The stock market indexes closed near session lows after racking up hearty losses Wednesday. The market was unpleasantly surprised after Fitch Ratings downgraded the U.S. long-term debt rating late Tuesday.
Fitch Ratings downgraded the U.S. long-term debt rating to AA+ from AAA late Tuesday, citing growing government debt, fiscal deterioration and eroding governance. The move marks the first downgrade of U.S. debt by Fitch since 2011.
The benchmark 10-year Treasury yield rose 3 basis points to 4.08%. That's down from earlier today, but it held above 4% and at its highest level since Nov. 9, 2022.
The Nasdaq composite sold off 2.2% in stock market action. The Dow Jones Industrial Average gave up 1% and the S&P 500 fell 1.4%. Meanwhile, the small-cap Russell 2000 skidded 1.4%.
The Nasdaq dipped below its 21-day exponential moving average while the S&P 500 is testing its 21-day line.
The Nasdaq 100-tracking Invesco QQQ Trust ETF slid 2.2%. And the Innovator IBD 50 ETF fared worse than the major indexes, tumbling 2.9%.
NYSE and Nasdaq volume rose vs. the same time on Tuesday, in preliminary numbers.
The July ADP Employment Report showed private payrolls grew by a surprising 324,000 vs. the 185,000 consensus, but lagged June's revised 455,000.
Stock Market Movers: Networking Stock Pops Over 8%
Extreme Networks stock catapulted 8.5% after the network services and hardware company beat fiscal fourth-quarter profit and sales expectations and gave strong current-quarter EPS and sales guidance. Quarterly earnings grew an impressive 120% on 31% sales growth.
IBD 50 stock ELF Beauty spiked 14.3% in heavy volume, after the skin care and cosmetics maker reported a blowout fiscal first quarter late Tuesday. The company raised its fiscal 2024 adjusted EPS guidance. Shares have rallied more than 140% so far this year.
Quarterly earnings grew 182% over the prior year's quarter on 76% sales growth. Analysts see 10% earnings growth in fiscal 2024 and a healthy 23% increase the next fiscal year.
Vita Coco pulled back from large gains, to close down 5% after tapping the 29.70 buy point of a cup base. The earlier jump came after the coconut water company reported higher Q2 earnings and sales than expected.
Vita earned 31 cents a share vs. 2 cents in the prior year's quarter, on 21% sales growth. Analysts forecast full-year 2023 EPS to grow to 68 cents from a lackluster 14 cents in 2022.
The stock's relative strength line hit a 52-week high as shown by the blue dot on the weekly MarketSmith chart. Shares have gained over 110% this year so far.
Vertiv soared 29.3% in heavy trading after the data-center infrastructure company beat second-quarter profit and sales expectations and raised its full-year EPS and sales guidance. Analysts project impressive 139% earnings growth this year and 23% next year.
Shares of managed health care provider Humana jumped 5.6% in heavy volume after the company reported higher-than-expected Q2 profit and sales. Humana forecasts its individual Medicare Advantage membership will increase by about 825,000 members in 2023, up from its 775,000 estimate in April. The pop lifted shares above the 50-day moving average.
IBD 50 stock Dynatrace gapped down 13.3% in heavy volume, despite a report of higher-than-expected fiscal Q1 earnings and sales. The software maker also maintained its subscription revenue guidance.
The sell-off triggered a round-trip sell signal from the 48 buy point of a cup base. The drop sent the computer networking stock below its 50-day moving average, which is another sell signal.
Stock Sell-Offs: Solar Stock Gets Burned
SolarEdge Technologies tanked 18.4% in heavy trading, after the solar power inverter and storage company reported a positive earnings report but gave a weak outlook.
A combination of higher interest rates and new requirements in California led to a decrease in demand compared to the second half of last year, said SolarEdge Chief Executive Zvi Lando on the earnings call. Lando explained that lower demand is causing increased inventory.
IBD 50 stock Norwegian Cruise Line fell 4% after Tuesday's brutal 12.1% drop that followed the company's Q2 report. The cruise ship operator beat views, but its third-quarter outlook lagged FactSet's estimate.
The sell-off is close to a round trip from the stock's 18.12 buy point of a cup base, after shares gave back most of the gains above the entry. Shares are now below the 50-day line.
Generac fell 24.4% after the power-generator maker reported a miss on its Q2 earnings and a beat on sales. It expects lower residential product sales in the second half of the year.
The stock gapped below its 50-day line in heavy volume, resulting in a sell signal. The stock is the biggest loser in the S&P 500 Wednesday stock market action.
Shares of Exact Sciences slid 11.7% in heavy volume, even after the cancer diagnostics company reported a smaller-than-expected second-quarter loss and higher revenue and raised its full-year revenue guidance. Shares fell below the 21-day and 50-day moving averages, which is a sell signal.
Follow Kimberley Koenig for more stock market news on Twitter @IBD_KKoenig.
