XAutoplay: On | OffFutures for the Dow industrials, S&P 500 index and other major averages fell significantly on fresh negative headlines on President Trump, but off their overnight lows. That followed a mixed session Tuesday in which the Nasdaq rallied, hitting fresh record highs, while the Dow Jones industrial average and S&P 500 closed slightly lower.
While the secular bull market is now 8 years old, quality stocks continue to break out of bullish patterns. Four that are in buy range right now: Apple chip supplier Qorvo (QRVO), Citigroup (C), Chinese search giant Baidu (BIDU) and Starbucks (SBUX).
S&P 500 index futures fell 0.5% vs. fair value. Futures for the Nasdaq 100 sank 0.4%. Dow Jones industrial average futures retreated 0.5% below fair value, or almost 100 points.
Late Tuesday, the New York Times reported that Trump had asked then-FBI Director James Comey to drop an investigation into former National Security Advisor Michael Flynn. Trump, who abruptly fired Comey last week, is also under pressure over a Washington Post article claiming that he gave highly classified information to Russian officials the day after ousting the FBI chief. The political furor makes it harder for Trump and the GOP Congress to focus on pro-growth agenda items, notably tax cuts.
Keep in mind that the major market averages have largely shrugged off various setbacks and negative media coverage for the Trump administration. But with key GOP lawmakers saying they plan to call Comey to testify and subpoena the memo that includes his account of Trump’s alleged Flynn request, the political headache for the White House is intensifying.
In Asian trading, Japan’s Nikkei fell 0.5% as the safe-haven yen continued to climb. Australia’s S&P/ASX 200 lost 1.1%. The Shanghai composite dipped 0.3%.
In European trading intraday, the U.K.’s FTSE was flat while Germany’s Dax slid 0.2% and France’s Cac-40 0.4%.
IBD’S TAKE: Hours earlier, the odds of a big Trump tax cut were cut after Senate Majority Leader Mitch McConnell set a high hurdle for tax reform.
Qorvo popped 4.6% to 74.84 in Tuesday stock market trading, clearing a shallow consolidation just above a prior consolidation. That followed the Apple iPhone chipmaker’s 5.5% gain on Monday. This base-on-base action is bullish, especially when the overall market is moving sideways.
Qorvo pulled back below its 50-day moving average in late April, then continued to slide modestly following earnings reports from Apple and then Qorvo itself. But the stock has risen for the last six sessions, capped by Monday’s 5.5% surge and Tuesday’s breakout.
Apple shares closed fractionally lower for a second straight session after hitting a new all-time high intraday Monday.
Citigroup cleared an aggressive buy point of 60.89 on Friday. The banking giant advanced 1.7% to 62.49 on Tuesday, its highest close since July 2015, still in range of that early entry. But it’s also near a conventional 62.63 flat-base buy point, 10 cents above the 22-month intraday peak set March 8.
Citigroup is among a handful of financials in or approaching buy points, while many others are in consolidation around or below their 50-day lines. Lower expectations for tax cuts and Treasury yields off their postelection peaks have cooled enthusiasm for bank stocks. But financial regulatory relief is still expected. That would boost bank profit and lending, analysts say, fueling dividend hikes and new buybacks.
Baidu rallied 2.4% to 190.64, clearing a 118.70 buy point from a cup-with-handle pattern (starting in late February), as part of a larger consolidation (stretching back to late April 2016).
Baidu is part of the China’s “BAT” internet trio that also includes e-commerce giant Alibaba (BABA) and messaging giant Tencent (TCEHY). But while Baidu’s growth and stock has stalled, Alibaba and Tencent (which have virtually identical market caps), have soared. Tencent reports earnings on Wednesday morning with Alibaba on tap Thursday.
Starbucks cleared a buy point of 59.64 on April 20, and moved up to 61.94 a week later. But weaker-than-expected Starbucks revenue sent shares tumbling on April 28, falling as low as 58.99, but closing above the entry point. Starbucks moved higher over the next couple of weeks but has pulled back again in light volume, slipping 0.8% to 59.98.
Starbucks’ action shows the importance of buying a stock as close to the entry point as possible. Anyone buying at the recent peak of 61.94 would have had a hard time holding on when the stock fell nearly 5% below that purchase price the following morning.