The Dow Jones Industrial Average briefly tumbled more than 225 points early Friday before trimming losses, as Apple dived on earnings. Alphabet, Amazon and Facebook also reported earnings. Tesla skidded 3% in morning trade, while Twitter plunged 17% on disappointing user growth.
JD.com, Microsoft and Tesla are all IBD Leaderboard stocks.
Dow Jones Today
Early Friday, the Dow Jones Industrial Average moved down 0.5%, while the S&P 500 fell 0.6%. The tech-heavy Nasdaq composite lost 1.3% in morning trade.
Amid the coronavirus stock market rally, the tech-heavy Nasdaq is up 24.7% for the year through Thursday’s close. Meanwhile, the S&P 500 is up 2.5%, while the Dow is down 6.6% year to date, through the Oct. 29 close.
According to the Worldometer data tracker, the cumulative number of confirmed coronavirus cases in the U.S. topped 9.2 million on Friday. Total virus-related deaths rose past 234,000.
The cumulative total of worldwide Covid-19 cases confirmed since the start of the outbreak topped 45.4 million Friday, with more than 1.18 million virus-related deaths.
Coronavirus Stock Market Rally
According to IBD’s The Big Picture, the coronavirus stock market rally is starting to falter amid heavy institutional selling.
Thursday’s Big Picture warned that “Amid Thursday’s positive price action, the Nasdaq is still clinging to life, but remains in a precarious position — it fell below its 50-day moving average this week for the first time since Oct. 2. All three major stock indexes are now below their critical 50-day support levels.
An uptrend under pressure means investors need to be much more cautious, but not go entirely to cash. Watch sell signals closely. Be sure to sell any stock that falls 7% or 8% from your purchase price, and maybe even 3% or 4% if you want to raise cash.
Avoid buying stocks for now, unless the breakout is exceptionally good. The best candidates are those that proved most resilient during the recent stock market weakness. Keep a close eye on stocks with strong relative strength lines. These ideas could become stock market leaders.
Use MarketSmith features like the RS Line Blue Dot to easily spot such stock candidates. The RS Line Blue Dot is assigned to stocks whose RS lines are making new highs while the stock is basing or breaking out.
Stocks to watch include IBD Long-Term Leaders, companies with stable earnings growth and price performance.
Dow Jones Earnings: Apple
Dow Jones leader Apple dived 5% after the company beat Wall Street’s targets for the September quarter, but its sales tanked in China. Sales rose in all regions of the world except Greater China, where sales tumbled 29% to $7.95 billion.
Shares fell further below their 50-day moving average line, according to MarketSmith chart analysis.
The blue-chip giant is the No. 1 performing Dow Jones stock for 2020, with a 57.1% advance through Thursday’s close. Recent Dow Jones 30 addition Salesforce.com (CRM) is the No. 2 performer with a 45.8% year-to-date advance.
Amazon reported better-than-expected Q3 results late Thursday, but shares still fell 4% Friday morning. The e-commerce giant reported adjusted earnings of $12.37 per share on revenue of $96.1 billion.
Amazon stock is tracing a cup with handle with a 3,496.34 buy point. Shares ended Thursday just below the 50-day line and have been near the line for about two weeks.
Alphabet, Facebook Report
Alphabet reported third-quarter earnings and revenue that handily topped estimates. The internet giant said earnings rose 62% from a year earlier to $16.40 per adjusted share. Revenue rose 14% to $46.17 billion. Shares soared 5% in morning trade.
The parent of Google is surging up the right side of a cup base with a 1,726.20 buy point. Meanwhile, the stock’s RS line hit a new high Friday. The RS line measures a stock’s price performance vs. the S&P 500. If the stock is outperforming the broader market, then the RS line angles upward.
Facebook reported Q3 results that came in well above Wall Street estimates, including user growth. The social media giant reported adjusted earnings of $2.71 per share on revenue of $21.5 billion. Shares lost 4% in morning trade.
Shares are on track to form a cup with handle, which would make 285.34 the proper buy point.
Stock Market Earnings: Twitter
Twitter plunged 17% after its user growth fell short of of estimates, while its new advertising system was again delayed. The company reported better-than-expected results late Thursday.
Shares hit a 52-week high on Thursday, but are now back near their 50-day moving average line.
Stocks Near Buy Zones: Chewy, JD.com
Chewy gave up its 70.82 buy point in a cup with handle on Thursday, just one day after the stock broke out of that entry. Thursday’s 6% loss underscores the danger of buying new breakouts during a market uptrend under pressure. Shares fell another 1% Friday morning.
According to the IBD Stock Checkup, CHWY stock has an 82 out of a best-possible 99 IBD Composite Rating. The Composite Rating — an easy way to identify top growth stocks — is a blend of key fundamental and technical metrics to help investors gauge a stock’s strengths.
Chewy was Wednesday’s IBD Stock Of The Day, as the stock made its breakout.
According to IBD Leaderboard commentary, “JD.com’s base has morphed into a cup with handle. It is a half position on Leaderboard. The relative strength line made new highs already, a bullish sign for the next breakout.”
JD.com was featured in this week’s Stocks Near A Buy Zone column.
Tesla stock remains below its 50-day line amid Friday’s 3% loss. Shares are about 20% off their 52-week high, as they form a new base with a 466 buy point.
According to IBD Leaderboard commentary, “The new base is later stage, following advances from cup-with-handle bases and a high, tight flag that also counted as a base. So, the latest pattern has higher risk.”
Dow Jones Leaders: Microsoft
Among the top Dow Jones stocks, software giant Microsoft looked to give back the bulk of Thursday’s 1% rally. Shares fell 0.75% in morning trade, and remain squarely below their 50-day line.
Year to date, Microsoft is one of the top Dow Jones stocks, advancing 29.8% through Thursday’s close.
Be sure to follow Scott Lehtonen on Twitter at @IBD_SLehtonen for more on growth stocks and the Dow Jones futures.
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