The Dow Jones Industrial Average saw gains evaporate ahead of testimony from Fed Chair Jerome Powell. Ferrari zoomed past Tesla to take the checkered flag as a top pick. Leaderboard stock MercadoLibre tested a new buy point while Apple was a top blue chip.
There were several breakouts amid early bullish action, but the moves faded. Hubbell, Deckers Outdoor and Trane Technologies all tested entries.
The market now gets ready for crunch Congressional testimony from Powell Tuesday and Wednesday. The 10-year Treasury yield reversed higher, rising just over 1 basis point to 3.98%.
Stocks opened higher despite San Francisco Fed President Mary Daly saying that "further policy tightening, maintained for a longer time, will probably be necessary" at Princeton University Saturday. She is currently not a voting member of the Federal Open Market Committee.
Traders seem to be betting on two or three more quarter-point rate hikes in this round. A meaningful stock rally or a painful drawdown could lie ahead, depending largely on the Fed's goals.
Nasdaq Reverses As Small Caps Plunge
The Nasdaq reversed lower and a late rally attempt failed. It closed down 0.1%. Dexcom, a leader in the continuous glucose monitoring device market for diabetics, was a noteworthy mover, plunging 7.9%.
The S&P 500 managed to dig its claws in for a gain of 0.1%. Lumen Technologies did well here, rising 4.1%. But the stock is trading for just 3.30 a share, which means it is not worthy of consideration for CAN SLIM investors.
The S&P 500 sectors finished the day mixed. Technology and communication services fared best while materials and consumer discretionary lagged.
Small caps were pummeled by the bears, with the Russell 2000 falling 1.5%. Growth stocks saw gains for the day melt away, with the Innovator IBD 50 ETF closing down fractionally.
Dow Jones Today: Apple Stock Pops Amid Bullish Call
The Dow Jones Industrial Average briefly turned negative in late trading before closing with a modest 0.1% gain.
Apple stock was one of the best performers, popping 1.9%. The stock is now pulling away from the 200-day moving average.
A comeback for AAPL continued to bear fruit after Goldman Sachs initiated it as a buy with a 199 target. Analyst Michael Ng said gross profit growth over the next five years will be driven by its services business.
But Merck was the best performer on the Dow Jones today. It jumped 3.9% on the release of data on an experimental cholesterol pill.
Dow Inc., Intel and Boeing were among the worst laggards on the index. DOW fell 2.1%, INTC dipped 1.6% and BA fell 1.5%.
Leaderboard Stock Moves Above Entry
MercadoLibre was also having a productive day, popping 2.4%. This saw it clear a 1,250.58 buy point. Crucially, it held above the level despite the late pullback.
On a weekly chart this qualifies as a flat base. On a daily chart it is more of a handle. Perhaps it is best described as a base-on-base formation.
MELI's bullish action saw it given the nod as today's IBD 50 Stocks to Watch selection. MercadoLibre is the largest e-commerce company in Latin America. It is showing strength despite competition from Amazon.com.
The retail stock has been making progress since posting strong earnings last month. Exposure to MELI was increased on Leaderboard to take advantage of the bullish move.
Tesla Stock Loses RACE Amid Ferrari Pick
Ferrari may have lost out in the first F1 Grand Prix of the year on Sunday but it won in perhaps an even more important category.
The stock has been named the top U.S. auto industry stock pick, ahead of Tesla stock, according to Morgan Stanley.
Analyst Adam Jonas said the Italian luxury sports car firm has overtaken the EV giant amid a "relatively bearish view on auto fundamentals."
Ferrari has the longest order backlog, the greatest earnings visibility and the highest pricing power of "any company we cover," according to Jonas.
Jonas is rating RACE stock as outperform with a 310 target. Ferrari stock ended the day down 0.4%. Nevertheless, it is trading near a 270.45 cup-with-handle entry, MarketSmith analysis shows.
Tesla stock fell 2%, losing ground on the 200-day line. TSLA is up more than 79% so far in 2023.
Outside Dow Jones: 3 Stocks Test Buy Points
With the market now back in a confirmed uptrend it is key to keep track of breakouts. Hubbell briefly passed a cup-with-handle entry of 256.53 but reversed lower. It closed the session down 0.1%.
The electrical equipment play made the move in low volume. Overall performance is strong, with its IBD Composite Rating coming in at 93 out of 99.
Deckers Outdoor closed barely above a flat-base buy point of 433.41 on its weekly chart, turning in a 1.1% gain. The relative strength line hit fresh heights, a bullish sign. Earnings and price performance are both very strong.
Trane Technologies tested a flat-base entry of 194.76 but reversed below this level. It finished the session down 1.1%.
The RS line is also at fresh highs. Big Money has been a net buyer of TT of late, with the stock's Accumulation/Distribution Rating coming in at B+.
Please follow Michael Larkin on Twitter at @IBD_MLarkin for more analysis of growth stocks.
