Stocks Veer Lower As Oil Prices Slump; This Dow Giant Gets An Upgrade

Stocks opened to quick losses Thursday as overseas action and early earnings news were mixed, and oil prices continued their two-week slide.

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Alcoa (AA) and Ericsson (ERIC) all stepped off early gains following earnings reports. Textron (TXT) and United Rentals (URI) each took a dive. Biotech Endocyte (ECYT) spiked more than 50% on a takeover deal from Novartis (NVS). Invesco (IVZ) bolted higher on news it would buy OppenheimerFunds from Massachussets Mutual Life for $5.7 billion.

The Dow Jones industrial average dropped 6%, the Nasdaq Composite tumbled 0.7% and the S&P 500 downshifted 0.6% at the starting bell.

Walgreens (WBA) led the Dow, rising 0.8%, while Nike (NKE) rose on an analyst upgrade and Caterpillar (CAT) tumbled 2.6% to the bottom of the list.  On the Nasdaq 100, Sirius XM (SIRI) swung to an early lead. Activision Blizzard (ATVI) skidded 6% lower.

Industrial earnings split the S&P 500 in early trade. Praxair (PX) sprung 3% to near the top of the index, just behind Invesco. Sealed Air (SEE) and Textron each fell to deep declines.

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Stock Market Correction Vs. Bear

The market slipped into a correction on Oct. 10, which means investors should raise cash where feasible and not jump into any new stocks or add to current positions until conditions improve. It’s a good time to study up on the traits of a follow-through day, which typically marks the launch of a new market uptrend. It is also a good time to identify leading stocks building early-stage base patterns, and to begin building a watchlist of stocks that could potentially break out past buy points when the market turns more positive.

The Dow ended Wednesday down 4.6% from its Oct. 3 high. The S&P 500 was down 4.5%. The Nasdaq had slipped 6% below its Aug. 30 peak. The current mood might at times be “bearish,” and “the bears” are often said to be controlling the market’s action during periods of strong selling, but all of the major indexes remain far from the 20% decline necessary to declare a bear market.

Alcoa, Ericsson Climb; Nike Gets Digital

Alcoa leapt 6.7% after reporting quarterly results late Wednesday. Both stocks are trading sharply below second-quarter highs and under critical levels of support.

Dow stock Nike gained 0.8% after Oppenheimer upgraded the stock to outperform, from perform. The note placed a 90 price target on the stock, citing an “already dominant, legacy global brand’s” adoption of digital marketing. “Digital is allowing NKE to drive sales through more profitable direct channels and minimize markdown risks,” the note said.

The early gain put Nike stock ahead 1.7% for the week, as it aims to snap a three-week pullback and find support at its 40-week moving average.

Handset maker Ericsson powered up nearly 4% after beating analyst targets as it battles back from two years of declines. The stock trades just below 10, and is now up 22% since clearing a cup-with-handle base in April.

M&A: Endocyte, Invesco

Cancer drug biotech Encyte soared 51% in opening trade. Swizterland’s Novartis agreed to pay $2.1 billion for the Indiana-based radiopharmaceuticals specialist. Novartis also reported better-than-expected Q3 earnings and revenue in line with analyst targets. Endocyte stock was up 264% for the year through Wednesday.

Invesco, the fourth-largest manager of exchange traded funds, rose 2.6% after announcing it would pay $5.7 billion to acquire OppenheimerFunds from Massachusetts Mutual Life Insurance. Oppenheimer’s high-fee actively managed funds add assets of around $246 billion, increasing Invesco’s assets under management to $1.2 trillion.

Invesco shares have been in a steep dive since January, ending Wednesday 46% below their January high.

Oil Prices Down; Philly Fed Tops Forecasts

Oil prices steepened their early decline, with West Texas Intermediate down 1.6% at $68.66 per barrel, Brent crude off 1.4%. WTI dropped 3% Wednesday following bearish supply data from the Energy Information Administration. It is 10% off its Oct. 1 high and tracking toward a second straight weekly decline.

First-time unemployment claims fell to 210,000 in the week ended Oct. 13, the Labor Department reported. That was counter to consensus expectations for an uptick, to 215,000, from the prior week’s 214,000 applications.

Manufacturing growth in the mid-Atlantic region has slowed less than expected in October. The Philadelphia Federal Reserve’s Manufacturing Business Outlook Survey dipped to 22.2, down from September’s 22.9 but above economist targets for 20. Positive readings indicate expansion.

St. Louis Federal Reserve President James Bullard is speaking in Memphis at 9 a.m. ET. Thursday’s heavy after-hours reporting schedule includes American Express (AXP), PayPal (PYPL), Intuitive Surgical (ISRG) and Atlassian (TEAM), among others.

China Dives Ahead Of GDP Data

China’s mainland markets dived, sending the Shanghai Composite 2.9% lower, as weaker oil prices, a diving yuan and concerns over margin-lending levels spooked investors. Hong Kong resisted the undertow and managed a flat finish. In Japan, Tokyo’s Nikkei 225 fell 0.8%. China’s markets remain deep in bear market territory, and skittish ahead of third-quarter GDP data due out Friday.

European markets were mixed on positive earnings news, a sell-off among Spanish banks and ongoing Brexit worries. The CAC-40 in Paris traded a fraction higher in afternoon trade. Frankfurt’s DAX and the FTSE 100 in London were down 0.2% apiece.

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