Stock Market Reverses at Resistance; Energy and finances shine

Stock indices hit June resistance at the opening bell and closed those gaps in the early afternoon, moving back into the red. Financial stocks faded after a rapid rally, with better-than-expected earnings Goldman Sachs (GS) motivating early buying interest.


The Dow Jones Industrial Average is trading almost flat at this time, while the S&P 500 is down 0.1%. The Nasdaq composite also gave up its gains and is now down 0.1%.

Stock market volume is mixed on this summer Monday, with NYSE trading levels down about 10% from the same time on Friday. Nasdaq volume jumped 29%, supported by a resilient small cap rally.

Energy stocks lead Monday’s price action, fueled by a 4.2% rally in the August WTI crude oil contract. The broad based SPDR Energy Select Sector ETF (XLE) is trading up 2.6%.

Chip stocks jumped at the opening bell in response to growing optimism that Congress will finally put aside differences and pass the $52 billion funding bill. Both Nvidia (NVDA) and Advanced micro-systems (AMD) are posting solid gains.

Bank of America (BAC) had a mixed quarter, with 5.7% year-over-year revenue growth, but earnings estimates missing pennies. Traders bought a quick drop after the news, continuing last week’s positive reaction to bank results, and the stock is up 0.4%.

Goldman Sachs reported a bumper quarter, earning $7.73 per share, beating consensus estimates of $1.12. Revenue fell 22.9% year-over-year to $11.86 billion, but still exceeded expectations by more than $1 billion.

The stock is trading up 2.1% in the early afternoon. GS continues to be challenged with upside resistance at its descending 50-day moving average.

Big week for earnings reports

IBM (IBM) reports in Monday’s aftermarket. Quarter-over-quarter comparisons are difficult because the old-school tech giant has turned slow-growing divisions into Kyndryl (K.D.) in October. The Street is looking for earnings of $2.29 per share.

netflix (NFLX) shareholders are hoping for divine intervention ahead of Tuesday’s post-trade report, as the stock has fallen 43% since the company warned it could lose 2 million subscribers in the second quarter.

You’re here (TSLA) reports after Wednesday’s closing bell, when the electric vehicle maker is expected to post second-quarter earnings of $1.88 per share. If achieved, the results would mark a 26% year-over-year profit increase.

This week’s major economic reports will highlight June housing, starting with Tuesday’s housing starts and building permits data, followed by Wednesday’s existing home sales. Expectations have eased over the past month, undermined by rising mortgage rates, supply chain disruptions and low inventories.

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Monday Stock Market Highlights

Wholesale Costco (COST) has been added to INN 50 Friday list. The big-box retailer holds a bullish composite rating of 96, along with an RS rating of 92 and an EPS rating of 88. Revenue is expected to rise 10% in 2022 and 11% in 2023, despite inflationary headwinds. The stock is grinding through a cup base that bottomed with a 34% pullback in May. It just closed above the 200-day moving average for the first time since May 5.

Friday IBD Stock of the day Health Care Option (OPCH) reached an eight-year high and broke the 31.18 buy point of a 31-day handleless cup last week. The rally stalled on Monday, but the stock remains in the 5% buy zone.

IBD Swing Trader take dollar tree (LTRD) remains in the buy range, just above the cut with the 166.45 buy point of the handle, despite falling 0.5% on Friday. The discount retailer’s relative strength line dipped on Monday, after hitting a new high last week. DLTR holds a bullish 97 out of a perfect composite rating of 99, according to the IBD Stock Check. Dollar Tree shares rose nearly 1.5% on Monday afternoon.

Psychiatric service provider Health Acadia (CCSA) rose 0.7% and broke out of a 59-day consolidation pattern, reaching the buy point of 76.79. The stock hit a seven-year high while the relative strength line hit a 52-week high. ACHC currently holds a composite rating of 96.

The Innovator IBD 50 ETF (FFTY), an indicator of growth stocks, rose 0.4%, in line with the main indices.

Follow Alan Farley on Twitter @Mstrader for daily stock action.


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