The stock market today closed substantially higher after bouncing back from losses that followed the latest inflation data. Indexes closed at session highs.
The S&P 500 closed 1.1% higher after being down more than 1.6%. The Nasdaq composite closed 2.2% higher and is still more than a 1% advance away from testing resistance at its falling 50-day moving average.
Despite the initial heavy selling on Wednesday, the major indexes still show decent double-digit gains for the year. The large-cap benchmark headed into Wednesday's session up 15.2% since Jan. 1. The Nasdaq composite was up 13.4% before the open.
As noted in Tuesday's Big Picture, IBD's recommended exposure to the stock market today remains muted at a 20%-40% range.
The Dow Jones Industrial Average also reversed from its decline and finished 0.3% higher. The Dow Jones industrials made a beautiful test of support at the 40,000 level.
Among the Dow Jones stocks rising, Microsoft jumped 2.2%. The AI-enhanced business software and cloud computing giant has created a follow-on entry point for long-term holders.
Microsoft stock rose for a third straight day, but closed below its 50-day moving average for a 35th session in a row.
The Innovator IBD 50 ETF climbed 1.8%, its best day since Aug. 8.
There were moderately more advancers than decliners on both the Nasdaq and the NYSE.
AppLovin Regains Buy Point
AppLovin, a marquee stock discussed on IBD Live on Wednesday, led the MarketSurge Growth 250 list with an 11% gain. At a late-afternoon session high of 96.21, shares in the platform for digital app developers retook a 91.91 proper buy point in a seven-week cup-style base with force. Volume jumped 157% above usual levels, indicating heavy buying among portfolio managers. The 5% buy zone goes up to 96.51.
Thus, the large-cap tech stock (worth $32 billion in market value on the stock market today) barely held within buy range.
AppLovin, based in Palo Alto, Calif., has shown remarkable earnings and blistering sales growth in recent quarters. On the top line, revenue went from a 3% year-over-year dip in the second quarter of 2023 to increases of 21%, 36%, 48% and 44%.
Analysts on consensus see earnings soaring 243% this year to $3.37 a share, then adding 28% in 2025 to $4.32. From 2018 through 2022, AppLovin lost money each year except in 2021, when the company posted a net profit of 9 cents a share. AppLovin has 329 million shares outstanding.
According to IBD Stock Checkup, AppLovin boasts a top-drawer 99 Composite Rating on a scale of 1 to 99. Use the Composite rating as a timesaver for selecting potential big winners in the stock market today, not as a market-timing mechanism.
Small Caps Also Erase Early Losses
The Russell 2000 traded slightly higher, yet has lost its ability to lead the equity indexes. In July, iShares Russell 2000 boasted a rising relative strength line, meaning it was outperforming the S&P 500. Now, the ETF's third-quarter advance has wilted to less than 4%.
Volume soared more than 20% vs. the same time on Tuesday on the Nasdaq but dipped 1% on the New York Stock Exchange, according to the homepage of MarketSurge.
Meanwhile, banking stocks tried to halt Tuesday's sour sell-off, a day after the Federal Reserve recommended fresh increases in mandatory reserves to cover loan losses. The banking news Tuesday coincided with a swift sell-off by consumer loan giant Ally Financial, which warned of deteriorating credit conditions among its credit card customers. Ally shares reversed off session lows to rise 1% in heavy turnover.
The SPDR S&P Regional Banking exchange traded fund undercut its 50-day line but shrank its loss from more than 3% to 1.4%. Still, the ETF has made little real progress since it traversed an early trendline entry near 51 on July 11.
Updated 11:57 a.m. ET
Solar Heats Up
Meanwhile, a few sectors showed small rays of light after the presidential debate last night between former President Donald Trump and Vice President Kamala Harris.
During the televised debate at the U.S. Constitution Center in Philadelphia, Harris stressed the importance of jobs growth stemming from current President Joe Biden's efforts to grow the clean energy economy. First Solar rallied more than 12%, and volume was running more than twice usual levels. However, the utility scale solar power facility supplier is still in the early stages of forming a new base.
While First Solar hoisted itself back above the falling 50-day moving average, at 227 it still trades more than 25% below a 52-week high of 306.77. That said, the stock's relative strength line appears to be cracking a multimonth downtrend.
Other alternative-energy stocks brushed off the broad drop on Wall Street.
Albemarle, a leader in lithium supply, moved 10% higher in heavy turnover. But its 7 Relative Strength Rating is still wretched. Albemarle's 200-day moving average crested in March 2023 and has been falling ever since. Chile's SQM rallied 10% but it too is trying to bottom out.
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These Industries Reject The Slide
Among IBD's 197 industries, solar topped the list, up 6.6% on a price-weighted basis. Metal ores and alternative energy stocks also edged up. See the daily performance list of all 197 industries at IBD Data Tables.
Going back to the broader stock market today, losses remained broad among the popular equity indexes after the Bureau of Labor Statistics reported a 0.2% month-on-month increase in U.S. consumer prices for August. That met expectations. The CPI index rose 2.5% year over year, slightly below the Econoday forecast of 2.6%. However, core prices edged up 0.3%, a little hotter than the 0.2% increase economists expected.
Annualized, that rate would be closer to 3%-4%, above the Federal Reserve's desired long-term inflation rate of 2%.
The Dow Jones Industrial Average sank 1.6% before trimming the loss to around 1.1%. Among sector indexes, the Dow Jones transportation average slumped even more, down more than 2%. Small caps also struggled in the stock market today. The Russell 2000 was off nearly 0.9%; earlier, its loss approached 2%.
Updated on 10:39 a.m. ET
Stock Market Today: Watch These Movers
Goldman Sachs and JPMorgan both fell further below their 50-day moving averages Tuesday, triggering a defensive sell rule for recent buyers. Berkshire Hathaway, which recently hit $3 trillion market value, dropped more than 2%. So did BlackRock, one of the world's largest money managers.
Not all small caps are showing dismal action.
Mission Produce, a leader in the avocado market, surged nearly 22% Tuesday after it announced fiscal third quarter earnings on Monday. The gain came in the heaviest volume in more than a year. On Wednesday morning, shares rose an additional 1.4%. A daily chart shows Mission Produce climbing past the left-side high of 13 in a four-month base.
Notice in the base how the stock posted two lows of 9.54 and 9.64. If the stock undercut the first low of 9.54, the pattern would have met the IBD requirements for a good double bottom.
The company, which holds a $932 million market value, is expected to grow earnings 68% to 32 cents a share in the fiscal year ending in October.
Also, don't ignore highly rated midcap growth stocks that are resisting the drop in the stock market today.
Oscar Health gapped up at the open and blasted 14% higher. Volume in the early going ran as much as 500% above its average level over the past 50 sessions. The next-generation, app-based health insurance firm out of New York City drove past a trendline buy point near 18.50-18.75.
The company has a market value of $4.8 billion and 242 million shares outstanding. Revenue totaled $7.22 billion over the trailing four quarters and grew 44% to 47% vs. year-ago levels each of those four quarters. Oscar also posted earnings of 62 cents a share and 20 cents a share in Q1 and Q2 this year vs. net losses a year earlier.
The stock got attention during the first part of Wednesday's IBD Live episode.
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Beyond The Latest Inflation Data
Government bond traders didn't react much to the latest salvo of inflation data.
The yield on the key U.S. Treasury 10-year bond held near 3.65%, well below its year-to-date high of 4.73%.
Crude oil futures on the NYMEX popped 1.5% to $66.80 a barrel. However, oil is in a bear market.
Based on December-expiration futures, light sweet crude has plunged 49% below its 2022 peak of $130.50.
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