Some investors likely thought the worst was over midday Thursday. About halfway through the trading session, the S&P 500 was down just 0.7%, and had rallied almost 3% from morning lows.
It was not to be. The S&P reversed and closed at the lows. The index posted its worst one-day loss since August 2011. The Dow Jones Industrial Average set a record for the largest one-day point decline. Overnight futures suggest the selling will continue on Friday.
But after a long and difficult week, Friday’s big stock charts aim to focus on the positive. These three stocks managed to rally in trading Thursday — an impressive feat. A Finviz.com screen shows that less than 6% of stocks with a market capitalization over $2 billion managed to close higher in the session.
What’s interesting about these names is that the good news might not be confined to a single session. In fact, the charts suggest some optimism going forward, though broad markets might need to find a bottom first.
Wynn Resorts (WYNN)
The declines in casino operator Wynn Resorts (NASDAQ:WYNN) seem to make some sense. Much of the stock’s value is derived from Wynn’s operations in Macau. Casinos there were closed for two weeks. Lingering economic impacts on the mainland could pressure revenue and profits for some time to come.
But the story might not be quite that simple. And the first of Friday’s big stock charts suggests that some investors may be realizing that fact:
- The primary piece of good news on Thursday isn’t the fact that WYNN stock eked out a small rise amid the broad market sell-off. It’s that shares snapped back after testing support around $104. Shares did fade toward the end of the session, and risks remain, but after a brutal few sessions WYNN at least showed some strength.
- Again, investors might think WYNN is a logical candidate for selling amid coronavirus fears, given its Chinese exposure. But that country’s stocks actually didn’t perform that badly on Thursday, at least in context. The iShares MSCI China ETF (NASDAQ:MCHI) only fell 1.2%. Pinduoduo (NASDAQ:PDD) and iQiyi (NASDAQ:IQ), seemingly two of the higher-risk names in that market, actually gained.
- That trading would seem to explain Wynn’s resilience. But there’s another factor to consider. WYNN has badly underperformed most Chinese names in its steep plunge from January highs. That’s surprising — and somewhat illogical. Wynn has operations stateside, in both Las Vegas and Boston, which combined generate roughly one-quarter of Property Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization).
- Thursday’s trading suggests that a good number of investors see the sell-off as overdone. That in turn raises hopes that support again will hold, allowing WYNN to rally when broader markets finally do the same.
Of over 1,700 stocks with a market capitalization over $2 billion, only two outperformed Etsy (NASDAQ:ETSY) on Thursday. Both Vir Biotechnology (NASDAQ:VIR), which is working on a coronavirus treatment, and Teladoc Health (NASDAQ:TDOC), which posted an earnings beat and whose telemedicine platform could benefit from the outbreak, are seeing positive external catalysts at the moment.
Etsy’s gains were driven by a fourth quarter earnings beat along with above-consensus guidance for 2020. But the second of our big stock charts does suggest some potential caution:
- ETSY’s intraday trading almost seems like the opposite of that of WYNN. While Wynn bounced quickly off support, Etsy stock did the same off resistance around $60. Still, there’s good news. The uptrend seems confirmed. Etsy cleared the 200-day moving average and tested it intraday. A “golden cross” even looks likely in coming sessions as the 50DMA inflects.
- Fundamentally, there’s still a case even after the gains. ETSY stock isn’t cheap, at 6x revenue and a little over 25x EBITDA, based on 2020 guidance. But the company is driving impressive revenue growth, and margins should expand along with that growth.
- I did argue in April that ETSY stock was too expensive at $68. But performance, even with last year’s sell-off, has been solid since. The company’s dominance in the craft space seems unquestioned. ETSY probably needs some external help to break through resistance. At the least, however, the company seems back on track.
CNH Industrial (CNHI)
Heavy equipment manufacturer CNH Industrial (NYSE:CNHI) seems like a logical candidate for a sell-off. Like Caterpillar (NYSE:CAT), CNH is sensitive to macroeconomic factors. Meanwhile, 11% of revenue comes from Italy, where new coronavirus cases have sparked concern.
Yet investors are taking the long view. The third of Friday’s stock charts shows the stock has found support:
- CNHI has clawed higher in recent sessions, and seems to have established a bottom. To be sure, risks remain. A “death cross” looms. And shares gave back some of their early gains on Thursday. Investors would be forgiven for seeing recent gains as a ‘dead cat bounce.’
- Still, the gains are positive for CNHI and, in a way, for the market. After all, cyclical stocks should see buying and multiple expansion at the bottom. The fact that shares have found support suggests that investors aren’t completely panicking. The same is true when looking at more modest declines in Chinese stocks.
- Of course, the market’s ability to take the long view with some names suggests an interesting possibility. It might be coronavirus fears that are crushing U.S. stocks — or at least not those fears alone. More than a few investors have wondered if the market was just looking for a reason to correct, and the small pockets of strength on Thursday provide some evidence that might be the case.
Vince Martin has covered the financial industry for close to a decade for InvestorPlace.com and other outlets. He has no positions in any securities mentioned.