Stock Indexes Pare Losses; Why Netflix Led IBD 50

The major stock indexes ended a four-day win streak, but losses were minor, while Netflix (NFLX) showed new signs of rising from its deep slump.




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The Dow Jones industrial average and the S&P 500 fell a fraction after both pared larger losses. The Nasdaq composite lost 0.2%. But the Russell 2000 climbed 0.2%, as small caps were able to outperform.

Volume was lower from Thursday’s totals, according to early figures. Advancing stocks led decliners by about a 9-7 ratio across the board.

While the market uptrend remains on track, indexes may be tiring after a feverish post-Christmas run. The Nasdaq is rubbing up against its 50-day moving average, which may be a resistance level for the market. The composite has raced more than 12% from its Christmas Eve low.

The S&P 500 is less than 2% below the 50-day average but is testing the 2600 level, which has shaped up as a potential barrier.

The Innovator IBD 50 ETF (FFTY) fell 0.3%, slightly more than the general market. The ETF also is challenging the 50-day line, creating a test of wills between the index and its price-trend indicator.

Netflix led the IBD 50 Friday with a 4% increase after the company won some analyst praise. Raymond James upgraded Netflix to a strong buy from outperform and raised the target price to 450 from 435. Reports said Credit Suisse boosted its estimate for Q4 subscriber additions, while UBS also upgraded Netflix and Morgan Stanley reiterated a buy rating.

Netflix shares are recovering from a deep correction and climbed back above the 200-day moving average Friday. It is still well below any potential buy point. The company reports earnings on Thursday.

Wingstop (WING), another IBD 50 stock, tried to break out past a 72.10 buy point but closed below the entry. Volume was tepid.

Indeed, breakouts continue to be in short supply. Vertex Pharmaceuticals (VRTX) topped an alternative entry at 187.86. The biotech was added to IBD Leaderboard today.

The retail sector was strongest, with the SPDR S&P Retail ETF (XRT) up 0.5%. Technology fared better, too, with semiconductor, networking and a few other tech groups in the top 25.

Wall Street next week braces for the first week of fourth-quarter earnings reports. Citigroup (C), JPMorgan (JPM), Wells Fargo (WFC), Charles Schwab (SCHW) and American Express (AXP) are among a raft of financial companies set to announce results.

Delta Air Lines (DAL), software leader Atlassian (TEAM) and Taiwan Semiconductor (TSM) are on deck also. Delta has lagged the stock market’s rebound, trading 7.5% above the Jan. 3 low.

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