Stocks opened abruptly lower Friday as losses broadened at the start of June’s quadruple witching trading session. Earnings news drove IBD Leaderboard listing Adobe higher. Analyst actions lifted Lennar, Nvidia and Biogen. And on the Dow Jones today, Goldman Sachs broke below critical technical support.
The S&P 500 stumbled 0.9%, with financials, retailers and chipmakers posting the deepest early declines. The Nasdaq Composite backed down 0.5%, fighting to maintain a fifth straight weekly gain, as DocuSign (DOCU), Okta (OKTA) and Nvidia (NVDA) traded atop the index.
Homebuilder Lennar (LEN) also traded high on the S&P 500, up 0.9%. JPMorgan upgraded Lennar stock and Evercore ISI and JMP Securities raised price targets following the companies Q2 report late Wednesday.
Early strength in chips faded, with the iShares PHLX Semiconductor ETF (SOXX) dipped 1% lower. IBD 50 and Leaderboard stock Nvidia (NVDA) was a holdout, rallying 2.4% after Bank of America boosted the stock’s price target.
Software held up, boosted by Adobe, as the iShares Expanded Tech-Software Sector ETF (IGV) added 0.5%.
Biogen (BIIB) traded up 0.9%, rising after Piper Sandler upgraded the stock to overweight with a price target at 450, about 17% above Thursday’s closing price. Biogen shares spiked 38.6% last week, following federal approval of its Aduhelm Alzheimer’s treatment.
Shipping container supplier CAI International (CAI) swept 46% higher, after cinching a deal to be acquired by Mitsubishi HC Capital at 56 a share. The overall deal was valued at $1.1 billion.
Friday is a quadruple-witching day: a session when stock index futures, stock index options, stock options, and single stock futures expire. In general, the market and individual stocks see much higher volumes during witching sessions.
Dow Jones Today: Goldman Dives
On the Dow Jones today, cloud-based software leader Salesforce.com (CRM) defended a narrow 0.1% advance. Shares are bucking to add their fifth gain over the past six weeks. The stock is back above support, and moving up the right side of a 32-week consolidation.
Goldman Sachs (GS) plowed 2.5% lower. That sent the stock well below support at its 50-day moving average for the first time since November. Goldman stock has been sending clear exit messages, losing ground in eight of nine recent sessions. It broke below support at its 21-day exponential moving average, and erased a 10% gain from an early May breakout.
A break below the 10-week line would send an additional sell signal. A rebound from the line would be a positive, suggesting a level of technical support.
Adobe stock climbed 2.6% in early trade after reporting a 24% gain in second-quarter earnings and a 23% rise in revenue, both easily topping analyst expectations. Management also hoisted its third-quarter revenue and earnings guidance to above estimates.
The premarket move suggested the stock would open beyond the buy range from a 536.98 buy point in what MarketSmith analysis plots as a 40-week consolidation. The buy range ends at 563.72.
Nvidia Price Target Hike
Chip leader Nvidia jumped 2.4% in early trade, after Bank of America maintained its buy rating and lifted the stock’s price target to 900, from 800. The 900 target was almost 21% above Thursday’s closing price.
The note projected company data center revenue would grow at a compound annual growth rate of 35%, and become Nvidia’s largest source of revenue by 2025.
Nvidia shares are extended, working on a fifth-straight weekly advance, with a year-to-date gain of 42.9%.
Federal Holiday, But Market Open
Stock and bond markets will operate on normal schedules, after President Joe Biden late Thursday signed into law the National Independence Day Act, pronouncing June 19 as a federal holiday. The “Juneteenth” holiday celebrates the 1865 delivery of news to African-Americans in Texas that they had been freed by Abraham Lincoln’s Emancipation Proclamation two years earlier.
Most federal offices are closed on Friday. That includes the Federal Reserve, although the central bank said its payment services, including fulfillment of orders for currency and coin, will remain open. Most banks remain open, with employees at holiday pay. McLean, Va.-based CapitalOne (COF) closed its corporate offices for the holiday, with bank branches set to be closed in observation on Saturday.
Bond Yields, Oil Prices, Copper, Bitcoin
The 10-year Treasury yield traded around 1.50%, slightly below the settle just above 1.51% on Thursday and down sharply from Wednesday’s settle near 1.57%. Despite the steep drop, yields are up around 3% for the week, on track to snap a four-week decline — the longest pullback since yields bottomed out in July,
Crude prices reversed early losses and rebounded after Thursday’s pullback. West Texas Intermediate futures gained 0.3% early Friday, trading above $71 a barrel. That was less than 3% off Wednesday’s 32-month high. Oil prices are effectively flat for the week, and up not quite 46% since Dec, 31.
Copper prices came off early lows, following a dive of nearly 5% on Thursday. Futures traded 0.3% lower at $4.17 a pound. The metal had touched a record high above $4.76 a pound in mid-May.
Bitcoin sagged about 4% to trade below $37,500, according to CoinDesk. The cryptocurrency had climbed above $40,990 on Tuesday. It reached a high above $64,800 in April. It is up about 30% year to date.
Dow Jones Today: The Microsoft/Caterpillar Split
Dow stocks did a good job of reflecting the overall market action on Thursday. Microsoft (MSFT) and Apple (AAPL) ended the session at the top of the index. Caterpillar (CAT) and specialty chemicals maker Dow (DOW) closed with losses of more than 3%.
Caterpillar stock had been an index top-performer for the year through early June. It is now down more than 13% for the month, and tracking toward its worst month since May 2019.
Microsoft, on the other hand, is working on its fourth-straight weekly advance and moving closer to a 263.29 buy point. The stock ended less than 1% below the entry on Thursday. Shares slipped 0.6% early Friday.
It is an important week for Apple stock, as it works on its third-consecutive up week. Shares are climbing off the floor of a seven-week flat base. They decisively retook support at the stock’s 10-week moving average, moving to within 4% of a 137.17 buy point. Apple stock slumped 0.8% Friday.
Aggressive investors may have used the break above 50-day/10-week support as a buy opportunity. The relative strength ratings for both stocks remain weak: 58 for Apple, 64 for Microsoft. Both relative strength lines have turned up, although Apple’s remains far below highs and within a general downtrend. Microsoft’s is very close to breaking above an April high, which would put it in its strongest position since November.
Find Alan R. Elliott on Twitter @IBD_Aelliott
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