The Nasdaq composite reversed slightly lower Wednesday, unable to rebound after a harsh day of institutional selling Tuesday that saw the index plunge 1.9% in higher volume. The Dow Jones rose 0.3% and notched an all-time closing high. Top gainers in the Dow Jones today with gains of more than 2% included Dow Inc. (DOW), Chevron (CVX), Merck (MRK) and Goldman Sachs (GS).
The stock market uptrend is under some pressure after higher-volume declines for the S&P 500 and Nasdaq composite Tuesday. The S&P 500 shows four distribution days since April 14. The Nasdaq shows four since April 12. When distribution days start to cluster, it can cause problems for a stock market rally
The Nasdaq composite ended with a loss of 0.4%. The Nasdaq 100 eased 0.3%.
After a nice close off lows Tuesday and test of its 50-day moving average, the Innovator IBD 50 ETF (FFTY) reversed lower for a loss of 0.5%.
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Nvidia faded off highs but still rallied nearly 1%. Shares were strong early after Baird initiated coverage with an outperform rating and 800 price target.
The VanEck Vectors Semiconductor ETF (SMH) rallied 0.4%, but it’s still below the 50-day moving average, with the 250 level a potential resistance level to watch.
But Peloton (PTON) crashed 14.5% after the company voluntarily recalled all of its treadmills, due to reports of injuries and one death. Peloton, which reports earnings Thursday after the close, is now 50% off its high. Persistent signs of institutional selling has lowered the stock’s Accumulation/Distribution Rating to a weak D+. An up/down volume ratio of 0.8% indicates slack demand for shares in recent weeks.
The S&P 500 inched up 0.1% and the Russell 2000 small-cap index fell 0.3%. Preliminary data showed volume on the NYSE and Nasdaq coming in lower than Tuesday.
In the early stages of a stock market uptrend, higher-volume gains and lower-volume declines are typical as institutional investors put money to work. But higher-volume declines followed up by lower-volume gains is a sign the stock market could be ready to take a breather.
Strong Debut For Honest Company
In IPO news, Honest Company (HNST) had a solid debut, up 43% to 22.93 after pricing last night at 16. The company offers baby, skin and household products, with diapers and wipes making up more than half of total sales in 2020. Last year, Honest did $300.5 million in sales, up 28% from 2019.
Oil and gas stocks outperformed again. In the exploration and production group, Matador Resources (MTDR) is still in the early stages of breaking out of a first-stage consolidation. The breakout comes after a nice test of support at the 10-week moving average.
The mining group yielded more breakouts. Teck Resources (TECK) cleared a cup-with-handle base with a 22.92 buy point in strong volume; Rio Tinto (RIO) also cleared a cup with handle. It’s still in buy range from the 88.39 entry. BHP Billiton (BHP) also showed technical strength with a breakout over last week’s high. Shares closed at 77.20, up 3.5%.
Another stock in the group, Cameco (CCJ), is closing in on an all-time high as it forms a shallow cup base. Shares of the uranium miner jumped 4% to 18.93, helped by reports the Biden administration is considering subsidies for nuclear plants to help meet climate targets.
Follow Ken Shreve on Twitter @IBD_KShreve for more stock market analysis and insight.
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