Stocks jumped at the starting bell Tuesday, lifting the Nasdaq and S&P 500 to new highs ahead of two days of congressional testimony from Federal Reserve Chairman Jerome Powell. Sprint (S) and T-Mobile (TMUS) spurred a telecom rally on a federal judge's ruling. Chemicals maker Dow (Dow) and Caterpillar (CAT) battled for the lead on the Dow Jones today.
XThe Nasdaq and S&P 500 shared the early lead, each up about 0.5% and taking new highs. The Dow Jones industrials gained about 0.3%, as Walmart (WMT) and Verizon (VZ) dragged lower on the stock market today.
Telecom stocks were busy, as Sprint opened to a 74% gain after a federal judge ruled in favor of the company's long-awaited merger with T-Mobile U.S. Shares of T-Mobile spiked 10%. Dish Network (DISH) soared nearly 11% following the ruling.
Earnings results sent Hasbro (HAS) up nearly 6%, to the top of the S&P 500, just behind T-Mobile and Dish. Facebook (FB) traded near the bottom of the Nasdaq 100, down 2%, after Pivotal Research downgraded the stock to sell.
Chip stocks showed some healthy early action, with IBD 50 stock Advanced Micro Devices (AMD) leaping 2.8% after RBC Capital boosted the stock's price target. Nvidia (NVDA) climbed 1.6% as both Oppenheimer and Wells Fargo raised their price targets on the stock. Nvidia reports earnings on Thursday. Taiwan Semiconductor (TSM) advanced 2%, after a Citigroup report downplayed the potential impact from China's coronavirus outbreak.
Among other IBD 50 stocks, NMIH Holdings (NMIH) gained 0.9% in opening trade. The mortgage insurance provider ended Monday's session less than 5% below a 35.89 buy point in a flat base. Ichor Holdings (ICHR) stepped up 2%, rising in a buy range on a rebound from its 10-week moving average.
Gear up for Tuesday's market action by reading IBD's Investing Action Plan.
Dow Jones Today: Dow, Caterpillar In Motion
At the top of the Dow Jones today, chemical maker Dow popped 1.5%, Caterpillar pounded out a 1.2% gain. Microsoft stock edged up 0.2%, after scoring a 2.6% surge in strong volume on Monday.
Reports late Monday said Amazon (AMZN) would seek to depose President Donald Trump and senior Pentagon officials. Amazon is arguing against the Pentagon's award of the $10 billion Joint Enterprise Defense Infrastructure Cloud, or JEDI, military contract to Microsoft in October.
Amazon's Web Services cloud-hosting unit had reportedly been the leading candidate for the decade-long agreement. Just before the award to Microsoft (MSFT), Trump threatened to intervene in the hard-fought commercial battle that also included IBM (IBM) and Oracle (ORCL).
Verizon reversed its premarket gain, dropping 0.6% after the Sprint ruling. Verizon stock has been consolidating for 14 months. It is below a buy point in a flat base, but also is caught below its 10-week moving average, with its sales and earnings growth dragging in low single digits for the past four quarters.
Powell Heads For The Hot Seat
Powell goes before the House Financial Services Committee at 10 a.m., followed by testimony before the Senate Banking panel on Wednesday. The central bank's semiannual report to Congress on Friday warned the "effects of the coronavirus in China have presented a new risk to the outlook." Last month, the Federal Reserve held its benchmark interest rate steady, but outlined plans to slow Treasury purchases in the second quarter. At the time, Powell said it's "too early to say" whether the coronavirus outbreak may force a policy change.
Earnings News: Hasbro, Under Armour, MercadoLibre
Hasbro was an early winner, up 2.3% after a big fourth-quarter earnings beat, although revenue growth was less than expected. Under Armour (UAA) dived 16%, as earnings just met consensus views, while revenue and guidance came up short.
AutoNation (AN) soared 5.3% after reporting fourth-quarter earnings jumped 36% on a 3% gain in revenue. Both numbers topped expectations.
On the downside, along with Under Armour, Argentina-based MercadoLibre (MELI) dropped almost 4% after reporting a mixed fourth-quarter performance late Monday.
Coronavirus Update, Impact
The number of confirmed coronavirus cases rose to 42,638 on mainland China early Wednesday, up from 20,467 cases a week earlier. More than 100 more persons died from the virus over the past 24 hours, bringing the death count to 1,016, vs. 425 a week ago.
The week-over-week rate of infection slowed to 108%, with the number of deaths up 139%.
All but five of the persons who succumbed to the illness over the past 24 hours were in Hubei province, the region thought to be the point of origin for the outbreak. The province of more than 58 million persons remains quarantined. Schools, businesses, industries and transportation remain quiet.
The Hubei region is a manufacturing hub, particularly important for the auto industry. Much of the rest of China is in various stages of lockdown.
A note from Goldman Sachs on Monday projected only limited global impact from the outbreak. It forecast the U.S. economic growth would suffer as much as a 0.5% hit in the first quarter, but would recover that lost growth over the subsequent two quarters.
Stocks most likely to see healthy rebounds as China regains momentum include Wynn Resorts (WYNN) and Caterpillar (CAT), and chipmakers Broadcom (AVGO) and Skyworks Solutions (SWKS).
Dow Jones Today: In The Range
A pullback Friday followed by a Monday rebound left the Dow Jones today bouncing above its short-term 10-day moving average. The index ended Monday 2% above its 50-day line, well within the 4% range that has defined the upper end of the boundary since November.
The Nasdaq's 1.1% jump put the index more than 6% above its 50-day line, and in the 6% to 7% range that has defined its upside for the past several months. The uptrend has shed distribution days, however, and signs of institutional buying have generally turned more bullish. Four new stocks and ETFs entered IBD's SwingTrader stock list on Monday. One new name joined the watchlist section of IBD Leaderboard.
(For updates on this story and other market coverage, visit the Stock Market Today.)
Microsoft Stock, Apple Stock
Microsoft has steepened its advance over the past two weeks. That pushed it into a profit-taking zone, more than 20% above a 142.47 buy point from its most recent breakout. That means the stock is due for a pullback and consolidation. Investors may want to lock in a portion of their gains.
Apple stock is also in a profit-taking zone, up more than 25% from its most recent breakout. The stock was poised for some consolidation, and uncertainty over the impact of suppliers forced by China's coronavirus outbreak to shut down has provided the hook from which to hang that pause.
The stock has traded largely sideways since mid-January, with no base pattern or valid buy point yet taking shape.
Global Markets, Oil Price Rise
Global markets moved higher Tuesday, with Hong Kong's Hang Seng Index punching up 1.3%. Europe's leading benchmarks stretched out solid gains entering afternoon trade. Frankfurt's DAX jumped 1%. The FTSE 100 in London rallied 0.8%
Oil prices surged as they tried to crawl off recent lows. West Texas Intermediate gained 2.2%, moving back above the psychologically important $50 per barrel mark. Europe's Brent crude benchmark climbed 2.6%, to trade at $54.66.
Find Alan R. Elliott on Twitter @IBD_Aelliott
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