Growth stocks got socked in late-afternoon trading Tuesday, particularly in areas such as luxury retail, consumer spending, homebuilding and medical systems, even as long-dated U.S. government bond yields appeared to cool after a strong rise in recent sessions. During the final hour, investors looked reluctant to search for bargains.
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Despite a fresh round of talks between President Joe Biden and Democrat leaders and GOP House Chief Kevin McCarthy to find a way to avoid a potential default on U.S. bonds on June 1, McCarthy told reporters that both sides were “nowhere near a deal,” CNN reported. McCarthy also said Republicans would allow the debt ceiling to rise but hinted they would not budge on other measures, such as reducing federal spending.
Meanwhile, volume was running a touch higher on the Nasdaq and more than 10% vs. the prior session on the NYSE, according to MarketSmith. The price-and-volume action indicated heavier selling than usual among the institutional crowd.
As the latest Big Picture column noted on Monday, the Nasdaq went into Tuesday’s session with zero distribution days on the book. But the S&P 500 still holds six sessions of intense professional selling over the past 25 sessions. One such distribution day, the 0.6% drop in higher volume on April 20, is set to expire on time on Thursday.
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Las Vegas Sands (LVS) triggered two sell signals as the stock fell as much as 6% in rising volume. Weakness in luxury product makers, such as Louis Vuitton handbag firm LVMH (LVMUY) and sportscar maker Ferrari (RACE), proved notable among growth stocks in the stock market today as well.
Las Vegas Sands fell sharply below the 50-day moving average, a key reason to consider taking profits from its nice move. Second, LVS dropped more than 7% below a buy point near 60, a level where the stock repeatedly hit resistance for months. That kind of decline means new buyers need to cut losses short.
The casino hotel operator also etched a tiny cup with handle with a 60.40 buy point. The April breakout produced a gain of nearly 9% before the stock’s strength faded.
A lack of progress on negotiations among U.S. political leaders to find a way to avoid a default of Treasury bonds on June 1 likely contributed to the overall decline. Plus, some economic news pointed to continued slowing in the world’s No. 1 economy. The PMI Flash Composite Index’s manufacturing component fell in May to 48.5, below the neutral 50 reading and under the Econoday consensus forecast. But the services index component jumped above expectations to 55.1. This marked continued expansion.
The yield on the benchmark U.S. Treasury 10-year bond edged 2 basis points lower to 3.69%. Crude oil futures, meanwhile, rallied 1.4% to $73.09 a barrel.
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With roughly an hour to go in the session, The Nasdaq extended its loss to as much as 1.2%. At around 12,566, the composite index still holds a large cushion of gains above its rising 50-day moving average, currently near 12,075. The Nasdaq 100 lost 1.1% but still shows a healthy gain of nearly 4% for the quarter.
Meanwhile, the S&P 500 sank 1.1%. The Dow Jones Industrial Average eased 0.7% and remains nearly flat for the year. Gains of 2 points or more by oil and gas giant Chevron (CVX) and Home Depot (HD) got offset by losses of at least 2 points by at least seven of the Dow Jones’ 30 components.
The Russell 2000 slid from an early gain of almost 1.2% to a 0.4% loss.
One of those big Dow losers on the day: American Express (AXP), a long-term winner among quality growth stocks and a longtime Warren Buffett holding.
The credit card and financial services giant fell 1.9% to 152.53. Volume was light throughout the day. But as seen on a daily chart, the stock has been hitting resistance near its 50- and 200-day lines.
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AmEx’s action changed in character on Jan. 27. The stock rocketed 10% after reporting a small decline in Q4 earnings and a 24% rise in revenue. The stock made more progress on its long base but has since given back those recent gains.
A 44 Relative Strength Rating means AXP has outperformed just 44% of all companies in the IBD database over the past 12 months. The 3-month RS Rating is weaker at 27, according to MarketSmith.
Meanwhile, regional banks bucked the market’s decline. Beleaguered lender PacWest Bancorp (PACW) jumped another 7% in heavy trading after vaulting more than 19% in above-average trading Monday. Shares fell shy of retaking its steeply falling 50-day moving average. It’s still unclear whether the Beverly Hills, Calif.-based bank has bottomed out yet.
Western Alliance Bancorp (WAL), which recently announced a strong increase in deposits in the current quarter, eased 0.9% but has climbed above its own 50-day line.
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Some airlines fared well.
Ryanair (RYAAY) of the UK jumped 5.2% and is trying to exit the 5% buy zone after a few breakout attempts past a 99.44 entry in a three-month flat base. The stock has made the Watchlist for IBD Live. The 95 Composite Rating is strong, and Ryanair also sports a nifty 91 Relative Strength Rating.
Over the past three weeks, RYAAY has posted at least five sessions of gains in heavy volume. This hints at institutional accumulation.
Watch to see if Ryanair’s Accumulation/Distribution Rating improves from a current so-so grade of C+.
Meanwhile, United Airlines (UAL) is crafting a new cuplike base. Shares rose 1%. UAL is trading above key moving averages, including the 21-day exponential moving average. The 21-day line began to curl higher in late April.
Elsewhere, jet engine components supplier Heico (HEI) tripped below its 50-day line amid a 7% drop. Volume was running more than triple normal levels following the company’s April-quarter results.
The Relative Strength Rating, on a 12-month basis, is solid at 86. But Heico’s relative strength line dipped to its lowest level since January.
Please follow Chung on Twitter: @saitochung and @IBD_DChung
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