Stocks opened sharply lower Monday, as markets already due for a pause received some added downward incentive. Boeing fell hard on the Dow Jones today, following a 737 airliner crash reported in Indonesia. Twitter shares dived as investors responded to the service’s ejection of President Donald Trump on Friday. China issues faced some pressure, as a White House investing ban took effect, and Bitcoin-related issues skidded as the cryptocurrency fell sharply after its steep run up to a record high on Friday.
X
The Dow industrials trimmed losses to 0.4%, after posting a 250-point drop at the open. The S&P 500 fell 0.6%, while the Nasaq led early declines with a 1.2% loss. Tesla (TSLA) and Facebook (FB) traded down more than 3% each at the bottom of the Nasdaq 100. MicroStrategy (MSTR), Twitter (TWTR) fell to the bottom of the S&P 500.
Stocks are due for a pullback after a powerful fourth-quarter advance, followed by a rousing rally in the first week of 2021. The Nasdaq has signaled some mild overheating, suggesting it might be due to consolidate some of its strong recent gains.
Despite all the red ink, there was a fair amount of positive news. Eli Lilly (LLY) led the index, up 14.7% after an Alzheimer’s disease treatment showed positive Phase 2 trial results. Biogen (BIIB) topped the Nasdaq, up 5.7%, possibly riding some of Eli Lilly’s updraft. Walgreens Boots Alliance (WBA) ran to the top of the Dow Jones today, up 3.6% after a handful of analyst upgrades and price target hikes.
China-based EV maker Nio (NIO) spiked 11%, after a string of announcements on Saturday. Leaderboard stock Nvidia (NVDA) also received a boost from the news. IBD 50 stock Crocs (CROX) spiked to a new high after updating its guidance.
Gamestock (GME) swept 12% higher, after reaching an agreement with activist investor RC Ventures. RC Ventures, managed by Chewy’s (CHWY) founder Ryan Cohen, will place Cohen and two others on Gamestock’s board of directors. The fund reportedly holds a 13.8% stake in the company.
A couple of significant conferences, the CES consumer electronics show and the JP Morgan Healthcare Conference, both begin on Monday. Both will be fully virtual this year. Earnings season gets underway later in the week, with Taiwan Semiconductor (TSM) and Delta Air Lines (DAL) reporting late Thursday, and Dow Jones stock JPMorgan (JPM) leading the kickoff among big banks on Friday morning.
Stocks To Watch
Apple (AAPL) is extended from a 125.49 entry but has formed a handle with a 138.89 buy point. Tencent (TCEHY) is approaching an 81.45 buy point but could be buyable now as it has retaken its 50-day line and clears short-term resistance. Danaher (DHR) is nearing a 248.42 buy point from shallow cup base. Repligen (RGEN) is eyeing a 212.65 cup-base buy point but flashed an earlier buy signal when it bounced off the 10-week line. Chipotle (CMG) is back in buy range, above a handle entry of 1,358.81 and a consolidation high offering a 1,384.56 entry.
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Dow Jones Today: Boeing Falls On Indonesian Crash
Boeing (BA) shares fell hard in early trade, down 3%, after Indonesian authorities reported a Boeing 737-500 aircraft crashed shortly after taking off from Jakarta. The Sriwijaya Air flight was reportedly carrying 62 people and disappeared over the Java Sea. Boeing’s 737 Max aircraft had just begun their return to service in December, following a two-year worldwide grounding due to problems contributing to two fatal crashes that killed 346 people in 2018 and 2019.
Boeing stock ended 2020 with a 33.5% loss, after rebounding 43.6% from its bear market low. Shares are still down 53% from their February 2019 peak.
Transition Of Power, End Of @realDonaldTrump
Markets have an eye on still rapidly developing events in Washington, D.C., where the final nine days of Trump’s presidency have the country teetering on an uncertain edge. There have been no briefings from the White House, the Pentagon, the FBI, the Department of Homeland Security, or the Capitol Police since the attack by Trump supporters against Congress and federal lawmakers last Wednesday, providing little clarity for U.S. markets and businesses.
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Trump’s followers have pledged additional violence in the capital amid demonstrations planned beginning Jan 16, ahead of the inauguration of incoming President Joe Biden. D.C. Mayor Muriel Bowser has requested all permits for demonstrations be denied from Monday through Jan. 24, and that a “pre-disaster declaration” be issued to increase security surrounding the inauguration.
House Democrats have pledged to initiate impeachment proceedings on Monday. Six people died in relation to Wednesday’s attack, including two U.S. Capitol police officers, one of whom apparently committed suicide after the incident. Capitol Police Chief Steven Sund tendered his resignation on Thursday, with Assistant Chief Yogananda D. Pittman assuming control of the force — which is charged with protecting U.S. lawmakers, federal facilities and events — on Friday.
Twitter shares tumbled almost 11% after the microblogging site announced late Friday it would permanently suspend President Trump’s @realDonaldTrump account. A blog post from the company said: “After close review of recent tweets from the @realDonaldTrump account and the context around them — specifically how they are being received and interpreted on and off Twitter — we have permanently suspended the account due to the risk of further incitement of violence.” All previous posts were removed.
Twitter stock had been trading in a buy range, after clearing a clearing a cup-base buy point at 53.03 in mid-December. Shares opened more than 8% below the buy point, which triggered the automatic sell rule.
EV Makers: Nio Rallies, Tesla Slips
Electric vehicle manufacturers were once again center-screen on Monday’s radar, with China-based Nio (NIO) up sharply after unveiling a luxury sedan and new battery technology on Saturday. Nio stock broke out past a 57.30 cup base buy point on Friday. Shares were up more than 10% in early trade Monday.
Nio also announced a partnership with chipmaker Nvidia (NVDA), adopting Nvidia’s DRIVE Orin system as the nerve center for its automated driving technologies. Nvidia is an IBD 50 and IBD Leaderboard stock. JPMorgan raised its price target on Nio stock to 75, from, 50, based on Saturday’s announcements, maintaining its overweight rating. Nio is extended after a breakout on Friday past a 53.03 buy point.
Other EV makers were also optimistic in early trade. China-based Li Auto (LI) and Xpeng (XPEV) reversed early losses and gained around 2%. Tesla (TSLA), which has been flashing some climax run warning signs, dropped 1%.
Bitcoin Retreats, PayPal, MicroStrategy Take Hits
Bitcoin had pulled back sharply, down 15% on Monday, according to CoinDesk, after striking a high above $41,900 on Friday. The cryptocurrency was trading just above $33,200 early Monday.
Among bitcoin-related stocks, Marathon Patent Group (MARA) dived 14%. MicroStrategy (MSTR) tumbled 5%. PayPal Holdings (PYPL), an IBD Leaderboard listing, narrowed its early loss to 1.8% in early trade.
Coronavirus Vaccine Update: Moderna, BioNTech Rally, Gilead Updates Guidance
Vaccine-maker stocks rallied in early trade, with Moderna (MRNA) and BioNTech (BNTX) both climbed nearly 5% in early action.
The number of vaccinated Americans rose above 6.68 million on Friday, according to the latest update from the Centers For Disease Control. That was 30.2% of the 22.13 million doses so far distributed, up from an 18% rate on Dec. 30.
South Dakota and Nebraska were the states showing the highest rates of implementation, vaccinating more than 7,600 and 7,400 persons, respectively, out of 100,000 persons.
Biotech Gilead Sciences (GILD) rose 0.7% in early action, after updating guidance on demand for its remdesivir coronavirus treatment. The company pointed to 2020 sales of $24.3 billion to $24.35 billion, up from prior guidance of $23 billion to $23.5 billion. Excluding remdesivir, Gilead sees product sales at $21.5 billion to $21.53 billion for the year. Gilead shares have been in a downtrend since May.
IBD 50/Leaderboard: Smith & Wesson, Nvidia
Smith & Wesson Brands (SWBI) rallied to the head of the IBD 50 list, up 8% early Monday. Shares of the firearms maker had soared 18% on Jan. 6, on news of the violence in Washington, D.C. That move sent the stock past a 22.50 buy point in a 17-week cup-with-handle base. A sharp pullback over the next two sessions left shares up 8.6% for the week, but more than 14% below the base’s buy point — beyond that 8% automatic sell rule threshold.
Nvidia stock jumped more than 4% Monday, after the Nio announcement. Nvidia shares are in a nine-week flat base with a 587.76 buy point, and have been struggling to regain support at their 10-week line since early November.
China Trade Ban To Take Effect
China-based stocks generally faced pressure early Monday, as a White House order banning investment in dozens of Chinese companies went into effect. The order aimed at blocking Beijing’s effort to use U.S. investors’ money toward modernizing its military. Trump signed it in November and set it to go into effect on Monday. The order affects only a few China-based companies that trade American Depositary Receipts on the NYSE, including China Mobile (CHL), China Unicom Hong Kong (CHU) and Cnooc (CEO).
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Baidu (BIDU) reversed its premarket rally and dropped 2.8% after confirming its electrical vehicle partnership with Geely Automobile Holdings (GELYY). The China-based automaker Geely manufactures a number of different brands, and acquired Sweden’s Volvo from Ford Motor (F) in 2009. Geely reported more than 1.3 million units sold in China in 2020.
Baidu will provide the artificial intelligence, while Geely will provide the designs and manufacturing muscle in the partnership. Baidu stock is up 11% so far in January, following December’s 55.6% advance. Shares are 18% below their May 2018 peak.
Dow Jones Stocks: JPMorgan Near Buy Point
Caterpillar (CAT) was one of a group of blue chip names rallying through the fourth quarter, buoyed by a change in regulatory outlook and forecasts for improving global demand. Caterpillar stock rallied for seven days through Friday, clearing a 183.43 buy point in a three-weeks-tight pattern on Jan. 4. Shares extended beyond buy range Friday, as the stock works on its 10th straight monthly advance.
Walt Disney (DIS) was the Dow’s fastest-moving stock during the fourth quarter, up 47.5% for the period. Shares have paused so far in January. However, a number of analysts have held their strong ratings and boosted price targets on the stock. They expect further expansion in the Disney+ streaming service this year. They also suggest pent-up demand for visits to Disney’s theme parks. Analyst also project Disney’s vaccine-bolstered outlook improves for the second half of the year. Disney shares rose 1.2% Monday.
Disney stock is extended after breaking out in December above what IBD MarketSmith charts as a 153.41 buy point in a year-long base.
JPMorgan is also in a year-long base with earnings due on Friday. Shares ended trade on Friday less than 4% below the 141.20 buy point. JPMorgan stock ranks No. 4 in the Banks-Money Center industry group. Its year-long consolidation has left it with a weak Composite Rating of 72. But its relative strength rating has been advancing since September and is at a nine-month high. JPMorgan stock added 0.6% Monday.
Find Alan R. Elliott on Twitter @IBD_Aelliott
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