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.

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The S&P 500 and Dow Jones Industrial Average rose 0.6{1c85f339815b3f699ae0fdee90a747b715d9a8e52ec31221581a933b2596fac0} and 0.5{1c85f339815b3f699ae0fdee90a747b715d9a8e52ec31221581a933b2596fac0}, respectively. The Nasdaq composite climbed 0.4{1c85f339815b3f699ae0fdee90a747b715d9a8e52ec31221581a933b2596fac0}, although it felt the drag of some software and biotech stocks. The Nasdaq was down as much 0.7{1c85f339815b3f699ae0fdee90a747b715d9a8e52ec31221581a933b2596fac0} 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{1c85f339815b3f699ae0fdee90a747b715d9a8e52ec31221581a933b2596fac0} higher on the NYSE and Nasdaq compared with the same time on Monday.

Small caps lagged, with the Russell 2000 off 0.2{1c85f339815b3f699ae0fdee90a747b715d9a8e52ec31221581a933b2596fac0}. 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{1c85f339815b3f699ae0fdee90a747b715d9a8e52ec31221581a933b2596fac0}; travel booking and leisure services lost 1.7{1c85f339815b3f699ae0fdee90a747b715d9a8e52ec31221581a933b2596fac0}. Lodging and casino and resort groups were down more than 2{1c85f339815b3f699ae0fdee90a747b715d9a8e52ec31221581a933b2596fac0}. 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{1c85f339815b3f699ae0fdee90a747b715d9a8e52ec31221581a933b2596fac0} gain, and the index could thank Translate Bio (TBIO). The biotech soared 29{1c85f339815b3f699ae0fdee90a747b715d9a8e52ec31221581a933b2596fac0} 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{1c85f339815b3f699ae0fdee90a747b715d9a8e52ec31221581a933b2596fac0} 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{1c85f339815b3f699ae0fdee90a747b715d9a8e52ec31221581a933b2596fac0} to new highs. The IBD Leaderboard stock is extended from 252.88 buy point. Moderna added more than 4{1c85f339815b3f699ae0fdee90a747b715d9a8e52ec31221581a933b2596fac0} and is on track for a new closing high.

Atkore (ATKR) surged more than 13{1c85f339815b3f699ae0fdee90a747b715d9a8e52ec31221581a933b2596fac0} after the heavy-construction products company reported June-quarter sales surged 122{1c85f339815b3f699ae0fdee90a747b715d9a8e52ec31221581a933b2596fac0} to $853.7 million as earnings vaulted 491{1c85f339815b3f699ae0fdee90a747b715d9a8e52ec31221581a933b2596fac0} to $3.96 a share. The stock is forming the right side of a cup base.

But Ultra Clean Holdings (UCTT) plunged 12{1c85f339815b3f699ae0fdee90a747b715d9a8e52ec31221581a933b2596fac0} despite that the company beat quarterly estimates and raised its guidance. The sell-off left the chip-equipment company 27{1c85f339815b3f699ae0fdee90a747b715d9a8e52ec31221581a933b2596fac0} 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{1c85f339815b3f699ae0fdee90a747b715d9a8e52ec31221581a933b2596fac0} gain in the Philadelphia Semiconductor Index. The gaming software group was weakest, down more than 5{1c85f339815b3f699ae0fdee90a747b715d9a8e52ec31221581a933b2596fac0} 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{1c85f339815b3f699ae0fdee90a747b715d9a8e52ec31221581a933b2596fac0} vs. a year ago, but earnings cruised 69{1c85f339815b3f699ae0fdee90a747b715d9a8e52ec31221581a933b2596fac0} higher to $1.30 a share. In the year-ago quarter, sales leapt 54{1c85f339815b3f699ae0fdee90a747b715d9a8e52ec31221581a933b2596fac0} 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{1c85f339815b3f699ae0fdee90a747b715d9a8e52ec31221581a933b2596fac0} 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{1c85f339815b3f699ae0fdee90a747b715d9a8e52ec31221581a933b2596fac0}.

Global X Video Games & E-Sports ETF (HERO) fell 3.7{1c85f339815b3f699ae0fdee90a747b715d9a8e52ec31221581a933b2596fac0} to a 2 1/2-month low.

The yield on the 10-year Treasury note was nearly unchanged at 1.18{1c85f339815b3f699ae0fdee90a747b715d9a8e52ec31221581a933b2596fac0}. The yield is trying to hold above July’s low of 1.13{1c85f339815b3f699ae0fdee90a747b715d9a8e52ec31221581a933b2596fac0}.

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

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