The Dow Jones Industrial Average was sharply lower after Federal Reserve Chair Jerome Powell spoke out on interest rates. Magnificent Seven stock Nvidia (NVDA) rallied on a price-target hike while Alphabet (GOOGL) and Apple (AAPL) also rose. Famed fund manager Cathie Wood snapped up a stock that’s plunging.
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Social media play Snap (SNAP) fell after it announced job cuts. Meanwhile, a trio of strong stocks tested buy points. MongoDB (MDB), Synopsys (SNPS) and JFrog (FROG) flirted with entries.
Powell Speaks Out On Interest Rates
Many investors have been betting on imminent cuts to interest rates. But Powell poured some cold water on that notion in a rare interview that aired Sunday.
The case for quick rates cuts was weakened by last week’s jobs report, which came in far hotter than expected.
Powell made the case for being careful on moving too quickly when he appeared on “60 Minutes.”
“We want to see more evidence that inflation is moving sustainably down to 2%,” Powell said. And while he said that central bankers’ confidence is rising, they “want some more confidence before we take that very important step of beginning to cut interest rates.”
The 10-year yield vaulted 13 basis points to 4.16% while the two-year yield popped 9 basis points to 4.46%.
Nasdaq Slips, Small Caps Mauled
The Nasdaq composite was off session lows but still dipped 0.4%. ON Semiconductor (ON) performed well here, popping 8% on an earnings beat.
The benchmark S&P 500 also climbed off lows for the day as it fell 0.5%. Air Products and Chemicals (APD) lagged as it fell nearly 14% after the firm missed earnings views.
The S&P 500 sectors were in mostly negative territory. Health and technology were the only sectors in the green in the stock market today. Materials and consumer discretionary lagged.
Small caps were lagging badly, with the Russell 2000 diving 1.7% at midday and falling below the 50-day moving average. Growth stocks bounced off lows, but the Innovator IBD 50 ETF (FFTY) remained down 0.5%.
Dow Jones Today: Caterpillar Shines, Boeing Stock Falls
The Dow Jones was lagging the other major indexes as it fell nearly 400 points, or about 1%
Caterpillar (CAT) was faring best on the much-watched index after posting strong earnings. It was trading low in today’s price range as it rose 1.3% at midday.
The firm benefited from particularly strong sales in North America. CAT stock is extended from a 293.88 entry.
In contrast, fast food giant McDonald’s (MCD) dropped more than 4%. It was slapped lower after turning in mixed quarterly results. Revenue came in slightly below Wall Street expectations.
Boeing (BA) also hurt the Dow Jones today. It fell nearly 2% after it emerged it will have to rework 50 undelivered 737 Max airplanes after a new fuselage problem was uncovered.
Cathie Wood Buys More Tesla Stock
Buying on the dip can be a risky strategy for the most investors. But that was not enough to stop fund manager Wood taking advantage of a big pullback in one of her favorite stocks as she hunts for potential bargains despite the risks.
Her firm Ark Invest, of which she is CEO and chief investment officer, snapped up nearly 88,000 shares of Tesla (TSLA) Friday for the ARK Innovation ETF (ARKK).
Tesla stock fell around 4% Monday afternoon and is currently trading below its 50-day and 200-day moving averages, MarketSmith analysis shows. This is a distinctly bearish look.
In fact, TSLA is now down more than 40% from its 2023 high of 299.29. It is down even more on its all-time high price of 414.50, which it reached in November 2021.
Other moves made by the fund Friday included adding almost 1.6 million shares in penny stock Ginkgo Bioworks (DNA) and buying almost 160,000 shares of Intellia Therapeutics (NTLA). Both were lower Monday morning.
Bargain hunting can be tempting for investors but IBD recommends buying stocks with strong earnings and price performance rather than laggards. Look for leaders in strong industries that are showing superior earnings growth and sales.
Magnificent Seven: Nvidia Gets Target Hike
The rest of the so-called Magnificent Seven stocks were having a mixed start to the week Monday.
Nvidia was faring best, up more than 4%. The Leaderboard stock is extended past its most recent entry. The AI chip stock was boosted after it received a price-target hike by Goldman Sachs to 800 from 625.
“Forward-looking commentary on Gen AI (generative AI) related capital spending was consistently positive across all major U.S.-based hyperscalers,” analyst Toshiya Hari said in a note to clients.
Google parent Alphabet was also solid as it turned in a gain of almost 1%. Dow Jones stock Apple rose more than 1% and was at session highs.
Other Magnificent Seven names were lagging, though. Microsoft (MSFT) fell more than 1%, Meta Platforms (META) skidded nearly 3% and e-commerce giant Amazon.com (AMZN) fell 1.5%.
Smell Of Success For Estee Lauder Stock
Makeup giant Estee Lauder (EL) was shining brightly Monday following its latest quarterly report.
EL stock jumped 14% after it crushed earnings views. It turned in a 43% adjusted earnings drop, to 88 cents per share, after four quarters of accelerating declines.
This was still enough to beat Wall Street estimates of 54 cents, according to FactSet. Net sales fell 7% to $4.28 billion, but came in above forecasts of $4.19 billion.
The perfume play was also smelling of roses due to newly announced layoffs and a restructuring plan.
It plans to reduce its workforce by 3% to 5% as part of its Profit Recovery Plan. The company is aiming for more sustainable profitability while also supporting sales growth acceleration. It is also hoping to lower its cost base and overhead expenses.
Snap Stock Falls Amid Jobs Cuts
Investors sometimes cheer the prospect of efficiencies when companies announce job cuts.
But that was not the case for Snap Monday, which was down 3.4% at midday after it announced it is jettisoning 10% of its global workforce. This equates to more than 500 employees.
Snap stock lost ground on a consolidation pattern buy point of 17.90, according to MarketSmith analysis.
Another risk for Snap stock is the fact the company is getting set to post Q4 earnings after the close Tuesday.
Outside Dow Jones: 3 Stocks Eye Entries
With the market’s continued strength, IBD is recommending exposure in the 80% to 100% range. Here are a trio of strong stocks worthy of consideration.
MongoDB tried to break out past the 442.84 buy point of a cup base but faded, MarketSmith analysis shows.
MDB is in the top 5% of stocks in terms of price performance over the past 12 months. MongoDB provides an open-source database platform for businesses around the globe.
Synopsys has formed a cup-with-handle base and is trading just above the ideal buy point of 554.57. It was already actionable from clearing downtrend within the handle or from the top of the base.
JFrog stock is below a buy zone after briefly clearing a flat base with a buy point of 35.35. This is a first-stage pattern, which is a bonus.
Overall performance here is once again top notch, with its IBD Composite Rating coming in at 99. Price performance is its strongest suit, but its EPS Rating of 81 out of 99 is still solid. Earnings are seen rising 1,009% in 2023 and 17% in 2024, according to MarketSmith.
Please follow Michael Larkin on X, formerly known as Twitter, at @IBD_MLarkin for more analysis of growth stocks.
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