The stock market today showed resilience following big gains on Tuesday and Wednesday as the major indexes gave little back in early-afternoon trading Wednesday. Meanwhile, utility stocks rebounded fiercely, a good sign that U.S. interest rates aren't likely to rise swiftly amid the dull economic recovery.
However, a few leading utility names, including Pinnacle West Capital (PNW), Duke Energy (DUK) and Consolidated Edison (ED), are showing some deep fissures in their latest rallies. Further sell-offs could raise the odds that some of these stocks threaten to do a round-trip of their year-to-date gains.
The Nasdaq composite and S&P 500 were roughly break-even, while the Dow Jones industrial average, a price-weighted index, eased 0.1%. Volume was running uniformly lower on both exchanges vs. the same time on Wednesday.
The Dow utility average, which got smacked with a 0.4% decline on Wednesday as the Nasdaq and the 500 posted solid gains, rallied 0.9%. Yet the defensive index is still down more than 2% in the second quarter so far.
While numerous top-rated electric and gas utilities tracked by IBD's Income Investor feature have shown mild pullbacks, others have undercut their 50-day moving averages and are failing to rebound quickly. Stocks that show healthy action tend to ride on the north side of this support line, not the south side.
Pinnacle West Capital rallied more than 1% to 72.74, but volume was running more than 30% below its 50-day average. The stock, nevertheless, has done a good job of recouping much of its more than 5% losses during a May 17-18 sell-off. That decline sent the Phoenix-based power producer sharply below its 50-day line near 73; the 50-day line has been rising sharply since late January.
On Feb. 1, Pinnacle West raced past a 67.12 flat-base buy point in heavy trading. That breakout ignited what has become a 13% gain in just two months -- a remarkable rally for a utility stock. Pinnacle boasts a three-year Earnings Stability Factor of 3 on a scale of zero (steady) to 99 (wild) from IBD.
Duke Energy rallied 1% to 77.79, still below its 50-day moving average. The Charlotte, N.C., firm inked its second deal in 2016 to convert methane gas captured from swine waste into electricity. Consolidated Edison of New York gained 1% to 72.62 in very slow turnover. Trade has been choppy ever since the stock first undercut its 50-day line in heavy trading on April 20.
Notice how on April 21, Edison tumbled another 3% as volume ballooned 90% higher than its 50-day average of 2 million shares.
Netflix's revenue climbed 21%, 26% and 23% vs. year-ago levels from 2013 to 2015. IBD Stock Checkup shows that Netflix's Accumulation/Distribution Rating of B+ now indicates net accumulation of shares by mutual funds, banks, insurers and the like. Netflix was highlighted by IBD earlier this week after showing more signs it could finish a new base pattern.
