Stocks slumped at the starting bell Monday, as the market paused after its two-day advance. Media stocks rallied on news of an AT&T/Discovery combination. Baidu and Amazon led the Nasdaq 100. Home Depot slumped to the bottom of the Dow Jones today, ahead of its first-quarter report due Tuesday.
The Nasdaq composite dropped 0.9%, as chip equipment makers KLA (KLAC), ASML Holding (ASML) and Lam Research (LRCX) swooned to the bottom of the index. The Dow industrials and S&P 500 each dropped 0.5% in early trade on the stock market today.
Discovery (DISCA) ran far ahead on the S&P 500, spiking 6.8% after confirmation that AT&T (T) would combine its Warner Media division with the Silver Spring, Md.-based company. The deal would provide $43 billion to AT&T, and would leave AT&T shareholders holding 71% of the new company. AT&T shares rose 3.7%. ViacomCBS (VIAC) added 3.6%. Comcast (CMCSA) dropped 1.6%. Competitor Netflix (NFLX) dropped 0.8%.
China-search giant Baidu (BIDU) rose 2.6%. A regulatory filing late Friday showed Soros Fund Management reported Baidu, Vipshop Holdings (VIPS) and Tencent Music Entertainment (TME) among its new buys during the first quarter.
Amazon.com (AMZN) added 1.9%, enough to trade high among Nasdaq 100 stocks. A Morgan Stanley note contended the company qualified for the same multiple given to retail and consumer staples. The report says that implies a stock price between 5,000 and 6,000. Morgan Stanley’s price target on the stock remains at 4,500.
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Dow Jones Today: Home Depot Stock Drags
Home Depot (HD) dropped 1.6%, to the bottom of the Dow Jones today, ahead of its earnings report early Tuesday. Home Depot stock staged a steep pullback last week, and almost hit its 50-day moving average. The move stopped a bit short for a possible rebound from 10-week support. But it also put shares back below a 38.93 buy point in a three-weeks-tight pattern. Analysts expect Home Depot to post earnings of $2.91 a share, a 40% jump, as sales rise 21% to $34.1 billion.
Apple (AAPL) each dropped 0.4% at the bottom of the Dow Jones today. Shares had tumbled 2.1% last week to 127.45, but found support at their 200-day moving average, then reclaimed the 50-day line on Friday.
Apple stock ended Friday 7.6% below a 137.17 cup-with-handle buy point. An aggressive trader might see shares as being on the cusp of an early entry from the 50-day line and breaking a downtrend in its handle.
But Apple’s relative strength rating is a weak 47, and its RS line is just off 2021 lows, showing that it’s not a leader right now.
IBD 50: B. Riley, Evercore, Ameris Near Entries
On the IBD 50 list, Cricut (CRCT) spiked 15% to a new high, compounding the stock’s steep 22.7% gain from Friday. Aggressive investors might use 27.45 as an entry on a brief consolidation, or IPO base. But keep in mind the market’s “uptrend under pressure” status, which hangs a caution flag over new stock purchases.
PLBY Group (PLBY) craved its early gain to 1.5%, following a 16% spike on Friday sent shares back above their 21-day moving average. PLBY has benefited from speculation of NFTs, or non-fungible tokens, related to its collection of nude photos and artwork.
Among IBD 50 stocks near buy points, B. Riley Financial (RILY) is just below a 74.10 entry in a three-weeks-tight pattern. Ameris Bancorp (ABCB) is just below a 57.91 buy point in an eight-week cup base. Evercore (EVR) is in a buy range over a 144.23 buy point — the buy zone runs to 151.44. All three stocks gave up ground in early trade Monday.
Bitcoin Veers Lower On Musk Tweet
Bitcoin collapsed to just above $42,000, its lowest mark since February, early Monday, before retaking some ground to just below $45,000, according to CoinDesk. Tesla Chief Executive Elon Musk implied in a Sunday tweet that Tesla might have sold or will sell its remaining Bitcoin. He tweeted early Monday that Tesla has not sold further Bitcoin so far.
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The cryptocurrency had run up to a new high above $64,800 on April 14. Bitcoin is down more than 22% so far in May, but remains up about 55% since Dec. 31, after starting the year just above $29,000.
Vital Signs: Oil, Copper, Bond Yields
West Texas Intermediate oil prices held steady around $65 a barrel — up 34.5% so far this year, but down from the $66.76 high from May 5, and well off the 33-month high of $67.98, recorded on March 8.
Copper added 0.6% to around $4.68, after climbing to new record territory above $4.78 per pound last week. Copper broke past its previous record, set in February 2011, on May 5.
The 10-year Treasury yield was at 1.64%, down from the CBOE settle of 1.66% on Friday. April inflation data tripped a surge in the 10-year to above 1.69% on Wednesday. Yields had skirted pre-pandemic levels late in March, climbing to almost 1.76%, the highest level since January 2020.
Dow Jones Today: Walmart, Home Depot Earnings
Wrapping up the Dow industrials’ March-quarter earnings calendar this week are Walmart (WMT), Home Depot and Cisco Systems (CSCO). Walmart and Home Depot report first-quarter results first thing Tuesday morning. Cisco reports its fiscal third quarter after Wednesday’s close. That leaves all 30 Dow components accounted for after the quarter, except for Nike (NKE), which runs on a staggered calendar and will report later in June.
Walmart stock is struggling to regain support at its 200-day moving average, after a quick dip to test support at its 50-day line. Wall Street expects Walmart to earn $1.21 per share, up 3%, as revenue slips 3% to $131.31 billion.
Dow Leads, Nasdaq Lags After 2-Day Bounce
The Nasdaq’s powerful rally on Friday was not enough to boost the index onto positive ground for the week, marking its fourth-straight weekly decline. However, the move did boost the composite to within 1% of its converged 50-day and 21-day moving averages. The index remains more than 4% below the 14,000 level, which has been its stumbling block to progress since February.
For more detailed analysis of the current stock market and its status, study the Big Picture.
The Dow Jones today is looking to continue its two-day rebound, after also logging a four-week decline. The index is back above its 21-day exponential moving average after a quick three-day slip. The status is similar for the S&P 500, although it has slipped in only two of the past four weeks.
Year to date, the Dow continues to lead the market with a 12.3% gain through Friday. The S&P 500 has an 11.1% gain, while the Nasdaq is lagging, up 3.5% since Dec. 31.
Find Alan R. Elliott on Twitter @IBD_Aelliott
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