Stock futures reversed lower Monday as volatility rippled across global markets ahead of a heavy week of earnings and economic news. Education stocks led an aggressive sell off among China-based names. Hasbro and Lockheed Martin led off the busy reporting calendar. Microsoft crept to an early lead on the Dow Jones today, on a price target hike ahead of its Tuesday earnings report.
Dow Jones futures carved an early 4% decline, enough to send the index back below the 35,000 level heading into the final trading week of July. S&P 500 futures dipped 2.5%, Nasdaq 100 futures were off 0.1%, after both indexes finished up last week at new highs.
Moderna (MRNA) led the index, possibly boosted by comments from top infectious disease official Anthony Fauci on Sunday, that persons with compromised immune systems may need a vaccine booster as the Delta variant of the Covid virus continues to spread.
On the S&P 500, Hasbro (HAS) jumped almost 3% as early earnings reporting got underway. Lumen Technologies (LUMN) rallied 2.9% after agreeing to sell its Latin American operations to private investors Stonepeak for $2.7 billion.
Dow Jones Today: Boeing Vs. Microsoft
Boeing (BA) dragged at the bottom of the Dow Jones today, down 0.9% ahead of its second-quarter report on Wednesday.
Microsoft (MSFT) gained 0.1%, a lonely advancer on Monday among blue chips. Jefferies kept its buy rating on the stock, and raised its price target to 335, about 16% above Friday’s closing price.
Microsoft reports fiscal fourth-quarter results after Tuesday’s close. Microsoft stock , which is listed on IBD’s Leaderboard and Big Cap 20, ended Friday up almost 10% from a 263.29 buy point following a breakout in June. Microsoft is also an IBD Long-Term Leaders.
Bond Yields, Fed Meeting, New Home Sales
Bond yields are likely to remain in focus ahead of a big week of economic news, headlined by the two-day session of the Federal Open Market Committee ending on Wednesday. Yields dipped to 1.24% early Monday, after settling on Friday just below 1.29%. Yields have fallen sharply for the past 10 weeks, after touching a high above 1.76% in April.
The Commerce Department reports June new home sales data at 10 a.m. ET.
China Stocks Drag On Global Markets
Market action on Monday reflected some big moves out of China over the weekend. Regulators overhauled rules governing education companies in the country, requiring a shift to non-profit business models and preventing public ownership. Shares of U.S.-traded New Oriental Education & Technology (EDU), which had fallen 54% after regulators’ warnings last week, tumbled 23% in premarket trade. Peer Tal Education (TAL), down 70% last week, dropped 22%.
China called the trade war launched by the U.S. in January 2018 a “stalemate,” in negotiations led Monday by U.S. Deputy Secretary of State Wendy Sherman and China’s Vice Foreign Minister Xie Feng in the northeastern port city of Tianjin.
China set out a series of issues on which it sought cooperation with the U.S., in its highest-level negotiations with the Biden Administration.
The education sell off spread across other market segments, sending Hong Kong’s Hang Seng Index down 4.1% and the Shanghai Composite to a 2.3% decline. In Japan, Toyo’s Nikkei 225 jumped 1%, playing catch up to strong global action late last week while Tokyo was closed Thursday and Friday on holiday and for the opening of the Olympic games.
Europe’s markets were in the red near midday. Frankfurt’s DAX traded down 0.4%. The CAC-40 in Paris and London’s FTSE 100 were each off around 0.25%.
Bitcoin came to life, after hovering between $29,000 and $36,000 for most of July. The cryptocurrency surged as high as $39,544, its highest level since June, then settled to a 12% gain, just above $38,500 in early action. The cryptocurrency touched a record high near $65,000 in April.
Stocks To Watch: Pool, Icici, Discover, CarMax
Pool found is in buy range from its 449.54 buy point. The stock retook the entry Friday, after pulling back to test support at its 50-day moving average.
India-based Icici Bank narrowly topped an 18.27 cup-with-handle buy point on Friday.
Discover Financial ended Friday about 2% below a 125.48 flat-base buy point. The stock has posted a couple of strong-volume dives below its 50-day line recently. But its relative strength rating remains a strong 93, and its relative strength line is hovering near new highs.
CarMax is trading just below a cup-with-handle base with a 137.63 buy point.
Dow Jones Today Gears For Big Earnings Week
The Dow geared up for its biggest reporting week of the earnings season, with seven blue chip reports on tap. Apple (AAPL), Microsoft, Visa (V) and 3M (MMM) lead off with reports on Tuesday. Boeing and McDonald’s (MCD) deliver reports on Wednesday. Merck (MRK) bats clean up on Thursday.
Apple is extended after topping a 137.17 buy point in early July. Visa is at the top of a buy range that runs to 249.48.
Meanwhile, Boeing is lagging struggling to establish support at its 200-day moving average. 3M is managing to hold steady in a 10-week flat base, riding its converged 50-day and 21-day moving averages.
McDonald’s retook a 238.28 buy point in a strong move last week. It remains in a buy zone, which extends to 250.19.
Find Alan R. Elliott on Twitter @IBD_Aelliott
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