Stock Market Reverses Higher; This Industry Is Hit With Bad News

The stock market reversed higher in afternoon trading Tuesday as the three major indexes sought support at a key chart level.

X

The S&P 500 and Dow Jones Industrial Average rose 0.6% and 0.5%, respectively. The Nasdaq composite climbed 0.4%, although it felt the drag of some software and biotech stocks. The Nasdaq was down as much 0.7% before stock market indexes shifted direction around 11:30 a.m. ET.

All three indexes were holding above support at the 21-day exponential moving average. Volume was tracking about 7% higher on the NYSE and Nasdaq compared with the same time on Monday.

Small caps lagged, with the Russell 2000 off 0.2%. The index, however, was off session lows.

Cyclical sectors such as energy, industrials and transportation led the market. Technology, internet and consumer discretionary sectors lagged.

Reopening Industries Lag Stock Market

A number of reopening industries were lower. Restaurants and airlines fell about 0.3%; travel booking and leisure services lost 1.7%. Lodging and casino and resort groups were down more than 2%. Some states and governments are reinstating mask mandates to stave off a rebound in Covid-19 cases.

Innovator IBD 50 ETF (FFTY) outperformed with a 1.4% gain, and the index could thank Translate Bio (TBIO). The biotech soared 29% to a new high after France’s Sanofi (SNY) agreed to acquire the company in a deal valued at $3.2 billion.

The acquisition boosts Sanofi’s use of mRNA technology to develop treatments and vaccines, such as the type used to create Covid-19 vaccines. Sanofi shares 0.4% and remain in a long pattern.

BioNTech (BNTX) and Moderna (MRNA), two vaccine makers in the IBD 50, rose in sympathy. BioNTech was up more than 3% to new highs. The IBD Leaderboard stock is extended from 252.88 buy point. Moderna added more than 4% and is on track for a new closing high.

Atkore (ATKR) surged more than 13% after the heavy-construction products company reported June-quarter sales surged 122% to $853.7 million as earnings vaulted 491% to $3.96 a share. The stock is forming the right side of a cup base.

But Ultra Clean Holdings (UCTT) plunged 12% despite that the company beat quarterly estimates and raised its guidance. The sell-off left the chip-equipment company 27% below a prior high, but it continues to work on a new base.

Tech Sector Not Leading Stock Market

In the tech sector, many software industry groups were down, while chip-equipment firms also fell despite a 0.4% gain in the Philadelphia Semiconductor Index. The gaming software group was weakest, down more than 5% on a series of bad news.

Take-Two Interactive (TTWO) gapped down to the lowest level since November after the company’s outlook disappointed. Barclays, Credit Suisse and other firms cut their price targets on Take-Two. The video game giant’s sales slipped 2% vs. a year ago, but earnings cruised 69% higher to $1.30 a share. In the year-ago quarter, sales leapt 54% as coronvirus-related lockdowns forced Americans to spend more time indoors.

Activision Blizzard (ATVI) sank to the lowest since November. Its president, J. Allen Brack, resigned Tuesday following a lawsuit that accuses the company of sexual harassment and discrimination.

Electronic Arts (EA) was off nearly 3% ahead of its earnings report Wednesday.

A Chinese state-owned newspaper called online gaming as “opium for the mind,” reports said. The article may foreshadow more regulatory moves from Beijing. NetEase (NTES), which has been volatile for a couple of weeks on China regulatory worries, tumbled 11%.

Global X Video Games & E-Sports ETF (HERO) fell 3.7% to a 2 1/2-month low.

The yield on the 10-year Treasury note was nearly unchanged at 1.18%. The yield is trying to hold above July’s low of 1.13%.

Juan Carlos Arancibia is the Markets Editor of IBD and oversees our market coverage. Follow him at @IBD_jarancibia

YOU MIGHT ALSO LIKE:

Investors Face New Risks In Stock Market Forecast For The Next Six Months

IBD’s Market Outlook: A Guide To The Different Designations

Get Free IBD Newsletters: Market Prep | Tech Report | How To Invest

What Is CAN SLIM? If You Want To Find Winning Stocks, Better Know It

Market Rallies Off Key Support; These 3 Stocks Test Recent Breakouts