Stock indexes headed for more trouble midday Thursday, as the Nasdaq piled on the biggest loss of the day.
X The Nasdaq hacked off 1%, while the S&P 500 and the Dow Jones industrial average sliced 0.8% and 0.6%, respectively. The small-cap Russell 2000 eased 0.3%. Volume in the stock market today was up on both major exchanges compared with the same time Wednesday.
Institutional selling has crept into the market in the past week or so. The Nasdaq has suffered four distribution days in the past seven sessions and was positioned to log another distribution day Thursday. Distribution involves a loss in a major index in rising volume. Such action points to institutional selling.
Small cap Medifast (MED) rushed ahead about 6% in triple its usual volume midday Thursday. The health and diet products provider broke out Aug. 9 and is now 15% above a 47.45 buy point. For investors who bought on the breakout, a natural price target would be 56.94 — the 20% profit-taking level. Medifast is thinly traded, but seven funds with A+ performance ratings from IBD added shares in the most recent quarter, one held its position steady and only one A+ rated fund trimmed its position.
Blue chips were mostly down, with about nine Dow stocks falling for every gainer in the Dow industrials. Cisco Systems (CSCO) lost 4% in heavy volume. Earnings matched the Street's consensus estimate, while revenue was barely above views. Cisco's stock has been in a rolling pattern for more than 13 years, finding resistance in the 30 to 35 range.
Apple (AAPL) dipped about 1% to 159.07 but remains in the 5% buy zone which stretches to 164.59. The Wall Street Journal reported this week that Apple plans to spend $1 billion in the next 12 months for original video content.
In the IBD 50, losers led winners by a 5-2 ratio. Dental products provider Align Technology (ALGN) dropped 3% in volume almost twice its average pace. Align broke out in February and rose about 75%.
China-based Alibaba (BABA) jumped 4% to a new high in volume 400% above average. Alibaba reported an earnings gain of 60% vs. the Street's consensus estimate for a 27% increase. China's Shanghai composite index rose 0.7%, the index's third gain in four days.
Among China stocks trading on U.S. exchanges, China Lodging Group (HTHT) scored the best gain — up 7% in torrid volume. The company's earnings rose 19% vs. a 1% decline that analysts expected.
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