Tech stock led early declines Friday, as early advances by Merck (MRK) and other medical-sector stocks did little to soften the blow to the broader market. Medical software leader Cerner (CERN) rallied on merger chatter. FedEx (FDX) opened higher on earnings news. And electric automaker Rivian (RIVN) tumbled after reporting wider-than-expected losses late Thursday.
The Nasdaq Composite drilled to an early 1.3% loss, than pared to a 0.7% decline. The Dow Jones Industrial Average dropped 1.4%, and the S&P 500 fell 1.1%. The Russell 2000 small cap gauge traded down 0.8%.
Oracle (ORCL) and Cerner bookended the S&P 500, after The Wall Street Journal said the two companies were discussing a possible $30 billion combination. Cerner soared 13%, leading the Nasdaq 100 and S&P 500. Oracle dropped more than 5%.
EV maker Rivian tumbled almost 15% lower after its third-quarter losses outpaced analyst expectations.
Darden Restaurants (DRI) also dragged on the S&P 500, down 5.8% after topping analysts’ earnings estimates, but announcing an accelerated pay-hike initiative during its fiscal second-quarter report. Winnebago Industries (WGO) rallied edged up 0.4% on its results.
Edwards Lifesciences (EW) and Abbott Laboratories (ABT) posted early gains. Edwards rose 2.3% on an upgrade to overweight from JPMorgan. The JPMorgan note placed a price target at 140, up from 114. Abbott notched a 0.9% advance after Citi boosted its price target to 154, from 141.
Stocks on the IBD 50 and Leaderboard lists traded generally lower early Friday. Among Leaderboard stocks, On Holding (ONON) and Airbnb (ABNB) were down more than 3%. IBD 50 stock CubeSmart (CUBE) clocked in with a 0.9% gain, climbing toward a 56.74 buy point in a seven-week flat base.
Among leading stocks to watch, Expeditors International Washington (EXPD) remained in a buy range after retaking a buy point. Charles Schwab (SCHW) and West Fraser Timber (WFG) closed below buy points in fully-formed bases.
Dow Jones Today: Merck Leads; Apple, Nike Slip
Merck climbed to the head of the Dow Jones Industrial Average, up 1.4%. The drugmaker’s Keytruda received a positive opinion from the EU’s Committee for Medicinal Products for Human Use as a treatment for adults with renal cell carcinoma. Goldman Sachs also gave Merck a buy rating in new coverage.
Merck stock is sitting on a four-day advance, up 4.5% for the week as it looks to end a four-week slide.
Goldman Sachs started Pfizer and JNJ stock at neutral.
Steelmakers, Ore Miners Show Strength Vs. Sell Off
Thursday’s harsh market sell-off left the Nasdaq composite down 2.5% and the S&P 500 0.9% lower, while the Dow industrials held to a loss of less than 0.1%.
But there were some winners for the day. Steelmakers and ore miners rallied during the session.
Steel Dynamics (STLD) rallied 6% Thursday. Nucor (NUE) gained 5.3%. U.S. Steel (X) rose 3.8% and Cleveland Cliffs (CLF) climbed 3.6%. Nucor, Steel Dynamics and U.S. Steel had all previously triggered the automatic sell rule by breaking out, then falling more than 8% below their buy points.
But late Thursday, U.S. Steel guided low for fourth-quarter unadjusted earnings, after Nucor warned on fourth-quarter results early Wednesday. On Friday morning, Steel Dynamics dropped 1.9%, while Nucor added 0.3%. Cleveland Cliffs showed a 1.3% loss. U.S. Steel slumped 4%.
Gold miners led a rally among mining stocks on Thursday, although others also did well. Silver miner Newmont (NEM) notched an 8.8% gain, with Agnico Eagle (AEM) and Wheaton Precious Metals (WPM) up more than 4% apiece. Newmont and Wheaton each gained more than 1% early Friday.
Stocks To Watch: Schwab, Expeditors, West Fraser
Expeditors International is holding in a buy range above a 130.86 buy point. The stock had triggered the automatic sell rule with a brief deep dive on Dec. 2. It retook the entry with a high-volume breakout on Dec. 13. The buy zone extends to 137.40. Expeditor shares rose 0.2% Friday morning.
Charles Schwab broke out above a flat base buy point at 84.59 on Thursday. Shares pared gains and closed narrowly back below the entry. The base shows firm support at the chart’s 50-day moving average. The buy zone runs to 88.82. Schwab stock dropped 1.8% at Friday’s open.
West Fraser Timber is perched in a cup base also showing healthy support at its 50-day/10-week line. Its buy point is 92.56. Shares slipped 0.6% in early trade.
A Confirmed Uptrend Stumbles
Thursday’s snap-back action was not what investors would like to see the day after a follow-through session confirms a market uptrend. Many investors were caught sending cash back into stocks. Only the most alert, or most cautious, managed to avoid taking a hit.
Not all confirmed uptrends succeed. A market rally remains technically valid as long as it holds above recent lows. But closing below the follow-through day low is a negative signal. So, while the market remains technically on a confirmed uptrend, Thursday’s action hung out a big bright caution flag.
The Nasdaq held above its low from Wednesday, and is still 1.7% off its Dec. 3 low. But it gave up support at its 50-day line, a technical marker that now threatens to become a level of resistance.
For more detailed analysis of the current stock market and its status, study the Big Picture.
Among other indexes, the S&P 500 — buoyed by miners, telecoms and steelmakers — held nicely above its short-term 21-day exponential moving average. The Dow is holding above its converged 50-day and 21-day lines.
SPDR Dow Jones Industrial Average ETF Trust (DIA) has formed a six-week flat base with a buy point at 365.74.
The holiday season can distort trading. It can increase the impact of automated trading, and news like Thursday’s rise in jobless claims back above the 200,000 level is just the sort of thing to set selling in motion.
But the result leaves investors who bought growth stocks on Wednesday’s follow-through considering whether to hold, pare down or entirely exit those positions. There are plenty of healthy charts out there worth hanging on to. But for those showing damage or weakness, it’s also a good time to protect capital, book losses before year-end and wait for the market to provide some clarity.
You can find Alan R. Elliott on Twitter @IBD_Aelliott
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