Stock futures edged higher early Wednesday as the market heads toward the final two sessions of a historic year. Alibaba led as China-based stocks moved to continue their rebound. Chegg, DynaTrace and Taiwan Semiconductor rose toward buy points. And Caterpillar topped the Dow Jones today, after an analyst named the stock a top pick for 2021.
Nasdaq 100 futures gained 0.5%, while Dow Jones futures rose 0.2% and S&P 500 futures traded 0.3% above fair value. Stimulus payments began to roll out across the U.S. economy, helping to buoy early trade. And a third vaccine was approved in the global battle against coronavirus. However, markets remained tentative, after Tuesday’s quick reversal and pullback from new highs, as small caps and growth stocks lagged the overall stock market’s push into record territory.
Small caps outpaced Wednesday’s early action, with Russell 2000 futures up 0.6%. Near the top of the index, Emergent Biosystems (EBS) gained 2%, after launching a U.S. Department of Defense-funded clinical trial to test an experimental treatment for use in protecting persons exposed to the coronavirus.
So called stay-at-home stocks led by Zoom Video Communications (ZM) and Teledoc Health (TDOC) were also active early Wednesday. The first case of a new strain of rapidly advancing coronavirus was discovered in the U.S., in a Colorado resident, late Tuesday. Teledoc shares gained 1.8%. Zoom Video gained 1.5% in premarket trade.
PayPal Leads S&P 500, Alibaba Extends Rebound
Applied Materials (AMAT) and Caterpillar (CAT) topped the S&P 500. Intel fell to the bottom of the Dow and the Nasdaq 100, after an activist shareholder recommended the company seek strategic alternatives in its recovery effort.
China stocks once again flexed early muscle as Alibaba Group Holdings (BABA) moved to add to its rebound. Alibaba shares rose 3%, after rebounding 6.3% on Tuesday and recovering some ground following Thursday’s 13.3% nosedive. Baidu (BIDU) and JD.com (JD) traded at the top of the Nasdaq 100. Among IBD 50 stocks, China-based investment platform Futu Holdings (FUTU) ran up 2.1%.
Software intelligence specialist Dynatrace (DT) rallied 2.9% to the top of the IBD 50 list, after BTIG initiated coverage on the stock with a 56 price target. Dynatrace is forming a possible handle on a double-bottom base.
Leaders rising toward buy points in early trade included IBD Leaderboard stock Taiwan Semiconductor (TSM), along with IBD 50 listings Chegg (CHGG) and Logitech International (LOGI), as well as Intuitive Surgical (ISRG), which was discussed in Monday’s Stocks Near A Buy Zone column.
Bitcoin Touches New High
Bitcoin traded near $27,000 after rallying to a new high at $28,445 early Wednesday, according to CoinDesk. At its early peak, the crytpocurrency has gained almost 43% since the start of December, with a year-to-date gain of nearly 575%. Bitcoin-related plays were positive in early trade. MicroStrategy (MSTR) climbed 2.2%. Overstock.com (OSTK) added 1.1%. Marathon Patent Group (MARA) — up 87% for the month through Tuesday — jumped 6.8%.
IBD Leaderboard listing Paypal Holdings (PYPL) gained 0.9% in early action. PayPal shares are extended above a 215.93 buy point, rallying after it launched a cryptocurrency trading service in late November.
Dow Jones Today: Caterpillar Leads, Intel Slips
Caterpillar topped the Dow Jones today in early trade. It climbed 1.3% after Baird named the stock a top pick for 2021 and raised its price target to 220, from 206. Caterpillar shares have easily outpaced the Dow, rising 16.5% for the year through Tuesday, vs. the industrials’ 6.3% advance.
Intel backed off 0.8% after it was hurt in early trades. A a letter from activist investment firm Third Point called on the company to enlist advisory assistance to look into trimming the company’s operations. Third Point called for such moves as divesting acquisitions and dividing design and manufacturing operations.
Intel has recently given up market share to rival Advanced Micro Devices (AMD) and to Apple (AAPL), which swapped out Intel processors in its Mac computers. Intel also decided to outsource some of its delayed manufacturing demand to competitor Taiwan Semiconductor. Apple, TSM, AMD stock are all IBD Leaderboard listings.
Intel ended Tuesday with a year-to-date loss of 17.5%. That makes it one of the four worst-performing Dow Jones stocks this year, just behind Boeing (BA), Walgreens Boots Alliance (WBA) and Chevron (CVX).
Treasury Secretary Steven Mnuchin said on Tuesday distribution of $600 coronavirus relief checks was underway, with some direct deposits expected to show up as early as Tuesday night. The overall $900 billion stimulus package also includes unemployment support of up to $300 per week. That support was initially targeted for a Dec. 27 launch, but was delayed by President Trump’s reluctance to sign the bill. The support is set to run at least until March 14.
The bill also includes $45 billion in support for transportation, $82 billion for schools, $20 billion for coronavirus vaccine distribution and $25 billion in emergency assistance to renters, among other provisions.
Efforts underway to boost consumer stimulus checks to $2,000, from $600, moved from the House to the Senate this week. These stand a small chance of succeeding, although the bulk of the efforts revolve around a battle for Republican party control. They relate to Georgia’s pending Jan. 5 Senate runoff election, and of the final verification of the presidential election results on Jan. 6.
A second coronavirus vaccine earned approval for use in the U.K. on Wednesday, sending AstraZeneca (AZN) shares up 2%. That set the stage for accelerating distribution of vaccines. Britain’s health secretary said people would begin receiving single doses of the vaccine, jointly developed by AstraZeneca and Oxford University, early next week. Shots of the Pfizer (PFE)-BioNTech (BNTX) vaccine, approved earlier this month, already are being distributed.
The rollout of vaccines has been slower than intended in both the U.S. and the U.K. In the U.S., federal officials had initially pledged 20 million Americans would be vaccinated before the end of the year. Current numbers from the Centers for Disease Control and Prevention show fewer than 11.5 million doses have been distributed, with about 2.1 million persons receiving their first shot. The vaccines from both Pfizer-BioNTech and Moderna require two shots for full effectiveness.
Moderna shares jumped 3.3% early Wednesday. The company confirmed late Tuesday that the South Korean government was seeking a minimum of 40 million additional doses of its vaccine. Moderna shares have pulled back sharply from a Dec. 1 high, and are testing support at their 10-week moving average.
Globally, the number of coronavirus cases reported daily hit a Dec. 22 peak above 648,000 new cases, up about 11% from the start of the month. New cases reported have since decreased to just below 564,000 on Tuesday, according to data collected by Worldometer. That is down about 4% from the daily average number of new cases reported at the beginning of December. The average number of new cases reported rose 17.9% in November, following a 66% jump in October. Some authorities contend that the decline in reporting is potentially linked to the holidays.
Deaths reported daily worldwide followed a similar trend, peaking on Dec. 22 at almost 12,000, up more than 13% in December. The average of reported deaths declined to 10,321 on Tuesday. The number of deaths reported daily soared 58.8% in November, and 30% in October.
In the U.S., the average number of daily new cases increased more than 36% in December, to a peak of 223,932 on Dec. 22. That was a big jump, but also a significant slowdown from November’s 100% increase, and the 90% surge seen in October.
The daily average for deaths reported in the U.S. was 2,246 on Tuesday, down from a Dec. 22 peak of 2,782 deaths. At its peak, the daily number of new deaths had increased by almost 83% in December. Deaths rose 77.5% in November and 17% in October.
IBD 50: Dynatrace’s Handle
IBD 50 stock Dynatrace ended Tuesday 8% below a 45.28 buy point in what IBD MarketSmith chart analysis describes as a double-bottom base. But the base may be morphing. The stock has completed four days of a possible handle. Handles require a minimum of five days. If Dynatrace remains below the left side high of the sub-consolidation for a fifth day, it would produce a buy point at 45.17.
The stock was testing support at its 21-day exponential moving average on Tuesday.
Find Alan R. Elliott on Twitter @IBD_Aelliott
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