Stocks held fast to early gains Thursday as the market angled for a third straight advance. A potential Congressional compromise on another debt-ceiling extension appeared to unleash broad optimism, tripping a rally across global markets. A better-than-expected reading on weekly unemployment claims also boosted early trade. Taskus (TASK) and Digital Turbine (UPST) led the IBD 50 list. And chemicals maker Dow (DOW) and Home Depot (HD) swung to the lead on the Dow Jones today.
The Dow Jones Industrial Average sailed more than 380 points higher, up 1.1%. That boosted the index back above both its 10-day and 21-day moving averages. The S&P 500 rallied 1.1% on the stock market today, also retaking 10-day and 21-day support.
The Nasdaq Composite jumped 1.2%, regaining its 10-day line and moving to its highest level since Sept. 29.
China-based stocks notched three of the Nasdaq 100’s five largest early advances, boosted by market rallies in Hong Kong and Shanghai. Pinduoduo (PDD) and JD.com (JD) gained about 5% apiece. NetEase (NTES) scored a 6.6% gain. The KraneShares CSI China Internet ETF (KWEB) rallied 6.5%.
Manufacturing software developer Aspen Technology (AZPN) spiked 8% to lead the S&P 500. Bloomberg reported late Wednesday Emerson Electric (EMR) was in discussions over a possible merger. Emerson shares leapt 3%.
Chip stocks showed early strength, with Marvell Technology (MRVL) up 4% after Morgan Stanley nudged the stock’s price target to 63, from 61. Chip developer Nvidia (NVDA) rose 1.8% on the IBD Leaderboard list. The iShares Semiconductor fund (ETFSOXX) grabbed a 1.9% gain.
BioNTech (BNTX) popped 3%, Pfizer (PFE) rose 1.9% on news that the companies had officially requested emergency use authorization for their mRNA Covid vaccine for use in persons aged 5 to 11 years.
On the IBD 50 list, Western Alliance Bancorp (WAL), Diamondback Energy (FANG) and Stifel Financial (SF) had all entered buy ranges.
Dow Jones Today: Home Depot’s Buy Point
At the starting bell, chemicals maker Dow and retail giant Home Depot took over the lead on the Dow Jones today. Dow is wrestling to reverse a four-month decline. Dow rose 3.2%. The company announced late Wednesday plans to invest more than $3 billion in a strategy aimed at improving underlying earnings growth.
Home Depot gained 2.2%, hoisting shares to just below a 338.65 buy point in what IBD MarketSmith analysis identifies as a flat base. The buy point is still technically in play, after the stock briefly cleared it in late September before pulling back. The pullback stopped well short of triggering the automatic sell rule. But the stock market, for now, remains in a correction, taking new buys off the table.
Big early moves by Nike (NKE) and UnitedHealth Group (UNH) marked powerful rebounds from 200-day support, reversing multi-week declines.
Jobless Claims, Debt Ceiling Negotiations
In the U.S., the Labor Department reported first-time claims for unemployment assistance fell to 326,000 in the week ended Oct. 2. That was down from 364,000 claims in the prior week, and below projections for 328,000 claims.
News outlets reported Thursday morning that Senate Democrats and Republicans were nearing an agreement to extend to a deadline for federal debt and raise the government’s borrowing limit. The proposed move would push out the current mid-October deadline to some time in December.
Treasury Secretary Janet Yellen had suggested that Oct. 18 was the deadline to extend the debt limit, or the U.S. could not pay its bills. Other reports say the Treasury might be able to avoid a destabilizing default until early November.
Earnings: Levi Strauss, Resources Connection
Accounting consultant Resources Connection (RGP) surged 10%, after reporting a solid fiscal first-quarter beat late Wednesday. Shares broke out above a flat base buy point at 16.60 on Wednesday. Marijuana stock Tilray (TLRY) reversed premarket gains and dropped 2.2%, as losses held steady but revenue surged 43% in its fiscal first quarter.
Jeans maker Levi Strauss (LEVI) rallied more than 7% after a third-quarter earnings beat, and despite soft Q4 revenue guidance.
Overseas Markets Rally
China’s markets picked up on Wednesday’s market reversal in the U.S., and launched a broader rally that fed through to morning trade in Europe. Chinese stocks were also buoyed by a Wall Street Journal report that President Joe Biden and Chinese President Xi Jinping are planning a virtual meeting in coming weeks.
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Hong Kong’s Hang Seng Index bucked 3.1% higher, posting its best session since July. The Shanghai Composite reopened to a 0.9% gain after its seven-day National Holiday break. That momentum carried over into Japan, where a 0.5% gain snapped an eight-day decline for Tokyo’s Nikkei 225.
Europe’s markets picked up the thread, rallying through their afternoon session. The CAC-40 in Paris showed a 1.6% gain in late trade. Frankfurt’s DAX climbed 1.4%. And the FTSE 100 in London powered up 1.2%.
Vital Signs: Oil, NatGas, Bond Yields, Bitcoin
West Texas Intermediate crude futures dipped 1.1% early Thursday, to $76.56 a barrel. WTI fell 1.9% Wednesday, clipping a four-day run, after the Energy Information Administration reported a 2.3 million barrel increase in U.S. oil supplies, vs. expectations for a decline of about a half-million barrels. Despite Wednesday’s decline, U.S. oil prices are working on the seventh week of a rally that has lifted them to their highest level since November 2014.
Natural gas futures slumped 1.7% to $5.58 per million British thermal units. Shortages driving price spikes in Europe have led U.S. natural gas into the seventh month of its rally, up 148% through Tuesday since Dec. 31, and at its highest level since December 2008.
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Bond yields perked up after the unemployment report, with the 10-year Treasury yield up three basis points to 1.55%. Yields hit this year’s low at just below 1.13% in July. They touched the year’s high, above 1.76%, in March.
Bitcoin added 1% to trade above $54,500. Bitcoin rallied more than 6% on Wednesday, after Securities and Exchange Commission Chairman Gary Gensler said Tuesday that he wasn’t looking at a China-like crypto ban. Also, an anonymous trader bought almost $1.6 billion in digital coins in just a few minutes. The cryptocurrency swung as high as $55,735 and as low as $51,186 over the past 24 hours. It touched its record high, at $64,888, in April.
IBD 50: Western Alliance, Diamondback, Stifel In Buy Ranges
Among IBD 50 stocks, Western Alliance Bancorp climbed 3%, to above a 109.94 entry in a 22-week cup base. Diamondback Energy dipped 0.5%, but held in a buy range above a 102.63 cup base entry. Stifel Financial jumped 2.9%, past a 71 buy point in a 22-week cup-with-handle base.
Taskus (TASK) is testing the 10-week moving average. Datadog (DDOG), which was mentioned in an earlier Stock Market Today update, is rebounding from its 10-week line. Datadog is an IBD Leaderboard listing.
In addition, research leader Gartner (IT) is rebounding from its 50-day line in powerful trade. Medical devices and supplies vendor Avantor (AVTR) is also positioned for a possible rebound from the 50-day line.
With the market in correction, these stocks are all watchlist candidates. Until the market forms a bottom and confirms a fresh uptrend with a follow-through day, investors should shy away from new purchases.
Dow Jones Today: A Watchlist Scan
As the market attempts to fashion a bottom to its current pullback, it is a time for building watchlists of leaders positioned for breakouts. Scanning the Dow, two-thirds of the benchmark’s 30 stocks gained in Wednesday’s turnabout session. A half-dozen gained more than 1%. This gives some clue as to which stocks may be primed to respond to a chance in market direction.
Microsoft (MSFT) topped the list, with Salesforce (CRM) and Visa (V) also up 1% or more. Microsoft, an IBD Leaderboard stock, is consolidating, and has now climbed to within a fraction below its 50-day moving average. Its current chart pattern is a flat base, with a buy point at 305.94. Microsoft ended trade on Wednesday less than 5% below that entry. And with the market in a correction, a move back above 10-week support would be a bullish marker.
Salesforce.com continues to tinker with a breakout, bouncing back and forth between a 275.32 buy point and its short-term 21-day exponential moving average. It is the stock’s first breakout attempt since exiting the pandemic bear market in May 2020.
McDonald’s (MCD) is also toying with a breakout. Its eight-week-old flat base has a buy point at 247.15. The stock briefly topped that entry in September, then pulled back for a test of its 50-day line. Shares have since perched neatly atop their 21-day average, with McDonald’s riding a four-day advance through Wednesday.
Please follow Alan R. Elliott on Twitter @IBD_Aelliott
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