Stocks plowed into early gains Wednesday, as the Dow surged more than 200 points at the starting bell following a May employment report, and as U.S. coronavirus data showed a peak in active cases. Chip stocks rallied behind MicroChip Technology's updated guidance. IBD 50 stock The Trade Desk scored a breakout. Crowdstrike Holdings spiked poast a possible buy point, while American Express and chemicals maker Dow lifted the Dow Jones today.
XThe Dow industrials bolted 1% higher at the open, then narrowed to a 0.8% advance on the stock market today. The S&P 500 rolled up a 0.7% gain. The Nasdaq climbed 0.5%, advancing to less than 2% below its record high from Feb. 19. The S&P 500 remains more than 8% below its record, also from Feb. 19. The Dow Jones today is about 12% below its Feb. 12 high-water mark.
MicroChip Technology (MCHP) vaulted more than 9%, to the top of the Nasdaq 100 and the S&P 500, after revising its outlook. Chip stocks rode MicroChip's slipstream, with NXP Semiconductors (NXPI) up 6.1% and Micron Technology (MU) posting a 2.3% gain. The VanEck Vectors Semiconductor ETF (SMH) gained 2.1% in early trade.
Gear up for Wednesday's market action by reading IBD's Investing Action Plan.
Chips Rise As MicroChip Boosts Guidance
MicroChip adjusted both earnings and revenue outlooks for the first quarter to well above analyst expectations. Covid-19-related supply chain disruptions, primarily in Malaysia and the Philippines, had eased, the company said, and the business performed better than expected in the first two months of the quarter.
MicroChip shares are up 99% from a March 19 low, climbing the right side of a deep cup base.
May Payrolls Hit Less Than Expected
U.S. non-farm employers cut 2.76 million workers from their payrolls in May, according to pay processor ADP's National Employment Report. The breathtaking number was nevertheless a steep drop from the prior month's 20.24 million idled employees, and far below economist expectations for 8.66 million jobs lost in May. Large businesses accounted for 58% of the losses. More than 70% of the total came from service sector employers.
For detailed analysis of the current stock market and its status, study the Big Picture.
Markets today begin their ramp-up to the May payrolls report due from the Labor Department on Friday. Expected to show a 7.73 million-worker decline, on top of the 20.5 million jobs lost in April, the report could push the unemployment rate to above 20%.
The definitions and data used by ADP don't map directly onto those used by the Labor Department in its reporting. One example is that furloughed workers are counted as employed by ADP, not by the BLS. This means that results of the monthly federal payrolls data often vary widely from ADP results, although the general direction of the data trends may be the same.
IBD 50: GSX Refutes Allegations, Trade Desk Breaks Out
China-based GSX Techedu (GSX) popped 6.7% to easily lead the IBD 50 list in early trade. The provider of K-12 tutoring services has been under fire from short sellers, the most recent of which were allegations of inflated student enrollment numbers, reportedly from Grizzly Research.
Techedu refuted the claims on Wednesday, saying that changes in data security and availability on its website skewed Grizzly's findings. Techedu's statement said the company strictly complies with all relevant legal and regulatory requirements, as well as the terms and conditions of social media platforms. It said it could potentially take legal actions against the photoshopped images from Grizzly.
Techedu shares are climbing toward a possible 42.35 buy point in a double-bottom base.
IBD 50 peer The Trade Desk (TTD) jumped 4.8%, breaking out past a 327.45 buy point in a cup-with-handle base. The buy range runs to 343.82.
Dow Jones Today: 3 Stocks Still In Buy Ranges
American Express (AXP) jumped 2.7%, Dow (DOW) rallied 3%, leading the Dow Jones today following the ADP employment report, leading the index.
Boeing (BA) swung 1.7% higher after rising in five of the past six sessions. Boeing stock is gaining some cushion above support at its 50-day moving average.
Dow Jones stocks Apple (AAPL), Microsoft (MSFT) and UnitedHealth Group (UNH) all remain in buy ranges and were trading higher early Wednesday. Apple's buy range runs to 335.78, above a 319.79 buy point. Microsoft remains in its buy range through 189.10. UnitedHealth's buy point is at 304.10, putting the top of its 5% chase zone at 319.31. All three stocks are IBD Leaderboard listings.
Zoom Takes New High, CrowdStrike Tops Buy Point
Zoom Video Communications (ZM) trimmed its early gain to 0.5% after reporting a powerful first-quarter earnings beat late Tuesday. Management also boosted its full-year revenue guidance well above its own prior forecasts.
Zoom shares are sitting on a five-day rally, up 15.9% so far this week, with a gain of almost 94% from a February breakout.
Security software developer CrowdStrike (CRWD) soared more than 8% after reporting its first profitable quarter, along with better-than-forecast revenue and guidance. Five analysts cranked up their buy points on the stock to an average of 109.60 — about 19% above Tuesday's closing price.
CrowdStrike shares are working on their fifth-straight monthly gain. Wednesday's action sent shares above a possible buy point at 101.98, although the stock quickly pulled back below that buy entry.
Protests Continue, More Quietly
Protests continued across the U.S. in more than a dozen major cities and countless smaller locations. The National Guard had been activated in 23 states. Local police and protesters appeared to find some balance, with less violence and destruction reported Tuesday night, even as protests ran past curfews in cities including Washington, D.C. Still, police and the National Guard in multiple cities fired tear gas and pepper packs in order to clear the streets after curfew.
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Coronavirus Update: Active Cases Peak
Almost 71,000 new cases of coronavirus infection were confirmed in the 24 hours to Wednesday morning, lifting the running tally for worldwide Covid-19 cases 1.3% to just under 6.47 million. Another 4,928 persons died, raising the death toll 1.3% to 382,811. Brazil confirmed almost 29,000 new cases. Russia, India and Peru also continued to deal with rapid spreads of the virus.
In the U.S., 21,512 new cases were confirmed, putting the cumulative total of cases above 1.88 million. Persons dying from the virus over the past 24 hours numbered 1,132. That raised the running total 1.1% to 108,059. The U.S. has reported 29.1% of the global total number of cases and 28.2% of the deaths. Countries of the European Economic Area have reported 21.8% of the global case total, and 43.5% of the deaths.
A couple of milestones have occurred in U.S. Covid-19 data. First, the number of daily tests continued to roll out at above the 400,000 level. That raised the 10-day running average to 401,185 — the first rise above 400,000 on record, and up from an average of just below 227,000 at the start of May.
Second, the number of active cases — confirmed infected patients either in hospitals or in some sort of quarantine care — decreased in two of the past three days, following a May 30 peak. Active cases on Tuesday numbered 1.12 million. That was down from nearly 1.18 million on May 30. The numbers, from Worldometer, are not official and are subject to data reporting issues. And they could well rebound if forecasts for a second wave in infections are correct.
But these numbers show the first action on the graph that is looking like peaking activity. The active cases number is critical, because it shows the capacity demand placed on hospitals and other healthcare resources.
Dow Jones Today: Converting The 200-Day
The Dow Jones today staked out another early lead in the stock market's confirmed uptrend, on track for a fourth straight up day. The Nasdaq has been the hands-down leader of the rally begun on April 2, with the S&P 500 showing flashes of brilliance, such as in Friday's session. But the Dow has repeatedly come out of the gate in strong fashion.
The stock market has shown little reaction to the protests racking cities across the U.S., and has been generally positive on the view toward states beginning to restart their economies following their coronavirus lockdowns. The Nasdaq is within one good day's rally from its record high.
Stock Market ETF Strategy And How To Invest In The Current Uptrend
While the Dow industrials remain around 12% below their record high from February, the index on Wednesday moved to less than 1% from its 200-day moving average. The Dow has not traded above its 200-day line since Feb. 26, and converting that moving average into a level of support would send a bullish signal across the broader market.
Another point to consider is the recent action among small caps. The Russell 2000 pulled back after meeting resistance near 1,450 on Thursday. Breaking that resistance and advancing to test its 200-day moving average would also mark an important test. The Russell was outpacing the overall market in early trade Wednesday, and appeared set to take another run at the 1,450 mark.
Find Alan R. Elliott on Twitter @IBD_Aelliott
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