 68.47, according to MarketSmith chart analysis.
Intel’s relative strength line, which has been climbing in recent months, still remains well off its highs. Additionally, the RS Rating of 51 remains well below the minimum 80 we like to see for growth stocks breaking out.
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