Stocks jumped Monday, bolstered on the first trading day of August by stronger than expected July manufacturing data. A Senate spending compromise lifted some infrastructure stocks. Vaccine and chip makers rallied on news. China names rebounded after harsh losses last week, and Tesla joined EV stocks rising after reporting July sales. Apple edged higher on the Dow Jones today, approaching a new buy point.
The Dow Jones Industrial Average briefly popped 200 points at the starting bell, up 0.5% and back above 35,000. The S&P 500 scrambled 0.4% higher. The Nasdaq Composite added 0.35%, with Zoom Video (ZM) and Atlassian (TEAM) lagged at the bottom of the Nasdaq 100.
Zoom agreed to an $85 million settlement in a privacy lawsuit. Atlassian received a downgrade to buy, from strong buy, by CFRA.
MicroChip Technology (MCHP) and Under Armour (UAA) were early leaders on the S&P 500, up 3.8% and 5.2%, respectively. MicroChip received an overweight rating in new coverage from Morgan Stanley, with a 177 price target.
Biotech Moderna (MRNA) leapt 2.9% after news reports said Pfizer (PFE) and Moderna would increase the price of their vaccine shots being delivered to Europe. The IBD 50 stock, which gained 50.5% in July, reports earnings on Thursday. Pfizer stock rose 1.8%.
Pfizer partner BioNTech (BNTX) bolted 3% higher, topping the IBD Leaderboard list. Vaccine makers also received a lift from a Wall Street Journal report on Sunday that said the U.S. Food and Drug Administration was under pressure to grant Covid-19 vaccines full approval.
IBD 50 stock Square (SQ) reversed premarket losses and rallied 8% after agreeing to pay $29 billion for Afterpay, an Australian fintech specializing in buy now/pay later services. The digital payments leader also released Q2 results ahead of Thursday’s scheduled date. Monday’s gain put Square stock back into a buy range above a 154.88 handle buy point.
Tesla (TSLA) surged 4.9%, aiming to extend its rally to a fourth day. The stock possibly felt some updraft from Li Auto (LI) and Xpeng (XPEV). Those China-based stocks each gained more than 4% after reporting July sales figures.
Steel stocks were in motion, with Steel Dynamics (STLD) and Nucor (NUE) rising less than 1% apiece. Luxembourg-based Ternium (TX) rallied 2.7%. Among miners, Freeport McMoRan (FCX) added 2%. Southern Copper (SCCO) jumped 2.3%.
Markit PMI Tops Expectations
A big week for earnings news kicks off with the release of final July purchasing managers index manufacturing data from IHS Markit and the Institute for Supply Management.
Markit revised its final tally higher, to 63.4, for the month. That was up from an initial reading of 63.1 and vs. June’s tally of 62.1. Economist had project a final number of 63.1. Expansion of output and new orders strengthened, although supply chain disruptions drove cost gains to a record-setting increase.
IHS reports its final June PMI at 109 a.m. ET.
The ramp up to Friday’s July payrolls report from the Labor Department begins Wednesday, with the National Employment Report from ADP (ADP).
Dow Jones Today: Apple’s New Buy Point
Goldman Sachs (GS) ran in front of the Dow Jones today, rallyoing 2.8% in opening trade. Goldman Sachs stock is trading tight along its 50-day line, in a flat base with a 393.36 entry.
Apple reversed its premarket gain and dipped a fraction. Apple stock is narrowly extended from its early July breakout above a 137.07 buy point. It is testing support at its 21-day moving average, and has technically formed a three-weeks tight pattern, with a buy point at 150.10. Shares ended Friday less than 3% below that entry.
Amgen (AMGN) is the only Dow Jones stock due to report this week. Its results are due after Tuesday’s close.
Stocks To Watch: Globant, Capital One
Among the stock to watch mentioned in IBD’s weekly Investing Action Plan, Globant (GLOB) is narrowly below a 244.82 buy point in what IBD MarketSmith analysis identifies as a 23-week consolidation. Capital One (COF) is riding 10-week support in a flat base with a 168.10 buy point.
Element Solutions (ESI) is struggling to regain support in a flat base with a 28.80 buy point.
Infrastructure Package Faces Senate Vote
A group of Senate Democrats and Republicans finalized details and submitted on Sunday a $550 billion infrastructure spending plan. The largest public works federal spending program in decades, the Senate is expected to pass the 2,700-page bill this week.
Bloomberg reports that the bill includes about $110 billion in new spending for roads and bridges, $73 billion of power grid upgrades, $66 billion for rail and Amtrak, and $65 billion for broadband expansion. It also provides $55 billion for clean drinking water and $39 billion for transit.
Approval in the Senate would mark a shift in the body’s gridlocked stance. Passage in the House will be more difficult, with progressives holding out for a much larger $3.5 trillion program tied to Green New Deal items, as well as sweeping antipoverty and education efforts.
Global Markets: A China Bounce
The Shanghai Composite jumped 2%, taking a sizeable piece of last week’s 4.3% slide. Hong Kong’s Hang Seng Index rallied 1.1%, following a 5% drop. In Japan, Tokyo’s Nikkei 225 bypassed the bulk of the selling, slipped less than 1% for the week. On Monday, the Nikkei rallied 1.8%.
China’s markets began selling off aggressively on July 23, as authorities rolled out a series of reforms reframing regulations for education companies, food delivery operations and companies listing on exchanges outside of China.
Regulators broadened the crackdown on Friday, with the Ministry of Industry Information Technology ordering a series of stringent reviews and corrections to 25 of the country’s largest internet and hardware companies, including Alibaba and Tencent.
In the U.S., the iShares MSCI China ETF (MCHI) gained 1% early Monday, after falling 4.8% last week. The Xtrackers Harvest CSI 300 China A-Shares ETF (ASHR) rallied 2% early Monday on the heels of a 4.8% decline.
Technology tracker KraneShares CSI China Internet ETF (KWEB) moved up 1.5% in premarket trade. The ETF lost 8.7% last week.
In Europe on Monday, markets ratcheted higher after mixed PMI news. Near midday, London’s FTSE 100 was up 0.5%. The CAC-40 in Paris rose 0.7%. Frankfurt’s DAX defended a thin 0.1% gain.
Confirmed Uptrend Continues
Friday’s Big Picture article noted, that despite a down week last week, the market remains in a remarkable long-term advance. “The S&P 500 and Nasdaq have now climbed eight of the past nine months. The S&P 500 made it six straight months of gains, the longest streak since April-September 2018. All three indexes made record highs during the week. “
It also cautioned, “The stock market’s extended runs raise the odds of a top with each passing month. Investors face some crosscurrents. The economic rebound still is in place, but there are signs the expansion is slowing.”
IBD 50 Earnings: Roku, HubSpot, Innovative
Among IBD 50 stocks, Translate Bio (TBIO) led in early trade, rebounding 5% after taking a 22% nosedive on Friday.
At least a dozen IBD 50-listed companies are due to report earnings this week. Roku (ROKU), HubSpot (HUBS) and Innovative Properties (IIPR) are among those near buy points.
Roku gained 1.2% in early trade. The stock had dropped to a test of its 21-day exponential moving average on Friday, about 8% below a 463.09 buy point in a cup-with-handle base. Roku reports results after Wednesday’s close.
HubSpot shares gained 1.3% early Monday. HubSpot stock ended Friday in a buy range above a 574.93 buy point in a cup base. Its pullback to the 10-week line didn’t trigger the automatic sell rule. So the breakout remains in play. The buy zone extends to 603.68.
Nasdaq, S&P 500, Dow Jones Today
Heading into the first trading session of August, the S&P 500 has climbed 17% since the start of the year. The Dow has advanced 14.1%. The Nasdaq Composite has a 13.8% gain.
All three indexes are cruising comfortably above their 50-day moving averages. The Dow and S&P 500 are riding above their short-term 21-day lines. The Nasdaq is bobbing against its 21-day level, testing support.
The challenge for the Dow Jones today remains the 35,000 level, against which the index has been knocking its head since May. The index closed on Friday about 0.2% below the 35,000 mark.
For more detailed analysis of the current stock market and its status, study the Big Picture.
The biggest year-to-date gains among the 197 industry groups tracked by IBD, consumer electronics retailers are up more than 124%. Those gains had some strong assistance from meme stock trades, which drove GameStop (GME) and Best Buy (BBY) sharply higher through early June.
Department stores also received a meme stock/social media boost, up more than 94%. Dillard’s (DDS) was the big booster there, up 190% since Dec. 31.
Nuts-and-bolts economy plays are next in line, with steel up 80.5% and U.S. oil and gas producers showing a 70.1% gain through Friday. Other groups with better-than 50% year-to-date gains include jewelry retailers, oil and gas drillers, office supplies and coal.
Find Alan R. Elliott on Twitter @IBD_Aelliott
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