The stock market today maintained a bullish bent, even as the cost of money continued to rise again.
XIn late-afternoon trading, amid another salvo of data pointing to a strengthening U.S. economy, the yield on the benchmark U.S. Treasury 10-year bond gained another 2 basis points to 1.64%, and it hit as high as 1.68%.
That marks a move of as much as 15 basis points in the past five sessions, according to CBOE data.
Nevertheless, on Thursday the Dow Jones Industrial Average moved more than 0.7% higher, easily retaking Wednesday's losses. Banks surged, as exemplified by gains of 1% to 2% by the likes of investment banking powerhouse Goldman Sachs (GS) and superregionals Fifth Third Bancorp (FITB) and Truist (TFC).
All three stocks are forming flat bases; in a flat base, the decline from high to low should not exceed 15%. That's a lot smaller than, say, a perfect cup with handle that includes a 25% to 30% pullback.
Flat bases signify a lack of enthusiasm among large funds to dump stock, even after a serious run-up in price.
GS has etched a 356.95 proper buy point in its nearly six-week flat-base structure; FITB shows a correct entry at 40.56 and is trading just above that price, so it's now in buy range. Truist, which also sports a 3% annualized dividend yield, much higher than 1.4% for the S&P 500, is approaching a 61.36 breakout point.
The NYSE financial index rallied more than 2.3%, outmatching a 0.6% gain by the Nasdaq 100 and advances of around 0.8% by the S&P 500 and nearly 0.4% by the Nasdaq composite.
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Stock Market Today: Still Reflecting An Economic Reopening
The initial reading of U.S. GDP growth in the first quarter, up 6.4% at an annualized rate, fell just shy of the Econoday consensus view for a 6.5% increase.
"The economic recovery is definitely broadening now," Gene Goldman, chief investment officer at the Los Angeles-based investment advisor giant Cetera, told IBD in an interview.
He expects market volatility to increase in the months ahead as more market participants may come to the conclusion that "good news on the economy is as good at it gets." Plus, minor steps by China to remove some of its stimulative economic measures to ward off contraction caused by the coronavirus last year, the prospect of higher corporate taxes and a step-up in inflation may prove to be headwinds for stocks throughout the rest of 2021.
Goldman, however, remains bullish for now on cyclical and value stocks. Why? For starters, U.S. consumers are likely to stop saving as much as they did during the pandemic. Leisure and travel industries could get a boost. And he's still recommending a healthy exposure in technology firms that are disrupting old ways of doing business, particularly in cloud computing and cybersecurity.
"I think (President) Biden said the word 'jobs' 43 times (in his State of the Union speech). It's clearly on his mind. We're looking more at the ADP private sector payrolls report as well as the employment portions of manufacturing surveys such as the Empire State and the Philadelphia Fed because they give a first monthly look at the economy," Goldman said.
The iShares Russell 2000 ETF (IWM) lost around 0.4%, likely to halt a four-session win streak. But the exchange traded fund is still positive in the second quarter, up more than 3% since the end of March. IWM has rallied as much as 19.5% in 2021 as well.
From Breakout To Reversal
Small caps certainly whipsawed investors. So did a few breakouts as well.
Align Technology (ALGN), the Invisalign invisible teeth straighteners maker, jumped past a 627.63 buy point in a cup with narrow handle. But shares went from an early-morning 5.5% gain to a 3.5% loss.
Now, the Leaderboard watchlist stock is trying to hold the 21-day exponential moving average. Notice how the relative strength line has, so far, fallen short of breaching its late-January peak.
Home Improvement: Still A Leading Theme For Growth Investing
Nonetheless, other leading growth stocks performed well.
Pool (POOL) is holding up nicely.
The IBD Big Cap 20 member also holds a spot in IBD's Long-Term Leaders. This home improvement play and provider of pool supplies recently gapped out of a symmetrical cup base at 401.39. It's trying to clear the 5% buy zone.
The company's earnings jumped 227% to $2.32 in the first quarter vs. a year earlier on a 57% pickup in sales to $1.06 billion.
Pool's industry mates Hayward (HAYW) and Leslie's (LESL) are showing leadership. Both are new IPOs.
According to IBD Stock Checkup, Pool garners a 99 Composite Rating on a scale of 1 (wimpy) to 99 (wizardly).
Please note the IBD Composite Rating works best as a stock selection tool but not for timing buys. The rating incorporates key fundamental, technical and fund sponsorship quality metrics.
Please follow Chung on Twitter: @saitochung and @IBD_DChung
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