The Dow Jones industrials and S&P 500 ended mostly unchanged Tuesday, but the Nasdaq reversed nicely higher after a soft start. Square stock was a bright spot in the stock market today, while FANG stocks Amazon.com (AMZN), Netflix (NFLX) and Facebook (FB) outperformed.
XA merger also made headlines when Dow Jones stock Cisco Systems (CSCO) announced plans to acquire optical component maker Acacia Communications (ACIA) for around $2.6 billion, or $70 a share. Acacia shares jumped 35% to 64.91. Cisco rallied 0.3% to 56.34. It's been stuck in neutral as it tries to clear a flat base with a 57.62 entry.
Inside the MarketSmith Growth 250, Inphi (IPHI) and AudioCodes (AUDC) were beneficiaries of the Cisco-Acacia merger because both firms are in similar markets. Shares of Inphi soared 4% to a new high, but they are extended from a proper entry. AudioCodes is more interesting as it approaches an entry of 17.54. Shares closed at 16.50, up 5.4%.
The Nasdaq composite added 0.5%, the S&P 500 edged higher by 0.1% and the Dow Jones industrials eased less than 0.1%. Preliminary data showed volume on the NYSE and Nasdaq coming in close to Monday's levels.
The VanEck Vectors Semiconductor ETF (SMH) performed mostly in-line with the Nasdaq, up 0.7%. Advanced Micro Devices (AMD) was a top performer in the chip sector, up 3.5%, helped by positive comments from Nomura.
All eyes will be on Federal Reserve Chairman Jerome Powell Wednesday when he testifies in front of the House Financial Services Committee. The testimony comes after a stronger-than-expected jobs report Friday.
Market watchers are still widely expecting the Federal Reserve to cut its key lending rate by 25 basis points to a range of 2% to 2.25% at the July 31 meeting. At the September meeting, the market currently sees a 66% chance of another quarter-point cut to a range of 1.75% to 2%.
Square Stock Rises On Upgrade
Square (SQ) cleared a 74.65 buy point after Raymond James upgraded shares to market perform from underperform. Shares closed at 78.03, up 6.3%.
Technically, Square never reset its base count after a series of breakouts since its debut in November 2015. But after a 51% pullback last year, a good argument can be made that Tuesday's breakout is an early-stage one.
Square's sharp pullback that started in October came even as the stock churned out strong earnings and sales growth. Growth prospects still look good, with annual earnings expected to jump 62% this year and 49% in 2020.
FANG Stocks On The Move
Netflix added 1% to 379.93, but sellers were around as the stock closed in the bottom half of its intraday range. It briefly topped a 386.09 buy point. Shares were strong early on news that the latest season of "Stranger Things" has been watched by a record 40.7 million households since its July 4 holiday launch. Netflix also said that 18.2 million households have finished the eight-episode season.
Amazon also topped a 1964.50 buy point and closed at 1988.30, up 1.8%. Volume was average. Facebook added 1.8% to 199.21. It closed just above a 198.58 entry.
IBD 50 Winners
In other stock market news, tech services firm Epam Systems (EPAM) followed through after Monday's breakout, rising 1.3% to 187.01. Epam joined Leaderboard Monday when it cleared the 180.65 buy point. It's also a member of the IBD 50 index of leading growth stocks.
Innovator IBD 50 (FFTY) turned in another solid showing Tuesday, up 0.7%. The ETF was helped by strength in software stocks like Veeva Systems (VEEV), Atlassian (TEAM), ServiceNow (NOW) and Upland Software (UPLD).
Follow Ken Shreve on Twitter @IBD_KShreve for more market analysis and insight.
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