Dow Jones Dives As Bears Maul Stocks On These Fears; Health Stocks Hit As HCA Collapses; 3 Stocks Craft Bases

The Dow Jones Industrial Average took a dive as fears over the economy caused stocks to swoon. Health was among the worst areas as HCA Healthcare (HCA) collapsed after earnings. Verizon Communications (VZ) saw a breakout attempt fail after it posted earnings.

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A trio of stocks continued to form bullish bases despite the painful action. FactSet Research (FDS), Shockwave Medical (SWAV) and Eastgroup Properties (EGP) are names worth watching.

Volume was mixed, rising on the New York Stock Exchange but falling the Nasdaq, according to early data. Lower volume is a good thing on a down day, but little help when indexes are off more than 2%.

Meanwhile, the yield on the benchmark 10-year Treasury note was virtually flat at 2.9%. Oil dipped, with West Texas Intermediate crude down 2.6% to just over $101 per barrel.

Fears Hit The Stock Market

The reverberations continued to be felt Friday after Federal Reserve Chairman Jerome Powell indicated the central bank is ready to take a more assertive stance on fiscal tightening amid spiraling inflation. He all but confirmed a half-percentage-point interest rate hike is in the pipeline for May’s FOMC meeting.

Traders are increasingly worried the Fed’s more aggressive approach could lead to a recession as the all-powerful U.S. consumer becomes more wary about spending due to fears over the economy. Next week, investors will parse fresh figures from the University of Michigan on April consumer sentiment.

“Interest-rate futures are fully pricing a half-point move in the benchmark lending rate when U.S. central bankers meet May 3-4, and another half-point hike is fully priced for June,” National Securities chief market strategist Art Hogan said in a note to clients. “Investors are betting on a third half-point increase for July and Powell’s St. Louis Fed colleague James Bullard has opened a debate about doing a more aggressive 75 basis-point increase if needed.”

Nasdaq Reverses As Growth Stocks Are Crushed

The Nasdaq gave up 2.6%. Intuitive Surgical (ISRG) was faring worst here as health stocks got smashed, giving up 14.3%. It fell as cautious guidance overshadowed an earnings beat.

But the broader-based S&P 500 fared even worse, falling 2.8%. Health plays were dominating the downside while SVB Financial (SIVB) was a bright spot thanks to a strong earnings report. It earned EPS of $6.22, well clear of the consensus estimate of $5.60 according to FactSet.

The S&P sectors all closed in negative territory. Consumer staples and utilities fared best while health care, materials and communication services dropped the most.

The rampaging bears had small caps for lunch, with the Russell 2000 diving 2.6%.

But it was growth stocks that suffered the worst shellacking. The Innovator IBD 50 ETF (FFTY), a bellwether for growth stocks, plunged 3.3%.

Dow Jones Dives As Verizon Earnings Hobble Breakout

The Dow Jones Industrial Average was also given a beating by the bears. It gave up nearly 1,000 points as it fell 2.8%.

Verizon Communications reversed on earnings, underlining the danger of buying a stock ahead of results. It had broken past a 55.80 cup-with-handle buy point on Thursday, tempting investors.

The relative strength line fell sharply, undoing its good work in recent sessions.

Verizon was the second-worst stock on the Dow Jones today, dropping 5.6%. It was hit after net income fell 12.4% to $4.7 billion in the quarter. EPS also slipped 1% to $1.35.

It reported a loss of 36,000 monthly phone subscribers in Q1. This was better than feared.

The only stock to fare worse than Verizon was Caterpillar, which gave up 6.6%.

HCA Healthcare Collapses On Guidance

HCA Healthcare led a rout among health care stocks. It was the worst performing stock on the S&P 500 as it fell 21.8%.

The hospital play was punished for a missing Q1 earnings views. Even worse was the fact it served up underwhelming full-year earnings and revenue guidance.

The stock, which had just broken out of a flat base with a 272.36 buy point, flashed multiple sell signals. It crashed through its 50-day and 200-day moving averages, according to MarketSmith analysis.

Universal Health Services (UHS) and DaVita (DVA) fell 14% and 9.2%, respectively.

Meanwhile, Eli Lilly (LLY) was jettisoned from Leaderboard after it triggered a round-trip sell signal. It saw gains from a cup-base breakout evaporate.

Bears Hunt Down Market Bulls; What To Do Now

These Stocks Build Bullish Bases

With stocks struggling it is a good idea to beef up one’s watchlist.

FactSet Research is a good candidate as it forms a cup-base with a 495.49 buy point. The relative strength line is gradually moving higher, a good sign amid broader wild action.

FactSet has been gaining since it posted earnings last month. The financial data and software company reported EPS of $3.27 on sales of $431.1 million, which represent year-over-year growth of 20% and 10%, respectively.

Shockwave Medical is forming the handle on a cup-with-handle base. It is shooting for a 223.25 entry in a deep base.

Shares have been pulling back over the past two weeks as the handle formed and are now testing the 50-day line. The RS line is also slipping.

Eastgroup Properties saw its relative strength line hit a new high Friday. This is an encouraging sign. The real estate investment trust operates industrial properties in states including California, Texas and Arizona.

It is forming a cup base with an ideal buy point of 229.94. Big money has been a buyer of late. And the company also offers investors a dividend yield of 2.1%, which beats the S&P 500 average.

Please follow Michael Larkin on Twitter at @IBD_MLarkin for more on growth stocks and analysis.

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