Dow Soars 600 Points As Oil, Bond Yields Plunge: Krystal Biotech, Morgan Stanley, Marriott In Focus

0:00Look, when people start to gamify investing, right? So when you think about people being rewarded with balloons and fireworks for trading, which we know is the more you trade, the worse offer you're going to be in the long run. I'm Joe Davis.

0:12Ken Shreve:And I'm Christine Kashkari. And this is Season 2 of Better Vantage by Vanguard, an eight-part video podcast series hosted by custom content from WSJ and Vanguard.

0:31Ken Shreve:Good afternoon, everyone, and welcome to Stock Market Today for Wednesday, May 20th. It's Alyssa Coram here. And the major indexes powering higher in the stock market today on falling oil prices and plunging bond yields. We also have NVIDIA earnings after the close to look forward to. And joining me now to discuss today's action is my colleague, Ken Shreve. Ken, great to see you as always. Thank you very much, Ali. Yeah, another 645-point gain for the Dow Jones Industrials today. It's amazing what a big drop in that 10-year Treasury yield. And plunging oil prices will do for stocks. But we do have three stocks to watch, two big large-cap stocks.

1:13We'll take a look at Morgan Stanley. And hotel operators did very well today. So we'll take a look at Marriott. And then in the biotech group, we're seeing a lot of biotechs working well here. Take a look at Crystal Biotech, K-R-Y-S.

1:30Ken Shreve:All right, we'll take a look at those stocks. But first, a closer look at the major indexes. The Nasdaq composite on the day up 1.6%. We had three days down in this power trend pullback, now powering higher today. Meanwhile, the S &P 500 up 1.1 % on the day. The Dow up more than 600 points, up 1.3 % in today's session. A great move there. And of course, with the Treasury yield situation, small caps, a bit of relief here, Ken, with the Russell up a strong 2.4 % on the day. So maybe we can start there. Yeah, well, the small caps are going to be the ones that, you know, that like that big drop in the 10-year Treasury yield the most.

2:20and this was the biggest percentage gainer. It was technically the weakest index headed into today. This is the one that had fallen the furthest below the 21-day line, but a nice percentage gain. Still below the 10-day moving average here, but a nice 2 % gain for the Russell 2000, and IWM closed just below that 280 level, but a great percentage gain for the Russell 2000. It was a leading index today and just a great, great day of outperformance. But you said the other indexes performed very, very, very solidly as well.

3:00Ken Shreve:Absolutely. So here's a look at the Nasdaq composite. We were talking on IBD Live this morning how our senior market strategist, Mike Webster, was saying that in this power trend, his base case for a pullback was two and a half to three and a half days. And it looks like he was more or less right on the money here, Ken. We'll have to see if this bounce holds, of course. We have NVIDIA earnings. We have this wall of worry that we continue to climb with the Middle East conflict. But what are your thoughts on the strength that we are seeing after this pullback? Well, Webby did nail it, I think, no doubt about it.

3:42The past two days, I thought, on the NASDAQ with the pullback were quite constructive. I mean, it was, you know, the pullback Tuesday, we had a close off lows and the pullback on Monday as well. We had a decent close off lows as well. The rally today, it was nice not only to see the index get above that nice round number of, what was that, 20 ,000?

4:12Ken Shreve:26 ,000. 20 ,000, 26 ,000, yep. And then also get above that 10-day moving average as well. Breadth was very, very solid today. It was better than 3 to 1 positive. And, yeah, I mean, it was – I wouldn't call it narrow breadth. I mean, it was, you know, semiconductor stocks rallied again in spades. It was just a – you know, SMH did the heavy lifting again another day of outperformance and a similar-looking chart to the NASDAQ. But, yeah, I mean, NASDAQ looked great today. It showed a lot of power, and semiconductor stocks led the charge again. And so ended the three-session losing streak in style.

4:58And nice to see it poke above that 10-day moving average here. So this uptrend is still very much intact.

5:07Ken Shreve:And we also talked about the low from a handful of trading sessions ago on the 12th of May as being a key level on the downside to keep an eye on. And we did test that intraday on Tuesday, managed to close above it. So that little test and undercut to shake investors out, perhaps, of some positions before this bounce here. And we've also talked about how in a power trend, when you have this uptrending 21-day above an uptrending 50-day and the action above that, that pullbacks are normal. They're healthy. What's been abnormal, honestly, Ken, is the rate of ascent, the power that we've had leading up to this pullback.

5:59Ken Shreve:But pullbacks are healthy to let some of the air out of a lot of the frothy vertical areas that we've seen. and also helps investors who maybe felt a little underexposed and like they were chasing leading stocks, the opportunity to get in versus something that's sticking straight up in the air. So we'll definitely keep an eye on setups as they develop, but wanted to point that out as well. Yeah. And what I said also this morning on IBD Live, what has also been highly unusual is the lack of higher volume declines that we've seen on the NASDAQ since the follow-through day that the S &P 500 showed all the way back on April 8th.

6:44I mean, we're not going to go back and count them, but if you just look since April 8th, when the NASDAQ gapped above its 50-day moving average, this was around April 8th when the S &P 500 followed through. But you can go back and look at the number of times since April 8th that the NASDAQ has actually just declined in higher volume. It has just been very few and far between, and it really has been such an incredible run for the NASDAQ. I mean, it's common to see an index fall in higher volume. I mean, that's just a plain old vanilla distribution day, and it's common to see distribution during a strong uptrend.

7:23But it really has been non-existent. So not only has the action in leading stocks been very, very strong, but the fact that the market has just not seen, you know, really hardly anything in the way of distribution has been quite impressive. So NASDAQ could even come down to this green line, that 21-day exponential moving average, and it would be, you know, a very modest pullback. And, you know, the uptrend would still be, you know, very much intact. tax. So it may or may not happen. Like you said, yesterday we came down and tested a prior low and rallied. And today was just a nice rally back above the 10-day moving average.

8:07So if oil starts to rise again because of some negative Iran headline or if bond yields start to rise, we may ultimately test the 21-day line and should be a good, solid support level. So if it happens, So we'll see. But, you know, really, really nice, strong uptrend is still showing very well and acting quite strong.

8:31Ken Shreve:Right. And in terms of what we'd like to see from the moving average, just like for a leading stock, we see a lot of powerful setups happen where a stock goes sideways near highs and the moving average line is catching up to the price action versus the stock coming down to it. So if this is a strong market, maybe we'll get that sort of set up at the index level where maybe, you know, we're not coming down too much, but the 21 day can catch up to the action and we get a bounce off of that level. We know in past power trends that can be a powerful buying opportunity. So something to look out for down the road there.

9:10Ken Shreve:Okay, let's get quick thoughts, Ken, on all the other major indexes. Here's the S &P. equally strong breadth on the S &P 500 is very similar on the NASDAQ as it was on the New York Stock Exchange today it was right around three to one as well and kind of a almost an identical technical setup here S &P 500 breaks a three session losing streak also moves above the round number of 7 ,400 today and reclaims the 10-day moving average. So very similar look here, but nice to see it back near highs and above that 10-day line. Similar situation to the S &P 500. We've got three distribution days on the S &P 500.

9:59That's a little higher than the NASDAQ, but only one of those days was a 1 % decline. The other two were very mild, so very limited distribution on the S &P 500 as well. All right.

10:11Ken Shreve:And here's a look at the Dow, Ken. Yeah, we got a close just above that 50 ,000 level. It doesn't look like it's an all-time closing high for the Dow. It is close, but nice to see it just close above 50 ,000. It is just right on the cusp of a breakout here. So it was a lagging index along with the S &P, along with the Russell 2000, but we'll see if the Dow is in position for a bona fide breakout try here. We'll see if it can get up and out of there, as our friend David Ryan likes to say, could try to break out tomorrow. We'll see. Okay, and a couple of other things we want to take a look at. We mentioned the 10-year yield, so we might as well go there just to take a look at that, Ken.

11:03Ken Shreve:And really impressive to see the rate of a cent here, along with spiking oil prices and in Tuesday's session, taking out the high from a little more than a year ago. So seeing it come in today, along with falling oil prices, a bit of relief for equities. It was definitely due for a pullback, Ali. There was just obviously some relentless selling in the bond market over the past six days or so that just caused this huge surge in the 10-year Treasury yield. So we'll see what happens here. But the 10-year yield was due for a pullback. And after six really, really strong up days, we did have the Fed minutes that were released today.

11:56And there was plenty of acknowledgement among committee members that if they continue to see these inflation readings that we've been getting recently, that their hand may be forced. and we may ultimately get a rate increase before the end of the year at last check. It's still a possibility that we could get a quarter point rate hike before the end of the year. I don't know that that's going to be a big game changer, but we'll see how that plays out. President Trump, of course, this morning is telling people once again that he's very close with some sort of deal with Iran. I'm not sure what exactly that means, but we will see.

12:39But what he is saying is certainly moving the oil markets and the bond market. But at least today it was interesting to see the bond yield act the way it did, especially with what we heard from the Fed in the minutes today. They're talking about a rate hike, but yields fell. I think it was more of a technical move today after such six strong gains in a row. So due for a little pullback, but we'll see where we go from here.

13:08Ken Shreve:Okay. And a few ETFs to check in on some themes. Here's the biotech ETF, XBI, a powerful move back above the 50-day today, up almost 4%. Yeah, it looked like biotechs, at least XBI, we've had this in the leaderboard model portfolio for quite some time. We actually trimmed the position back. It was four down days in a row. It gave up its 50-day moving average this week. And then just like that, boom, it just moved back above its 50-day moving average. It showed some technical strength today. Still seeing some outperformance among many biotechs. We're going to take a look at one in just a little bit.

13:52But yeah, encouraged to see this action in XBI today. Strong technical move today, and it's kind of moving back towards the top of this base that it just broke out of. So, you know, nice technical move for XBI today. Arguably gave a buy signal. So we'll see if that can follow through tomorrow. You can see it's just about to move into that blue shaded area again, meaning it's going to move back into a prior buy zone. So nice, strong technical move for XBI today.

14:22Ken Shreve:All right. And let's check out the solar stocks with the TAN ETF up over 3 % today. Talking about so much outperformance among the semiconductor stocks in this market, but seeing some solar outperformance as well. TAN is the very liquid solar ETF. This one is also actionable here. Nice little breakout and support at the 21-day moving average. snapped a two-session losing streak today. Again, I thought it gave a buy signal today, support at the 21-day line, and a nice move today. So again, good broad leadership in this market outside of chip stocks. You got the solar ETF acting well here, and another one as well that we're going to look at.

15:12Ken Shreve:Exactly. You have been paying very close attention to the strength in the cybersecurity industry. So here's the CIBR ETF up 1.6 % today. And taking a look at the weekly chart, you can see the strong advance. We're working on six weeks up in a row here, Ken, off the bottom. Yeah, six weeks up in a row for CIBR. And we've seen a lot of, we've talked about a lot of the leaders in the group that have been moving. So, you know, with CIBR and frankly, with a lot of the leading stocks in the group, wouldn't mind seeing this one kind of trail off a little bit, maybe take a little bit of a breather. So whether you're looking at individual leaders in the group like, you know, a Palo Alto or some of the other names that we've been looking at, if you want just you want single stock risk, you could take a look at CIBR.

16:05But again, I just kind of wait, wait, wait for a little pullback here. Wait for it to just pause and digest gains. It seems like cybersecurity is a place where you want to be in tech, especially after that really strong earnings report from, I think it was. Fortinet. Yeah, Fortinet, FTNT recently. Yeah, really nice earnings a couple of weeks ago. That one really hasn't looked back after it reported earnings. Very, very stretched and quite extended up here. So a lot of these stocks just need to kind of pause and just kind of digest gains here. So whether it's CIBR or some of the big leaders in this group, just keep them on the watch list and wait for our next little market pullback here and you get a better place to enter them.

16:52But showing a lot of strength, which means that you probably want to own them, but don't want to chase them either. This episode is sponsored by Morgan Stanley's Thoughts on the Market. Today's financial markets move fast. Morgan Stanley moves faster with their daily podcast, Thoughts on the Market.

17:08Ken Shreve:Thoughts on the Market covers daily trends across the global investment landscape with actionable insights from Morgan Stanley's leading economists and strategists. And with most episodes under five minutes long, staying informed has never been easier. Listen and subscribe to Thoughts on the Market wherever you get your podcasts. mm-hmm okay well with the strength in the biotech space let's check out one name there that is crystal biotech the taker here k-r-y-s shares up three percent on the day a second chance after a breakout that pulled back and is now bouncing again back into the buy zone yeah this was uh an earnings breakout that initially lifted this stock off the 250 level.

18:00And this was our first quarter earnings report. You can see the top line earnings, top line revenue was up 32%. There you go. And the earnings were up 52%. They have just one marketed drug, but you can see They've been profitable for a couple of years now, and it is a drug that treats a rare genetic skin disorder that causes some skin blistering, but they do have a very robust pipeline as well that is quite compelling. So a lot of optimism about the pipeline that has some drug that deals in dermatology. They've got a drug that is in oncology, respiratory, ophthalmology. So very, very kind of spread out, different phases and different trials.

19:02So a very compelling pipeline here. So after the earnings, it broke out and now it's coming down and testing the 21-day moving average and finding support and starting to move back into a buy zone here. So So, you know, we like profitable biotechs. We don't mind unprofitable biotechs as well, but as long as they've got some revenue growth with Crystal Biotech, you've got both. You've got a biotech that's making money and also that's got good top line growth and pretty good sponsorship as well. So, you know, broke out, came down and came close to retesting a prior buy area and is now kind of moving again back into a buy zone.

19:47And, you know, pretty decent composite rating here, strong pipeline and good sponsorship as well. So one of the stronger performers in the group that is filled with actually a lot of interesting names right now.

20:01Ken Shreve:It sure is. Next on our list, let's pivot over to the financial sector. Here's a look at Morgan Stanley. 4.3 % on the day, double its average true range, Ken. It typically has an average movement of 2 % or so on the day. So a particularly strong day for this stock with a 4 % gain as it continues to power higher after some recent earnings strength of its own. The movement in financials today was really a sight to behold. We had Goldman Sachs made a very big move in the Dow Jones today. So just movement among all sorts of large cap financial stocks. So I think Morgan Stanley is still actionable here.

20:58It kind of gapped out of this cup base and moved over a conventional entry around 192, but there is an alternate entry of 194 and change that I think is also accurate and also legitimate. Exactly right there. So the 194 and change is also a legitimate pivot, I think, for Morgan Stanley or an alternate entry. So still well within the 5 % buy zone from that alternate entry. So lots of large cap financials moving on that big, big drop in that 10-year Treasury yield today. And I think Morgan Stanley is still actionable here. It has one of the better looking relative strength lines, you know, compared to, you know, some of the other large cap techs.

21:53I saw large cap financials moving in the group. You can see on the weekly chart, the relative strength line is actually up near highs. So I think Morgan Stanley looks pretty good. I mentioned Goldman Sachs in the Dow. The relative strength line for Goldman Sachs is a little bit weaker than Morgan Stanley. But you can see Goldman Sachs also had a nice breakout in the Dow. That one's probably actionable too. But the relative strength line, at least on the daily chart, is a little bit further off highs than Morgan Stanley. So Morgan Stanley, not a Dow component, but again, just broad-based strength among the financials today.

22:34Ken Shreve:I thought Morgan Stanley looked the best, but really nice strength in the financials today. All right. Now, a trip on over to the Leisure Group with Hospital. Hospital, oh my gosh. with a Marriott hotel, hotel, hospital. All right, let's go to Marriott. Maybe sort of, kind of in the same vein. Yeah. Kind of, yeah. There we go. For your health, you know? Yeah. Hotel stay can be good for your health. Here's Marriott, up 3 % today, Ken. Yeah, another stock that broke out but quickly came down again to that 21-day exponential moving average and is getting some lift and actually got a lot of lift today.

23:24You'll notice that the relative strength line after the pullback came far off highs and is now starting to rise again. Really nice move for Marriott again today. Oil prices plunging. Oil went below$100 a barrel today, down more than 5%. I think it was recently trading around$98.25, something like that. But a lot of hotel operators like Marriott, Hilton all had good days today. But I think Marriott gave a buy signal as well. So even though we're seeing good outperformance among the chip stocks and other areas of tech, seeing other areas of the market that are working quite well here. So Marriott is very close to reclaiming that prior 370 entry.

24:13Nice move off the 21-day moving average. and you can just now see it's starting to climb into that blue shaded area. So it's starting to reclaim a prior entry. I think this one is worth watching as well as it moves back into a buy zone here. So you also have Hilton in the same group, HLT, made a very similar move. So both of these stocks had good days. They look a little bit differently. Marriott is a little bit closer to reclaiming that buy point, a little closer to highs. That's why I went with Marriott. But I think it looks really good here. Great.

24:57Ken Shreve:Okay. Well, Ken, I think NVIDIA earnings are out. I'm not sure what the stock is doing. But let's check it out in real time together. So far, shares down just fractionally here. It does look like they beat revenue estimates. I'm seeing the earnings per share number not immediately clear if it's adjusted or unadjusted, comparable versus the estimate. Looks like perhaps investors are still trying to digest the numbers here. Not seeing a whole lot of stock action, but one that we are keeping a close eye on, especially, I think, the conference call, right? So that's going to start at 5 p.m. Eastern with CEO Jensen Wong.

25:41Ken Shreve:And that's going to be where the real interesting data comes, I think, from this earnings report. Yeah, more information to come and there will be a lot of it. And, you know, this is a holding on the leaderboard model portfolio and a stock that I own personally. So expecting to, you know, to see more strong growth. I mean, the earnings and revenue has been accelerating sequentially for several quarters in a row here. So the growth story is well documented for NVIDIA. So obviously the company is held to a high standard. But, you know, we've been talking about the positive sentiment around the semiconductor sector.