The leading indexes punched up to another round of new highs Tuesday, as lagging small caps and growth stocks continued to reflect the market’s uneven advance. IBD Leaderboard stocks Shopify and Nike climbed in their buy ranges. China names rallied as Alibaba Group rebounded sharply. And Boeing traded high among Dow industrials, as the 737 Max headed for its first U.S. flights in nearly two years.
The Nasdaq trimmed early gains, trading up 0.45% as NetEase (NTES), JD.com (JD) and Baidu (BIDU) led the Nasdaq 100. The Dow industrials halved an early 125-point leap to a 0.2% gain. The S&P 500 rose 0.15% on the stock market today. Biotech Amgen (AMGN) rallied to lead both the Dow industrials and the S&P 500, up more than 2% after Daiwa initiated coverage with a buy rating and a 300 price target.
Small caps held back, with the Russell 2000 posting an early 0.5% loss. Growth stocks also showed weakness, with the Innovator IBD50 ETF (FFTY) taking an 0.8% dive. Monday’s Big Pic noted that the market’s move to record highs at the start of the week “masked weakness in leading stocks and small caps.”
Communications security specialist Technical Communications (TCCO) spiked 192% in opening trade. Special purpose acquisition company Bull Horn Holdings (BHSE) rallied 8.5%. Bull Horn went public Dec. 17.
Bitcoin traded just below $27,000 early Tuesday, down from what CoinDesk marks as the cryptocurrency’s record high early Sunday at $28,347. Among Bitcoin-linked stocks, Leaderboard stock PayPal Holdings (PYPL) slipped 0.7%. MicroStrategy (MSTR) dropped 1.7%. And Overstock.com (OSTK) rallied 3.4%. Marathon Patent Group (MARA) sheed 5.2%.
The market runs a short week due to the New Year’s day holiday on Friday. Markets will close early, at 2 p.m. ET, in the final session of the fourth quarter and of the year, on Thursday.
Dow Industrials: U.S. 737 Max Flights Resume
Boeing (BA) climbed 2.2% to lead the Dow industrials, after American Airlines (AAL) said it would restart flights on the beleaguered 737 Max aircraft today, its first U.S. flights in nearly two years. American said it would deploy the aircraft on a roundtrip route between Miami and New York.
The 737 Max was grounded by the Federal Aviation Administration and by all other global agencies in March 2019, following two fatal crashes killing a total of 346 persons. Boeing stock peaked in the first week of March 2019.
Shares have rebounded almost 143% off their bear market low this year, but they remain down 33% for the year, and almost 52% below their March 2019 peak.
Senate: Military Veto, Stimulus Increase Votes
Tuesday could be a telling day in the U.S. Senate, where expectations are for Majority Leader Mitch McConnell to call for a Wednesday vote on whether to override President Donald Trump’s veto of the $741 billion defense authorization bill. The House passed an override of the veto on Monday.
Sen. Bernie Sanders, D-Vt., has pledged to hold up the Senate’s military bill veto vote unless McConnell also agrees to an up-or-down vote regarding an increase in coronavirus relief payments from $600 to $2,000. Trump criticized the $600 payments, saying they should be raised to $2,000, but signed the relief measure on Sunday night. The House approved the increase to $2,000 on Monday. Sanders’s move threatens to prevent the Senate from exiting Washington at the end of the week for the holiday.
The Treasury Department reportedly plans on beginning to send direct-payment coronavirus-relief checks as early as Friday.
AstraZeneca (AZN) shares rose 2.7% in premarket trade, as expectations rose that the U.K. was preparing to approve the company’s coronavirus vaccine. The U.K. approved the Pfizer-BioNTech vaccine on Dec. 3, and administered the first doses on Dec. 8.
Competing vaccine developers BioNTech (BNTX) and Moderna (MRNA) fell more than 4% each. Pfizer (PFE) traded flat. Both BioNTech and Moderna stocks are in the third week of a steep dive. Moderna is testing support at its 10-week moving average.
The U.K. is battling a sharply rising trend in new Covid-19 cases, with its average case count hitting 36,603 new cases per day on Monday. That is up 150% from Nov. 30. Deaths in the country averaged 499 per day on Monday, up from 460 on Nov. 30, and 259 at the end of October.
In the U.S., new coronavirus cases have been trending lower since Dec. 18. The seven-day average for new cases on Monday was 184,692, down from the Dec. 18 high of 223,902, but up 12% from Nov. 30. New cases reached a low in mid-September of 35,873.
Deaths in the U.S. have trended lower since Dec. 22. The daily average on Monday was 2,247, vs. the Dec. 22 peak at 2,782. That compares with 1,522 at Nov. 30 and a mid-October low of 714.
London, Tokyo Markets Rally
Markets across Asia were mixed Tuesday, led by a 2.7% surge from Tokyo’s Nikkei 225. The gain gives the Nikkei a 16.5% gain so far this year. European markets strengthened their early advances afternoon trade, as London’s FTSE 100 rallied more than 2%. Frankfurt’s DAX gained 0.3%. The CAC-40 in Paris rose 0.6%. Hurt by Brexit fears and a harsh hit from the coronavirus, the FTSE 100 remains down 12.1% for 2020.
European Union ambassadors approved a provisional Brexit agreement application ahead of a deadline on Monday. The provisional approval allows the complex agreement to take effect ahead of the expiration of current trade rules between the two blocs on Dec. 31. The agreement, among many other things, prevents tariffs or limitations on trade quantities between the EU and U.K. An estimated 7000 pounds of goods trade between the EU and U.K. annually.
The EU parliament is not expected to formally vote on the matter until January. Britain’s parliament plans to vote on the agreement on Wednesday.
IBD 50: Logitech, Futu Rise
Logitech popped once again narrowly above a 95.81 buy point in a cup base. Shares briefly cleared the entry on Dec. 22, but have since traded just below the breakout line.
Etsy (ETSY) gained a fraction, failing to snatch back a portion of Monday’s 6.4% dive. The pullback stopped just short of a test of the stock’s 21-day exponential moving average. Shares are in the second week of an eight-week hold rule, triggered when the Nov. 27 breakout rose more than 20% in fewer than three weeks.
Dow Industrials: 2020 Top Performers
The Dow industrials managed a 6.5% gain for the year through Monday’s session, lagging by a long shot the Nasdaq’s 43.8% advance or even the S&P 500’s 15.6% rise. But almost half of the Dow’s stocks have outpaced the overall index’s advance. And the top four have turned in unusually strong performances for blue chips.
Apple and Microsoft (MSFT) are the Dow’s leaders, up 86.2% and 42.7%, respectively, through Monday. Apple stock has plowed through two recent buy points and is rapidly closing in on a third. Microsoft stock is in the midst of a three-week climb that has lifted it back above support at its 10-week moving average, and within 2% of an early, aggressive buy point.
Salesforce.com (CRM) was a new issue to the Dow as of Aug. 31, and was briefly the index’s top performer for the year. But shares began to break down two weeks after officially becoming a blue chip. The stock is still defending a healthy 38.3% gain for the year, the fourth-best advance among Dow Jones stocks. Yet Salesforce stock is now in its sixth week below its 10-week moving average, and has repair work to do before presenting a valid buy point.
Nike (NKE) has climbed almost 41% for the year, on track for its best performance since a 52% gain in 2013. The culture and tech-savvy brand managed to capitalize on the sudden swerve toward online shopping created by the coronavirus pandemic, countering the hit to its vast markets in professional sports. Nike stock is currently in a buy range above a three-weeks-tight buy point at 141.24. The buy range runs to 148.30.
Apple, Microsoft and Nike are all current IBD Leaderboard listings.
Find Alan R. Elliott on Twitter @IBD_Aelliott
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