Dow Jones Fades Ahead Of Powell Testimony; Ferrari Overtakes Tesla As Leader; MELI Tests Entry

The Dow Jones Industrial Average saw gains fade ahead of key testimony from Fed Chair Jerome Powell. Ferrari (RACE) zoomed past Tesla (TSLA) to take the checkered flag as a top pick. Leaderboard stock MercadoLibre (MELI) tested a new buy point while Apple (AAPL) was a top blue chip.

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There were breakouts galore amid early bullish action, though these were coming under pressure. Hubbell (HUBB), Deckers Outdoor (DECK) and Trane Technologies (TT) all tested entries.

The market now gets ready for crunch Congressional testimony from Powell Tuesday and Wednesday. The key 10-year Treasury yield reversed higher, rising about 2 basis points 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.

Despite this, traders seem to be betting on two or three more quarter-point rate rises going forward. A meaningful rally or a painful drawdown could lie ahead.

Nasdaq Fades As Small Caps Plunge

The Nasdaq saw its early gains fade and was practically flat in afternoon trading. Dexcom (DXCM), a leader in the continuous glucose monitoring device market for diabetics, was a noteworthy mover, plunging around 8%.

The S&P 500 was up 0.1%. Lumen Technologies (LUMN) did well here, rising about 6%. But the stock is trading around 3 a share.

The S&P 500 sectors were mixed. Technology and communication services fared best while materials lagged.

Small caps were getting pummeled, with the Russell 2000 down 1.5%. Growth stocks saw gains for the day evaporate, with the Innovator IBD 50 ETF (FFTY) down fractionally.

Dow Jones Today: Apple Stock Pops Amid Bullish Call

The Dow Jones Industrial Average saw early gains fade but remained slightly positive with a 0.1% gain.

Apple stock was one of the best performers, popping around 2%. The stock is now pulling away from the 200-day moving average. 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 (MRK) was the best performer on the Dow Jones today. It jumped almost 4% on the release of a data on an experimental cholesterol pill.

Dow Inc. (DOW) and Boeing (BA) were the worst laggards on the index.

Leaderboard Stock Passes Entry

MercadoLibre was also having a productive day, popping around 3%. This saw it clear a 1,250.58 buy point.

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. It is 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 (AMZN).

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 pick, ahead of Tesla stock, according to Morgan Stanley (MS).

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 was up slightly. It is trading above a 270.45 cup-with-handle entry, MarketSmith analysis shows.

Tesla stock fell more than 1%, losing ground on the 200-day line. TSLA is up about 80% so far in 2023.

Outside Dow Jones: 3 Stocks Test Buy Points

Hubbell briefly passed a cup-with-handle entry of 256.53. 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 is holding above a flat-base buy point of 433.41 on its weekly chart. 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 is back below this level.

The RS line is also at fresh heights. 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.

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