The Dow Jones Industrial Average saw gains evaporate awaiting testimony from Fed Chairman Jerome Powell. Ferrari (RACE) zoomed by Tesla (TSLA) to take the checkered flag as first choice. Stock ranking Free market (MELI) tested a new point of purchase while Apple (AAPL) was a top blue chip.
There were several breakaways amid early bullish action, but the moves faded. Hubbell (CENTER), Deckers outside (DEK) and Trane Technologies (TT) all tested entries.
The market is now preparing for Powell’s congressional testimony on Tuesday and Wednesday. The 10-year Treasury yield turned higher, rising just over 1 basis point to 3.98%.
Stocks opened higher despite Mary Daly, president of the San Francisco Fed, saying “further policy tightening, sustained for an extended period of time, is likely to be needed” at Princeton University Saturday. She is not currently a voting member of the Federal Open Market Committee.
Traders appear to be betting on two or three more quarter-point rate hikes in this round. A meaningful equity rally or a painful pullback may be ahead, depending largely on the Fed’s goals.
Nasdaq fades while small caps collapse
The Nasdaq fell lower and a late rally attempt failed. It closed 0.1% lower. Dexcom (DXCM), a leader in the market for continuous glucose monitoring devices for diabetics, was a notable mover, falling 7.9%.
The S&P 500 managed to dig in its claws for a 0.1% gain. Lumen Technologies (LUMN) performed well here, up 4.1%. But the stock is trading for just 3.30 per share, meaning it’s not worth considering for CAN SLIM investors.
Sectors of the S&P 500 ended the day mixed. Technology and communications services outperformed, while basic materials and consumer goods lagged.
Small caps took a beating, with the Russell 2000 down 1.5%. Growth stocks saw overnight gains melt away, with the Innovator IBD 50 ETF (FFTY) closing fractionally.
Dow Jones Today: Apple Shares Rise During Bullish Call
The Dow Jones Industrial Average briefly turned negative in late trading before closing with a modest gain of 0.1%.
Apple stock was one of the best performers, popping 1.9%. The stock is now moving away from the 200-day moving average.
A comeback for AAPL continued to pay off after Goldman Sachs initiated it as a buy with a target of 199. Analyst Michael Ng said gross profit growth over the next five years will be driven by the services business.
But Merck (MRK) was the best performer on the Dow Jones today. It increased by 3.9% after the release of data on an experimental cholesterol pill.
Dow Inc. (DOW), Intel (INTC) and Boeing (BA) were among the largest laggards on the index. DOW was down 2.1%, INTC was down 1.6% and BA was down 1.5%.
Leaderboard inventory passes entry
MercadoLibre also had a productive day, popping up 2.4%. This freed up a buy point of 1,250.58. Crucially, it remained above level despite the late pullback.
On a weekly chart, this qualifies as a flat basis. On a daily chart, it’s more of a handle. Perhaps it is best described as a base-on-base formation.
MELI’s bullish action led to it being named to today’s IBD 50 Stocks to Watch pick. MercadoLibre is the largest e-commerce company in Latin America. It shows strength despite the competition from Amazon.nl (AMZN).
Retail inventory is making progress since posting strong gains last month. Exposure to MELI was increased on Leaderboard to take advantage of the bullish move.
Tesla Stock loses RACE amid Ferrari Pick
Ferrari may have lost the first F1 Grand Prix of the year on Sunday, but it won in perhaps an even more important category.
The stock has been named the top pick for the U.S. auto industry, ahead of Tesla stock, according to Morgan Stanley (MRS).
Analyst Adam Jonas said the Italian luxury sports car company has overtaken the EV giant amid a “relatively bearish view on auto fundamentals”.
According to Jonas, Ferrari has the longest order backlog, the greatest earnings visibility and the highest pricing power of “any company we cover”.
Jonas rates RACE shares as outperforming with a target of 310. Ferrari shares ended the day down 0.4%. Nevertheless, it is trading near a 270.45 handle cup entry, MarketSmith’s analysis shows.
Tesla shares fell 2%, losing ground on the 200-day line. TSLA is up more than 79% so far through 2023.
Outside of Dow Jones: 3 Stock Test Buy Points
With the market back in a confirmed uptrend, it’s important to keep track of breakouts. Hubbell briefly passed a cup-with-handle entry of 256.53 but returned lower. It closed the session down 0.1%.
The game with electrical equipment made the move in low volume. Overall performance is strong, with an IBD Composite Rating of 93 out of 99.
Deckers Outdoor barely closed above a flat buy point of 433.41 on the weekly chart and posted a gain of 1.1%. The relative strength line reached new highs, a bullish sign. Earnings and price performance are both very strong.
Trane Technologies tested a flat base entry of 194.76, but returned below this level. It ended the session down 1.1%.
The RS line is also at new heights. Big Money has recently been a net buyer of TT, with the stock’s Accumulation/Distribution Rating at B+.
Follow Michael Larkin on Twitter at @IBD_MLarkin for more analysis of growth stocks.
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