The Dow Jones Industrial Average fell as stocks struggled amid House Speaker Nancy Pelosi visiting Taiwan. China stock AMTD Digital (HKD) exploded and is now up almost 26,000%. Monolithic Power Systems (MPWR) surged on strong results. Caterpillar (CAT) tumbled on earnings.
A couple of noteworthy stocks managed to stage breakouts amid the mixed action. Aris Water Solutions (ARIS) and Hershey (HSY) both tested entries.
Pink volume on both the Nasdaq and the New York Stock Exchange according to preliminary data.
The yield on the benchmark 10-year Treasury note rose 15 basis points to 2.75%. West Texas Intermediate crude oil edged higher to just over $94 per barrel.
Nancy Pelosi’s Taiwan Visit Angers China; Fed Officials Speak
Stocks closed off highs amid a headline-grabbing visit by Speaker Pelosi (D–Calif.) to Taiwan.
She is the highest-ranking US official in a quarter of a century to visit the island.
Chinese media reported the People’s Liberation Army sent an unspecified number of Russian-made Su-35 fighter planes over the Taiwan Strait in a show of force. China has also taken action against the island, suspending imports from Taiwanese companies producing pastries, baked goods and sweets.
The longer-term ratifications of the visit remain to be seen, though Oanda senior market analyst Edward Moya said there could be economic impacts.
US Stock Market Today Overview
Last Updated: 4:30 PM ET 8/2/2022
“China’s response to Pelosi’s trip to Taiwan could have an impact on supply chains and demand, which could keep the inflationary pressures going strong,” he said in a note to clients. “Traders are starting to bet that the Fed won’t take rates much above neutral.”
Chicago Fed President Charles Evans also warned Tuesday that the economy needs rate setting that slows economic growth. San Francisco Fed President Mary Daly also said the Fed’s work on inflation is “nowhere near almost done.”
Nasdaq Fades As Small Caps Gain
The Nasdaq ended the day down 0.2%. Old Dominion Freight Line (ODFL) lagged as it fell more than 3%.
The S&P 500 also struggled, giving up 0.7%. Molson Coors (TAP) was among the laggards here, falling more than 10% on earnings.
The S&P 500 sectors were all negative. Real estate and financials were the worst performers.
Small caps also fell, with the Russell 2000 sliding 0.1%.
The Innovator IBD 50 ETF (FFTY), a bellwether for growth stocks, stood out by rising 1%.
Dow Jones Falls As Caterpillar Earnings Miss
The Dow Jones Industrial Average was hit hardest out of the major indexes. It fell 1.2%.
It was hit following a poor report from Caterpillar. The industrial giant closed the day down 5.9%. CAT stock plunged away from the key 50-day moving average. It fell in extremely high volume.
It was hammered after missing revenue expectations for Q2. Management said it was hurt by Caterpillar’s exit from Russia as well as ongoing supply chain issues.
AMTD Digital Explodes, Beware These Dangers
In a same stock mania-esque move, AMTD Digital exploded.
It ended the session up 126%, though it closed off session highs.
HKD stock is now up more 21.426% since going public in mid-July. The IPO price was 7.80. It has also been up as much as 32,000%.
Such a parabolic move makes the stock extremely risky. Buying now would be more akin to gambling than investing.
The Hong Kong-based investment banking company is the creator of a digital platform named AMTD SpiderNet used by fintech companies.
MPWR Stock Eyes Leaderboard On Earnings Move
Monolithic Power Systems stock was one of the top performers on the stock market today. It ended the session up 9.4%.
The Kirkland, Wash.-based company saw EPS jump 80% to $3.25 a share. Revenue climbed 57% to $461 million. This was well clear of analyst views.
Strong sales of power chips for enterprise data, storage and computing applications helped the firm deliver its outstanding report. For the current quarter, Monolithic forecast revenue of $480 million to $500 million. The midpoint of $490 million is well above Wall Street’s target of $458 million.
MWPR stock is looking to pass a consolidation buy point of 514.80. Its strong performance won the chipmaker a place on the IBD Leaderboard Watchlist.
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Pollution control stock Aris Water Solutions moved above a 22.10 buy point from a cup base, MarketSmith analysis shows.
The relative strength line also notched a new high. Aris works on reducing companies’ water and carbon footprints.
Investors should steer clear for now as the firm reports earnings Thursday, a risk for anyone buying this breakout.
An approach highlighted by Investor’s Business Daily is to use options as a strategy to reduce risk around earnings. It’s a way to capitalize on the upside potential of a stock’s move around earnings, while reducing the downside risk.
Chocolate stock Hershey broke past a 231.69 flat base entry but closed below it. The stock boasts a strong EPS Rating of 92 out of 99.
It is also in the top 6% of stocks in terms of price performance over the past 12 months. In total, funds hold 43% of its stock.
Please follow Michael Larkin on Twitter at @IBD_MLarkin for more analysis of growth stocks.
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