Stocks staged a brisk rebound at Wednesday's open, aided by an early Dow Jones stock rally on earnings news.
XThe Dow Jones industrials received an early lift from IBM (IBM), United Techologies (UTX) and Procter & Gamble (PG), all soaring after their reports. Financials were split, with Synchrony Financial (SYF) surging and Capital One (COF) tumbling after quarterly earnings reports. China-based Vipshop Holdings (VIPS) popped on an analyst upgrade. Tesla (TSLA) slumped on an analyst downgrade and price target cut.
The Dow Jones industrial average powered up 1.1% at the start of trade. IBM and United Technologies held the high ground. Dow Jones stock Pfizer (PFE) dropped to the bottom of the list on an analyst downgrade.
The Nasdaq Composite hashed out a 0.8% advance. Comcast (CMCSA) was the top dog. Qualcomm (QCOM) and Tesla had the largest declines. Chip stocks kicked into action at the starting bell, with Nvidia (NVDA) rising almost 4%, and Advanced Micro Devices (AMD) climbing 3%.
The S&P 500 fought to a 0.7% gain, as Synchrony Financial and IBM led, and Capital One and Kimberly Clark (KMB) weighed heavy at the bottom of the list.
Dow Jones Industrials: Test Of Support
The 50-day moving average continues to play a significant role in the current stock market uptrend, as a market hyper-sensitive to China trade chatter stumbled back to test support at the 50-day line on Tuesday.
The Dow Jones industrial average, S&P 500 and Nasdaq Composite all dipped back to test support, then recovered to end above their respective 50-day lines. The market's next few sessions will be telling, as institutional investors decide whether to buy strongly enough to fortify the technical moving average as a line of support, or retreat, and allow the major indexes to drop and confirm the 50-day as a continuing line of resistance.
Overseas, markets in China and Japan ended effectively flat on Wednesday. Markets in Europe and the U.K. were mixed, with the CAC-40 in Paris ahead 0.4%, Frankfurt's DAX trading up 0.2% and the FTSE 100 in London down 0.3% in afternoon action.
Dow Jones Stock Trio: IBM, P&G, United Tech
IBM stock powered up nearly 8% at the start of trade. A 5% earnings slip and a 3% dip in revenue reported late Tuesday were not as bad as forecast by analysts. The struggling tech heavyweight also late Tuesday gave full-year 2019 earnings and revenue guidance above expectations. For 2018, revenue from IBM's new, focal business was strong, including a 12% gain from its cloud computing unit. IBM stock is down 43% from a March 2013 high.
Aerospace leader United Technologies surged 7%. The Farmington, Conn.-based outfit on Wednesday reported a 22% earnings gain and a 15% rise in revenue for its fourth quarter — its best performance in more than four years. United Technologies plans to divide into three independent companies in 2020. The Dow Jones stock has gained 11% since late December, but remains down 23% from a late-December high.
Procter & Gamble grabbed an early 6.1% advance. The Cincinnati, Ohio-based personal care leader reported a 5% earnings advance and a fractional gain in revenue, enough to top expectations on both lines. Organic sales rose 4%, aided by price strength. Management raised the high-end of its 2019 organic growth outlook by 1%, lifting the range from 2% to 4% for the year.
The Dow Jones stock pulled back sharply after a mid-December breakout, a move which triggered the automatic sell rule. Shares traded 1% below a 96.99 buy point in a flat base.
Shutdown: 32 Days
The Senate is finally set to join in the standoff between the White House and House Democrats that has a broad shutdown of federal offices and operations now entering its 33rd day. Two Senate votes are now scheduled for Thursday. One involves a White House proposal to provide $5.7 billion in border security funding and end the federal shutdown. The other is a stopgap measure that passed a House vote, which would fund government offices and operations through Feb. 8, and provide none of the requested border-related funds.
Friday marks the second payday of the shutdown. About 380,000 furloughed workers, and another 420,000 working without pay have so far missed one paycheck. A Jan. 15 poll by IBD/TIPP found the shutdown was undercutting consumer confidence in the economy.
Stocks Near Buy Points: Cisco, Starbucks
In the stocks near buy points category, Cisco Systems (CSCO) rose 1.5% premarket as it struggled to break resistance at its converged 10- and 40-week moving averages. The stock ended Tuesday 11% above a late-December low, working its way up the right side of a seven-week cup base pattern.
Starbucks (SBUX) swung 1.7% higher, as it works on its fifth-straight weekly advance. The coffee shop's shares ended Tuesday narrowly above their 50-day moving average, and less than 6% below a 69.08 buy point in a flat base.
Tesla Downgraded On Realities
Tesla dropped more than 2% after RBC Capital downgraded the stock to underperform, from outperform, and trimmed the price target to 245, from 290.
"The reality of Tesla becoming a high-volume manufacturer with the scale and high average selling prices/margins are coming to a head," the note said. Part of that reality is the company's inability to achieve the $35,000 price tag it had target for its Model 3, suggesting demand will not reach previously expected levels.
Tesla shares have broken back below key levels of technical support over the past several sessions, and are still in a possible basing pattern, but are testing late-December lows.
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