The Dow Jones industrial average looked poised to stop a five-day winning streak but the roughly 16-point loss in late-hour trading looks quite puny compared with the 1,136-point rally seen since the day after Christmas. Meanwhile, small caps outperformed in a mild session in stocks today.
While the Dow Jones industrial average edged roughly 0.3% lower, the small-cap S&P 600 moved up nearly 0.2% to mark a sixth straight advance. At 901, the S&P 600 has now trampolined more than 13% from a three-week low of 793.
Apple (AAPL) is up nearly 2% for the week after sinking more than 5% during the first week of January on a surprise quarterly revenue warning. Please read this recent Stock Market Today column on how to discover clues that the iPhone, iMac, Apple Watch and digital services giant is bottoming out after its worst price correction since 2012-2013.
Some small-cap leaders have even gone so far to hit new highs, including Innoviva (INVA), Wingstop (WING) and Alteryx (AYX), which looks poised to mark a closing high.
Please read this story on Wingstop, the fast-growing chicken wings chain in IBD’s new feature, IBD 50 Growth Stocks To Watch.
Cannabis plays such as Tilray (TLRY) helped IBD’s Consumer Products-Specialty industry group post the day’s biggest gain among 197 IBD industry groups, up nearly 6%. Wholesale electronics, nonalcoholic beverage, movie, specialty retail and semiconductor firms also led the market upside with gains of 1.4% or more.
Tilray, up more than 20% in super-charged turnover on Friday, got as high as 103.69 in the stock market today. The story stock also rose back above the key 50-day moving average for the first time since Nov. 7. Yet Tilray remains 67% below an all-time climax-run peak of 300.
Other Major Averages Join The Dow Jones In Posting Miserly Losses
With less than a half hour to go in the regular session, the S&P 500 and the Nasdaq composite also kept the day’s losses limited to around 0.1% to 0.2%. The S&P MidCap 400 and the Russell 2000 rose fractionally. All of these indexes headed into the final hour of trading with hefty weekly gains.
Volume is running mildly lower vs. the same time Thursday on both major exchanges.
Defensive stocks are cooling off more. The Dow utility average sank 0.8%.
As Dow Jones Holds Firm, Watch These Stock Market Factors
In addition to high-quality growth stocks making new highs, there are two more reasons why the bears are losing control on Wall Street.
One, market breadth has improved remarkably. The NYSE’s advance-decline has risen sharply higher since the end of 2018, and it may be cracking a longer-term downtrend. When more stocks participate on the upside, it means the potential of good bases and strong breakouts is rising as well.
Two, institutions have been reluctant to sell hard since IBD noted a key change in the current outlook for growth stocks. The Jan. 4 Big Picture column explains the key follow-through day that signaled a potential new market uptrend is underway. Since Friday’s important rally, so far neither the Nasdaq nor the S&P 500 has logged a distribution day, or session of unusually heavy professional selling.
The IBD Sector Leaders Stock List Expands
In December, the IBD Sector Leaders screen shrank to as few as two names. Through Thursday’s close, the list has rejuvenated with as many as nine companies qualifying. The software sector grabs the lion’s share with six companies making the list, including IBD Leaderboard memberAtlassian (TEAM), security software innovator Fortinet (FTNT) and customer relationship management pioneer Salesforce.com (CRM).
In addition to Innoviva, heart pumping device firm Abiomed (ABMD) has recently rejoined the Sector Leaders and is working on a deep cup-type base. No proper buy point has emerged for now. Shares have gained nearly 3% for the week and have bounced as much as 25% from a Christmas-time low of 274.
The large correction for Abiomed, an innovator in cardiovascular care, is totally normal. Why? Abiomed staged a superb run-up. It first broke out of a first-stage base with a 30.87 buy point all the way back in the week ended Oct. 31, 2014. Since then, the Danvers, Mass., firm rose more than 1,300%, forming new bases along the way.
Watch to see if Abiomed can lift back above the 10-week and 40-week moving averages, drawn in red and black, respectively, in all IBD weekly charts and at MarketSmith. Doing so would indicate a return of institutional appetite for shares.
The company is expected to increase earnings in fiscal 2019 (ended in March) by a whopping 111% to $5.05 a share. But the Street currently sees earnings dipping 2% in FY 2020 to $4.97.
In Other Financial Markets
Crude oil futures succumbed to profit taking. WTI near-term prices fell more than 1.5% to $51.79 a barrel.
Investors bought back Treasuries. The yield on the benchmark 10-year U.S. government bond fell 4 basis points to 2.70%. The spread between 3-month T-bills and 10-year notes is currently a slim 28 basis points. But at the start of 2018, the spread was even thinner at 24 basis points. The benchmark 30-year long bond yields 3.04%.
Please follow Chung on Twitter at @IBD_DChung for more on growth stocks and financial markets.