Chipmakers got walloped in a broad market slide Wednesday, as all the Magnificent Seven megacap stocks got swept up in the nosedive, tumbling by more than 6% in one instance. But small caps kept losses relatively light, and the Dow Jones Industrial Average managed to chalk up a decent gain on the stock market today.
The tech-heavy Nasdaq composite plunged 2.8% by the time the closing bell rang, roughly twice the 1.4% drop suffered by the S&P 500. Even at the close, the Nasdaq finished not far above its intraday low of 17,972.
The Dow Jones Industrial Average, however, held a small gain and climbed 0.6%, setting another closing record for the third straight session. The blue chip gauge rose as high as 41,211, up 9.3% for the year. Unsurprisingly, four of the five worst performers within the Dow Jones hailed from the tech sector, at least on a points-basis. They included Microsoft, down 6 points to 443.52 and Salesforce, off 4.81 points or 1.9%. Salesforce is now down 2.7% year to date. Caterpillar joined the Dow's top five decliners with a drop of 2.78 points to 357.80.
Notice on a daily chart that Caterpillar got closer to a 364.43 entry point within a properly formed double-bottom base.
To find the 364.43 buy point within this pattern, simply find the middle price peak wedged in between the first low (329.25) and the second, deeper low (315.85) within the base.
The giant in mining and construction equipment is slated to report second-quarter results on July 30. The Composite Rating of 88 has improved this year. Watch to see if its Relative Strength Rating, currently a 77, keeps getting better. According to the chart's right-hand Technical Panel in MarketSurge, CAT showed an RS Rating of 93 three months ago and 79 back in mid-January.
Professional Selling Hits The Market
At the close, CAT saw its Composite Rating stay at 88 for now, according to IBD Stock Checkup. The IBD Composite Rating is a time-saving tool for selecting truly excellent stocks in terms of fundamental strength, stock price prowess, and their ability to attract top-performing mutual fund investors.
In the stock market today, total volume cruised higher on both the Nasdaq and the New York Stock Exchange vs. the same time on Tuesday. The vigorous selling pointed toward a distribution day, or bout of pronounced selling by professional investors. Through Tuesday's close, IBD's Big Picture column noted four distribution days on the S&P 500 and a single distribution on the Nasdaq.
A surprise highflier in the stock market of late, the Russell 2000 gave back a relatively mild 0.9%. The small-caps index has been a huge winner in the past several sessions, ramping up 6% last week. From the July 9 close, the Russell has soared 12% to Wednesday's intraday high of 2,278.
But every single Magnificent Seven stock ended up in the red, ranging from Microsoft's 1.3% slip to Nvidia's 6.2% plunge.
Among the others, Apple dropped 2.5%, Amazon.com lost 2.6%, Google-parent Alphabet sank 1.6%, Tesla skidded 3.1% and Meta Platforms tumbled 5.7%.
Updated 3:40 p.m. ET
Chip Firms Shaken By Regulatory Concerns
A sell-off among chip stocks came amid reports that the Biden administration is considering even stiffer regulations on exports of high-grade American semiconductor technology to China, a strategic rival in the global geopolitical landscape.
Advanced chip design lithography equipment maker ASML gapped down at the open and slid more than 12% in heavy volume. ASML marked a nearly eight-week low. The tech firm also pierced the 50-day moving average, prompting a sell signal.
Magnificent Seven Stocks: Why This Chip Firm Is At A Key Chart Level Now
Big movers among exchange traded funds included iShares Semiconductor, which dropped 5.7% on the stock market today. That marked the ETF's worst one-day decline since a 15.2% drubbing on March 16, 2020. The iShares fund also sank below the 21-day exponential moving average, a sign of short-term weakness that offers a timely exit for short-term traders.
And sell rules weren't limited to chip firms. Novo Nordisk slumped 6.6% on positive news from a rival in the weight-loss drug market. Down nearly 6% for the week so far, Novo also undercut the 10-week moving average, a key defense-oriented sell rule if the medical play does not find support at this key technical level.
Novo posted a 3-for-1 stock split during the week ended March 8.
Meta Stock Today: Why It's Delivering A Fresh Sell Signal
Meanwhile, Meta Platforms on Wednesday exited the IBD Leaderboard portfolio of model growth stocks as the megacap social media firm suffered a fifth-straight decline.
Shares, down nearly 8% for the week, slumped below the 50-day line in heavy turnover to as low as 461.25. The stock also dropped further below a recent cup-with-handle base with a buy point of 514.01.
Volume is running 46% above average on a weekly basis, indicating serious profit-taking by institutions. That action broke expectations, signaling a time to cut losses short.
Updated 1:55 p.m. ET
Banks Up, But Brokers Down
Meanwhile, the financial sector showed mixed action. On one hand, regional banks sustained their recent eye-popping advance.
Take PNC Financial, part of Investor's Business Daily's superregional lenders group. PNC, which reported tepid sales growth of 2% in the second quarter and a 2% dip in earnings, nevertheless rose more than 1.4%. At the session high of 180.86, the large cap bank has now rallied more than 11% past a new buy point at 162.24 in a three-month consolidation.
The stock was actionable last week when PNC still traded within 5% of that 162.24 prime buy point.
However, financial advisory firms continued to tank. LPL Financial has suffered a waterfall-style decline in the past 10 trading days, falling 22% over that period. LPL also undercut its 200-day moving average.
When the stock began falling below its 50-day moving average, giving back most of its gains from a recent cup breakout at 250.65, LPL Financial was signaling investors that big funds were taking profits.
Meanwhile, Raymond James fell in sympathy, down 1.4%. It also took out the long-term 200-day line. The St. Petersburg, Fla.-based broker reports second-quarter results on July 24. LPL reports July 25.
Updated at 11:59 a.m. ET
Stock Market Today: Novo Nordisk Switches Gears
Going back to Novo Nordisk, the pioneer in GLP-based diabetes and obesity treatments has made an amazing run since it initially broke out of a neat double-bottom base back in the spring of 2021. That base was relatively early stage. And since then, Novo has made big gains.
However, the latest breakout of a shallow cup with handle at 137.22 has reversed from a pedestrian 8% gain into a small loss. More important, Novo has lost support at the 10-week moving average, a key technical level. So, for recent new buyers of Novo Nordisk stock, the negative action indicates a timely sell signal.
Novo Nordisk holds a strong 90 Relative Strength Rating over a 12-month time span. But on MarketSurge, Novo has seen its 3-month RS Rating slump to a weak 46 on a scale of 1 to 99. This means Novo Nordisk has outperformed just 46% of all companies over the past three months.
Driving the sell-off: Biotech titan Roche said its Phase 1 clinical trial for a once-a-day GLP-1 receptor drug, CT-996, showed weight loss of 7.3% after four weeks of treatment. Novo's blockbuster Wegovy medicine is an injection. Roche shares rallied more than 7%, surpassing a 37.49 entry in a long double-bottom-style pattern.
Updated at 10:40 a.m. ET
Dow Stock Leads Upside In Stock Market Today
UnitedHealth paced the Dow's upside Wednesday, rising more than 16 points, or 3%. A member of IBD Long-Term Leaders, the health insurer has blasted past an early trendline entry near 525. UnitedHealth also rose past the left-side lip of a choppy base at 554.70.
UnitedHealth has a dull IBD Composite Rating of 79 on a scale of 1 to 99. Generally, stock market leaders hold a Composite score of 90 or higher during the start of great price runs. However, UnitedHealth's relative strength line is bolting higher, signaling strong outperformance vs. the S&P 500 in the near term.
Other members in the Dow Jones Industrial Average faring well: Johnson & Johnson, Travelers, Goldman Sachs and Chevron. All four components rallied two points or more for the price-weighted index.
Looking at IBD's 197 industry groups, oil and gas groups gained ground, as did meat producers and water supply companies. They rose 1% or more. Chip equipment slumped 4.7% while fabless semiconductor fell 3.4%. Computer data storage dived 2.8%, design software 2.1%.
Stock Market Forecast For Next 6 Months: Eye These Risks
Chips Punched
Taiwan Semiconductor, a leader in the stock market today, dove 7% to 172.36. While the chipmaking giant still boasts a year-to-date gain of more than 65%, Wednesday's drop is the stock's biggest single-session point drop since its breakout past a double bottom at 148.43 in May.
Such action represents a defensive sell rule.
Going back to ASML, the Dutch chip equipment titan reported a second-quarter profit beat and booked 5.57 billion euros, or roughly $6.07 billion, in orders during the quarter, nicely above a 5.04 billion euro estimate from Visible Alpha. However, the company's sales outlook was disappointing.
In other markets, the yield on the U.S. Treasury 10-year bond edged up two basis points to 4.18%. Crude oil rose 1.7% to $82.16 a barrel on the Nymex.
Gold inched higher by less than 0.1% to $2,470 an ounce after striking an all-time high of $2,488.
Investor's Corner: Make This Your No. 1 Profit-Taking Sell Rule
Please follow Chung on X/Twitter: @saitochung and @IBD_DChung
