[Biotech&Pharma] Dow Jones Today Lags, Stocks Tumble; Microchip Stirs Chip Rebound, Tesla Expands China Strategy

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Stocks traded lower Tuesday morning, despite some positive economic data, following reports detailing threats of retaliation from Iran. Some chip stocks helped bolster the Nasdaq after Microchip Technology (MCHP) amended its quarterly guidance. However, Merck (MRK) posted the heaviest early loss on the Dow Jones today. Tesla (TSLA) was an early leader, after expanding its strategy in China.


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The Nasdaq trimmed its loss to 0.1% in the stock market today, bolstered by rising chipmakers.  The Dow Jones industrials was down 0.3%. The S&P 500 also hovered around a 0.3% decline.

After two tough sessions in a row, a handful of chip stocks wrestled for top slots on both the Nasdaq 100 and S&P 500.

Microchip Technology vaulted almost 5%, after raising its revenue outlook for the second time in a month. Western Digital (WDC) popped 5% and Micron Technology (MU) jumped 6% after upgrades from Cowen & Co.

Tesla stock swung 1.8% higher. The company announced it would build its Model Y sport utility vehicle at its Shanghai gigafactory, along with the Model 3 sedans that it began delivering last week.

Among biotech stocks, Germany's Biontech (BNTX) jetted 6% higher. The stock ended Tuesday up 197% from its Oct. 10 initial offering price. Kentucky-based Apellis Pharmaceuticals (APLS) spiked 27% after announcing its drug pegcetacoplan, a treatment for a rare blood disorder, met targets in a phase 3 clinical trial.

International oil play Apache (APA) rocketed 20% higher, easily leading the S&P 500, after announcing an oil discovery, in partnership with France's Total (TOT), off the coast of Suriname. Total shares dipped 0.5%.

Stocks opening Tuesday's session in buy range include IBD SwingTrader stocks Vertex Pharmaceuticals (VRTX) and RH (RH). IBD Leaderboard stock Copart (CPRT), IBD 50 name Salesforce.com (CRM) and Dynatrace (DT), Monday's IBD Stock Of The Day, are also in buy ranges.

Gear up for Tuesday's market action by reading IBD's Investing Action Plan.

U.S.-Iran Conflict: 13 Scenarios

News reports quoted a White House official who said the decision to kill Iranian General Qassem Soleimani hinged, in part, on Soleimani plans targeting American diplomats and service members stationed in the region.  Iran's state news agency reported that leaders there were reviewing 13 scenarios for a potential response. The report quoted the head of Iran's national security council, Ali Shamkhani, saying “Even if the weakest of these scenarios gains a consensus, the implementation of it can be a historic nightmare for the Americans.”

The U.K.'s National Security Council will meet late today to discuss how best to protect British citizens and their interests. An emergency meeting is also planned among foreign ministers of the U.K., France and Germany.

Dow Jones Today: Goldman Jumps; Intel, Chevron, Merck Drag

Goldman Sachs advanced 1% to snatch the early lead on the Dow Jones today. A Wall Street Journal report said the investment bank planned a shift in financial reporting aimed at increasing visibility into its various businesses. Goldman topped the Dow Monday with a 1% advance, rising after a price target hike from Deutsche Bank. The company is due to report fourth-quarter results Jan. 15.

At the bottom of the list, Merck traded at a 2.5% loss after its keytruda lung cancer treatment did not meet intended targets in a clinical trial.

Chevron (CVX) slumped 1.2%. Bank of America downgraded the stock to underperform, from neutral.

Intel dived 1.2% after AMD introduced new PC and graphics chips on Monday, and an analyst report said AMD was set to take additional market share from Intel.

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Microchip, Texas Instruments Near Buy Points

Chandler, Ariz.-based Microchip received price target hikes from Keybanc and Suntrust Robinson Humphrey after raising its fiscal third-quarter revenue guidance above analyst targets. The company said it believed the downtrend in orders had bottomed out in December.

Microchip Technology stock is retesting a 101.67 buy point from a flat base. It has a 92 Composite Rating from IBD.

Texas Instruments (TXN) gained more than 2% Tuesday. The stock ended Monday's session less than 2% below a 129.27 buy point in a cup-with-handle base. It has an 80 Composite Rating from IBD.

Cowen upgraded Western Digital to outperform from market perform, nearly doubling the stock's price target to 88, from 45. Micron also received an upgrade to outperform. Western Digital is near a 65.41 buy point in a cup base. But the company's fundamentals are lagging after five straight quarters of sales and earnings declines.

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Tokyo Leads Global Markets Higher

Global markets rose almost across the board on Tuesday, and bonds and gold futures traded effectively flat as safe haven buying paused. Tokyo's Nikkei 225 in Japan swept 1.6% higher as it rebounded from Monday's sharp loss.

In China, the Shanghai Composite leapt 0.7% and the Hong Kong Hang Seng Index added 0.3%. Gains were uneven in Europe, where Frankfurt's DAX tightened its early gain to 0.6%, the CAC-40 in Paris tacked on less than 0.1% and London's FTSE 100 flattened in afternoon trade.

Dow Jones Today: Support Confirmed

The Dow Jones today is looking resilient, after dropping on Monday to undercut its short-term, 10-day moving average, then recovering to close back above that level. The Dow fell almost 0.8% in opening trade, then powered higher through the remainder of the session to close with a 0.2% gain. McDonald's (MCD) and Goldman Sachs each rose more than 1%. The index's worst performance was a mild, 0.6% slip from Walt Disney (DIS) on Monday.

Disney stock continues forming a bullish base-on-base pattern. The IBD Leaderboard stock broke out of a double-bottom base with a 140.18 buy point early in November. It is technically still in the buy range from that buy point. But with consolidation underway, the stocks relative strength line is lagging well below its late November high.

Oil Prices Touch 8-Month High

Oil prices traded lower Tuesday, with West Texas Intermediate down 0.8% to $62.77 a barrel. Europe's Brent crude benchmark faded 0.6%, to $68.35. WTI is up more than 23% from an early October low, and on Monday touched its highest level since April.

On Monday, WTI rose 0.3% and Brent gained 0.5%, after pulling back from early highs. Oil stocks posted three of the day's 10 largest gains among S&P 500 stocks. EOG Resources (EOG), Pioneer Natural Resources (PXD) and Occidental Petroleum (OXY) all rose more than 3%.

Oil prices could see some effect from weekly data set to be released by the American Petroleum Institute late today.

Economic News: Services Expand, Trade Deficit Hits 3-Year Low

The services side of the economy picked up its pace of expansion in December, sending the Institute of Supply Management's Non-Manufacturing Index to 55 for the month. That is a nice uptick from November's 53.9 reading, and above expectations for 54.5. Numbers above 50 indicate economic expansion.

The U.S. trade deficit tightened to $43.1 billion in November, the Commerce Department reported, the gauge's lowest level in three years. That was nearly 9% lower than September's $47.2 billion gap, undercutting forecasts for a drop to $43.9 billion.

November exports increased $1.4 billion, to $208.6 billion. Imports were down $2.5 billion, to $251.7 billion.

Factory orders declined 0.7% in November, down from September's 0.3% increase, and in line with economist projections.

Find Alan R. Elliott on Twitter @IBD_Aelliott


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