Stock futures lost strength in early trade Wednesday, as U.S. markets remained on pause after rallying to new highs on Monday. Chipmakers showed early resilience after taking hard hits late Tuesday. NetEase and Tencent Holdings signaled some heavy selling among China-based stocks. Merck took over the top slot on the Dow Jones today, with a modest 0.2% advance.
Dow Jones futures and S&P 500 futures dipped 0.1%, Nasdaq 100 futures dropped 0.2% below fair value. Small caps also weakened, with Russell 2000 futures shedding early gains and dipping 0.1%. Among chip stocks, the iShares PHLX Semiconductor ETF (SOXX) clung to a 0.1% gain.
Cruise lines Royal Caribbean (RCL), Carnival (CCL) and Norwegian Cruise Line (NCLH) led the S&P 500, up around 2% apiece following a Bloomberg report that the Centers for Disease Control and Prevention recommended that cruises could resume this summer with certain restrictions. In addition, Carnival earnings are due Wednesday morning.
L Brands (LB) also traded high on the S&P 500 roster, up 3% after UBS upgraded the stock to buy, from neutral. The Victoria’s Secret and Bath & Body Works owner is below a 64.22 buy point in what has become a four-weeks tight chart pattern.
A number of China-based names were under early pressure, with Tencent HoldingTCEHY falling hardest, down almost 10%. NetEase (NTES) fell more than 3%, to the bottom of the Nasdaq 100. JD.com (JD), Alibaba Group Holding (BABA) and Baidu (BIDU) also showed early losses. New issue Utime Limited (UTME) was a clear exception. The mobile phone designer gained 26% in premarket action, after spiking 875% in its first day of trade on Tuesday.
The Federal Reserve will release minutes from its March 17 meeting at 2 p.m. ET.
Merck Tops Dow Jones Today
Merck clocked in with a 0.2% advance, topping the Dow Jones today, after announcing a pair of clinical trial partnerships, with IMV (IMV) and Ireland-based Alkermes (ALKS). Merck’s shares are attempting to form a floor in a long-term consolidation.
Fewer than a third of the Dow’s stocks managed gains in early trade on Wednesday. Nike (NKE) edged a fraction higher, facing a test of resistance at the underside of its 50-day/10-week moving average as it attempts to climb the right side of a possible bas pattern. A push above this line would provide an early entry point for aggressive investors.
Vital Signs, Global Markets
The Hong Kong Stock Exchange reopened from its five-day holiday Wednesday, with its benchmark Hang Seng Index falling 0.9%. The Shanghai Composite trimmed off 0.1%, pointing the index toward its sixth decline in the past seven weeks.
Stocks in London, Frankfurt and Paris slipped into mixed trade in theri afternoon session. London’s FTSE 100 held the high ground, up 0.7%.
Crude oil prices, a key indicator of recovering economic activity, continued to bob after taking a dive on Monday. West Texas Intermediate futures had dropped 4.5% Monday, sending prices back below $59 a barrel. WTI futures edged up 0.7% early Wednesday, still below $60. Brent crude moved up 1% to above $63.
Bonds edged up, with the 10-year yield adding 1 basis point to 1.66%. Yields skirted pre-pandemic levels last week, climbing above 1.76% — the highest level since January 2020. Yields had started 2020 at around 1.8%, down from about 2.7% a year earlier, then dipped to record lows around 0.5% in August.
Bitcoin slipped more than 3%, to below $57,000, according to CoinDesk. The cryptocurrency climbed to a record high at $61,556 on March 13. Competing cryptocurrency Ethereum slumped 5%, to below $2,000. Ethereum touched a new record high above $2,151 on Monday night.
Keeping An Eye On Microsoft, Apple
Tech stocks will be key to watch on the Dow Jones today, as big tech names attempt to reassert some market leadership. Microsoft (MSFT), Salesforce.com (CRM) and Apple (AAPL) have led the Dow over the past five trading sessions, each rising more than 5%.
Salesforce.com has broken down below several technical support levels, leaving it with work to do before it can offer a valid buy point. Apple has rallied in seven of eight recent sessions, and is testing resistance at the underside of its 50-day/10-week moving average. A break above that line, which is around 127.49, would present aggressive investors with an early buying opportunity.
Microsoft overtook a 246.23 buy point in a seven-week flat base on Monday. Volume on the move was solid, but well short of the 40% increase you would like to see in a real breakout move. Still, the heavyweight is in a buy range, which runs to 258.54.
Tracking Chip Stocks: Intel, Qorvo, Amkor, Skyworks
Intel (INTC) is in a buy range above what IBD MarketSmith analysis charts as a cup-with-handle buy point at 63.64. The buy range extends to 66.82. A pullback following the initial breakout showed firm support at the stock’s 50-day moving average, and stopped well short of triggering the automatic sell rule.
Microsoft has a Composite Rating of 85, making it the top-ranked stock in the desktop software industry group. Intel ranks a much weaker 70, placing it outside the leadership in the semiconductor manufacturers group.
The top-ranked chipmaker, Qorvo (QRVO), is also in a buy range. It inched above a 191.92 buy point in a nine-week cup base on Thursday, and has remained low in its buy range this week. The Greensboro, N.C.-based stock has a best-possible Composite Rating of 99.
IBD’s No. 2-ranked chipmaker, Amkor Technology (AMKR), broke out in modest trade on Monday, then dropped back below its 26.17 buy point on Tuesday. Shares finished the session 2% below the entry.
Skyworks Solutions (SWKS), the No. 4-ranked chipmaker, ended Tuesday about 4% below a 195.92 entry in seven-week cup-base.
Find Alan R. Elliott on Twitter @IBD_Aelliott
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