Stocks plowed into a forceful open Tuesday, as positive coronavirus sentiment powered the S&P 500 easily past recent resistance. Vaccine testing news sent Novavax to the head of an early biotech rally. Regeneron Pharmaceuticals tumbled as a major shareholder exited. Chemicals maker Dow snapped to the head of the Dow Jones today.
XA number of data points showed the U.S. economy improving, helping to send global markets higher Tuesday. The Dow industrials opened to a 2.3% gain, up 550 points, as almost a quarter of the index rallied more than 4% in opening trade. That cracked the April 29 high, moving the index past recent levels of resistance in a bullish move for the market.
The S&P 500 surged 2%, exploding back above the 3,000 level as well as its 200-day moving average — its first time above both hurdles since early March. Small caps ran well ahead of the early action, with the Russell 2000 bulldozing ahead 3.3%.
The Nasdaq held to a 1.6% gain, as Regeneron Pharmaceutical (REGN) dived 4.9% to the bottom of the index. The company announced a share offering Monday, as France-based Sanofi (SNY) exited its 23.2 million share stake. Regeneron agreed to purchase half the shares directly from Sanofi.
United Airlines (UAL) and Expedia (EXPE) topped the Nasdaq 100, as airlines and travel issues climbed on early signs of travel restrictions in Europe and parts of Asia. Seattle Genetics (SGEN) popped 2.7% as biotechs staged an early rally.
Cosmetics brand Coty (COTY) spiked to the head of the S&P 500, up 11%, although shares remained below 5. Cruise lines, airlines and hotel chains dominated the index in early trade.
Early earnings news was generally positive. AutoZone (AZO) ramped up 1.6% after scoring a strong first-quarter earnigns beat.
IBD 50/Leaderboard: Dropbox, ServiceNow, Dexcom
On the IBD 50 list, Dropbox (DBX) led with a 3.2% gain. The database software leader ended Friday less than 7% below a 23.13 buy point in a cup-with-handle base.
Box (BOX) rallied 2.5% at the starting bell.
Among Leaderboard stocks, ServiceNow (NOW) and Dexcom (DXCM) each climbed more than 2%.
Covid-19 Vaccine Race: Novavax, Merck
Vaccine optimism factored prominently in early trade Monday, as biotech Novavax (NVAX) rallied 25% after announcing it had launched phase 1 clinical trials of a coronavirus vaccine candidate.
Merck (MRK) swung 3.6% higher after the New Jersey-based drugmaker announced the acquisition of vaccine and immuno-modulation therapy developer Themis Bioscience. Merck also announced a collaboration with Ridgeback Bio to develop an oral antiviral treatment for Covid-19.
IBD 50 stock Neurocrine Biosciences (NBIX) skipped up 2.2%. The San Diego-based biotech ended Friday near the top of a buy range above a 199.75 buy point. The buy range runs to 125.73.
Among other coronavirus-related stocks, test maker Co-Diagnostics (CODX) popped more than 4% after reporting that its test successfully identified coronavirus in cancerous tissues. Germany-based biotech BioNTech (BNTX) rallied 2.3% early.
Dow Jones Today: Boeing Fights To Reverse Streak
Boeing (BA) snapped more than 5% higher. The move was enough to put Boeing stock on track for a gain in the month of May, after five straight months of declines.
Chemicals maker Dow (DOW), Merck and American Express (AXP) all rose more than 4% in premarket action. More than 20 of the Dow's 30 issues had gains of better-than 1% in early action.
Coronavirus Update: U.S. Active Cases, Brazil Hot Spot
In the three days since Friday, 390,658 new Covid-19 cases have been confirmed worldwide, lifting the cumulative total of cases to more than 5.6 million. Another 13,240 deaths were reported, placing the total death count at 334,997.
Countries of the European Economic Area represented about 25% of the total cases and about 48% of the deaths, according to data from the European Center for Disease Prevention and Control. The U.S. was just over 30% of the cases, and not quite 29% of the deaths, based on Worldometer data.
On Friday, Brazil reported more than 20,000 new cases, rising above Russia to become the second-largest source of new cases worldwide. Africa rose above the 100,000 mark for confirmed cases. On Sunday, Brazil's daily death count rose above that of the U.S. Brazil's total number of cases is about 22% of that in the U.S.
The White House on Sunday expanded its travel ban to include any person who had visited Brazil within 14 days of their attempt to enter the U.S.
In the U.S., 84,893 new coronavirus cases were reported over the three-day weekend, boosting the total to more than 1.7 million. Persons killed by the virus rose 3,442, to 99,805. The total for active cases – persons being treated in hospitals or under quarantine who have been confirmed as infected — decreased on Friday of the first time in the course of the outbreak. Active cases have since continued to increase, rising on Sunday to 1.14 million, up 1,556 from Thursday's high.
Coronavirus: Economy Steadies, NYSE Floor Restarts
Average testing in the U.S. accelerated to a pace of 392,652 tests administered per day, up from around 226,000 at the end of April. In China, the city of Wuhan announced Tuesday it had conducted 6.5 million tests on its residents in nine days.
The Wall Street Journal reported that air travel, mortgage applications and hotel bookings were all early signs of an economy "creeping back to life." Stay-at-home orders remained in place only in Illinois, New Jersey and Delaware. The order expires Friday in Illinois, where retailers have been permitted to open, but only for curbside pickup, and personal care businesses have been allowed to operate. New Jersey's stay-at-home order expires June 5. Delaware's order lapses on June 8.
The New York Stock Exchange trading floor will partially reopen on Tuesday. The number of traders — already greatly reduced from highs years ago — will be limited to 25% that of recent numbers. Traders will be separated by Plexiglas dividers, and are not permitted to travel to work via public transit. The NYSE had shifted to an all-electronic trading format on March 23, after two floor employees tested positive for Covid-19.
Dow Jones Today: The May Malaise
Heading into the final week of May, the Dow Jones today rolls toward the starting bell with a 0.5% gain for what is traditionally a slack month. The S&P 500 has a 1.5% gain for the month through Friday. The Nasdaq has a 4.9% gain.
The market deserves a breather coming off April's big rally. The market's status remains firmly in a confirmed uptrend, after posting four thunderbolt up-weeks during the 10-week rebound from March lows. Lower volatility over the past week "is a healthy sign that we are on our way back to a normal bull market," according to IBD's Weekend Stock Market Update.
The S&P opens Tuesday just one healthy rally away from the 3,000 mark, as well as its 200-day moving average. Overtaking that mark would provide another bullish indicator for the uptrend.
For more detailed analysis of the current stock market and its status, study the Big Picture.
Stock Market: April Hurdle, S&P 500 History
But there were also a few technical reservations in last week's outcome. The continuing lag by the Dow industrials and the Russell 2000 below their high from April 29 shows the stock market is still showing significant signs of caution. Both indexes are clearly finding resistance at this level, which is also their interim-level 100-day moving average.
Moves by either or both could unlock both the blue chips and small cap segments of the market to further gains. Continued resistance could signal problems ahead.
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In addition, the S&P 500 ended Friday having logged 21 days rangebound between its 50-day and 200-day moving averages. Ben Levisohn at Barron's notes that the index has now spent more than 20 days between the two averages only 30 times since 1928. Of the 29 prior cases, the S&P moved lower and undercut its 50-day 21 times.
The current market is, very obviously, an exception to everything that has come before it. If the S&P 500 does move higher and snap above its 200-day line it will also be breaking with its historical trend, which would make the move doubly-bullish.
Find Alan R. Elliott on Twitter @IBD_Aelliott
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