BREAKING: Market Falls Sharply With Fed Meeting On Tap
S&P 500 dividend standout Devon Energy (DVN) and top cybersecurity play Palo Alto Networks (PANW) lead this weekend’s watch list of 5 stocks holding near buy points, despite a dicey time for the market. The Federal Reserve is set to unleash its third-straight 75-basis-point rate hike on Wednesday. Expectations for hawkish Fed projections for the interest-rate outlook sent the S&P 500 reeling 4.8%, leaving it back on the threshold of a 20% bear-market loss.
Other stocks on the watch list that are withstanding this year’s market upheaval better than most include Neurocrine Biosciences (NBIX), Staar Surgical (STAA) and the Invesco Solar ETF (TAN).
Devon is part of the flagship IBD 50 list of top stocks. Neurocrine and the Invesco Solar ETF are among a handful of elite stocks still remaining in the IBD Leaderboard portfolio, which has been winnowed as downside risk rises for the S&P 500.
The blue chip index slumped 4.8% over the past week, leaving the S&P 500 down 19.25% from its record closing high on Jan. 3. The S&P 500 is still 5.6% above its 52-week closing low on June 16, but Wall Street strategists increasingly expect a test of that low.
In healthy market environments, investors might seize on aggressive early entry points noted below, or scoop up shares of NBIX and PANW on a move above their 50-day moving averages. But this market isn’t healthy, so exercise caution. Be sure to read IBD’s daily afternoon The Big Picture column to stay on top of the latest market trend and what it means for your trading decisions.
At a time of rising interest rates, high-dividend stocks tend to be in favor, and Devon Energy offers among the juiciest dividends. In its latest presentation, Devon boasts a dividend yield of more than 8%, or about six times the S&P 500 average.
That includes both its regular fixed dividend and its variable dividend payout of up to 50% of excess free cash flow. This year’s total payout is expected to be around $5 per share, up from $1.97 in 2021. If oil and natural gas prices fall amid possible recession, the variable dividend will retreat too.
DVN stock got on a roll after Devon’s Aug. 9 deal to buy Validus Energy for $1.8 billion. Truist analyst Neal Dingmann boosted his price target for DVN stock to 115 from 110 after the synergistic deal, keeping a buy rating. He said the deal adds 42,000 adjacent acres in the Eagle Ford shale region of Texas, in a “much oilier” stretch than the existing footprint.
DVN stock lost 3.8% to 66.82 in Friday stock market action, falling below its 21-day moving average. Devon stock is now 11% below a 75.37 cup-with-handle buy point, according to a MarketSmith analysis. The stock also offers a potential 73.39 early entry point above Wednesday’s high.
PANW stock soared after its Q4 earnings report on Aug. 22, which included news of a 3-for-1 stock split. After the report, Jefferies analyst Joseph Gallo assumed coverage of Palo Alto Networks with a Buy rating and 220 price target. He cited three quarters of accelerating billings growth, saying Palo Alto’s results “appear immune to macro.”
The company has spent more than $3 billion on 10 acquisitions over the past three years to build a broad cloud-based cybersecurity platform.
On Friday, PANW stock fell 3.1% to 174.09, rallying from intraday lows to close at its 50-day moving average. PANW is now about 10% below a 193.01 cup-with-handle buy point. A move past Monday’s high offers a 190.08 early entry point.
NBIX stock is ranked No. 6 by IBD in the top-tier Medical-Biomedical/Biotech industry group, based on technical and fundamental factors. Neurocrine has been propelled by strong sales of Ingrezza to treat an involuntary movement disorder called tardive dyskinesia. It also has a promising pipeline that analysts say haven’t been priced into the stock.
Neurocrine was featured as IBD Stock Of The Day on Aug. 31.
NBIX stock slipped 0.8% to 106.09 on Friday, leaving it about 3% below a 109.36 buy point from a flat base, according to MarketSmith. On Wednesday, NBIX tumbled briefly to its 50-day line and the top of a prior base, but rebounded to close higher. The relative strength line, the blue line in the accompanying chart that tracks its progress vs. the S&P 500, is at a new high. That underscores its strong outperformance in a weak market.
Staar Surgical has largely defied the market downdraft since FDA approval of its EVO Visian Implantable Collamer Lens for the correction of myopia and myopia with astigmatism. Strong growth in China, despite lockdowns, also has buoyed results.
Following Q2 earnings on Aug. 10, Canaccord analyst William Plovanic raised his STAA price target to 97 from 89, with a buy rating. He said he expects Staar’s EVO lens to become the standard for refractory surgery in the U.S. over time.
STAA stock slid 6.4% on Friday to 85.36, undercutting its 50-day line. A move back above the 50-day and breaking of its downtrend from 112.27 could provide an early entry. Staar Surgical could have a proper base in another week.
The Invesco Solar exchange-traded fund contains a bundle hot and lukewarm solar stocks, including leaders such as First Solar (FSLR) and Enphase Energy (ENPH). First Solar has soared out of sight since the Inflation Reduction Act moved to passage, with the biggest batch of government alternative energy subsidies in history. But the Invesco Solar ETF remains close to buy range, thanks to its broader portfolio, including Chinese solar stocks such as JinkoSolar (JKS).
On Friday, the Invesco Solar ETF dipped less than one-tenth of a point to 84.98. The solar-stock ETF is about 7% below a 91.22 buy point from a flat base. A move above its short-term high on Sept. 8 offers an early entry point at 88.91.
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Biotechs are making remarkable strides in clinical testing, and biotech stocks are outperforming the rest of the market. (© Chris Gash)
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