Stocks staged a positive open Friday, with the Nasdaq and S&P 500 knocking off another round of new highs in early trade. A Senate stimulus vote early Friday buoyed optimism, smoothing the response to a spotty January payrolls report from the Labor Department. Earnings news was mixed, but Johnson & Johnson led the Dow Jones today after applying for a new vaccine approval, and a pair of China-based stocks appeared to have attracted interest similar to that of GameStop's ongoing short squeeze.
The Dow industrials jumped 150 points at the starting bell, then pared back to a 0.3% gain, holding below the 31,272 record set Jan. 21. The S&P 500 jumped 0.3%, while the Nasdaq Composite narrowed its advance to less than 0.2% on the stock market today. Activision Blizzard topped the Nasdaq 100, T-Mobile dragged at the bottom of the index, both on earnings.
The Dow and the S&P 500 are bucking to extend rallies to a fifth session. Neither index has put together a five-day advance since late August.
Stocks opening in buy ranges on Friday included ICF International, Blackline, CDW, IBD Leaderboard stock FarFetch and IBD 50 stock ServiceNow. Stocks below buy points include RingCentral, IBD 50 stock Dropbox and IBD Leaderboard stock Apple.
Small caps outpaced in early action, after easily outrunning the overall market on Thursday. The Russell 2000 rallied 0.9%, while the Vanguard Russell 2000 Index Fund ETF rose to a 0.65% gain. Plantronic and Varex Imaging traded high on the index.
January Payrolls Rebound, December Revised Sharply Lower
Nonfarm employers hired 49,000 workers in January, the Department of Labor reported, just below the 50,000 new hires projected by economists. Private payrolls accounted for only 6,000 of those jobs, about 12% of the month's total gain. Manufacturing payrolls shrunk by 10,000 workers. Significantly, the report also revised December's job losses sharply lower, to a 227,000-job reduction in payrolls, vs. the early estimate of 140,000 jobs lost. The unemployment rate downshifted, to 6.3% from 6.7% in December.
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Coronavirus Stimulus Progress
In Washington, the energy in the Senate was clear just after 5:30 a.m. ET Friday, when a 51 to 50 vote moved forward a budget bill that would provide $1.9 trillion in economic stimulus and coronavirus relief. The Washington Post reported the chamber, in an all-night session, "plowed through dozens of amendments in a chaotic process known as a 'vote-a-rama.'"
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The House, which passed its own version of the bill on Wednesday, now takes up the task of incorporating the Senate bill into a final piece of legislation. That final bill is expected to take weeks to complete, with Democrats shooting for a deadline in mid-March, according to the Washington Post, when the current, enhanced unemployment benefits are scheduled to lapse.
J&J Leads Dow Jones Today On Vaccine News
Johnson & Johnson rose 1.8% to the top of the Dow Jones today, after its Janssen Biotech unit filed for Emergency Use Authorization for its single-dose Covid-19 vaccine candidate, based on phase 3 trial results. The company said it was prepared to begin shipping to the federal government immediately upon approval, and could supply 100 million doses in the first half of 2021.
That would bring the number of vaccines available in the U.S. to three, with drugs from Pfizer/BioNTech and Moderna already in broad distribution.
J&J stock technically remains in a buy range, after a breakout above a flat base buy point at 157.10. However, it carries very weak relative strength and Composite ratings.
Earnings: Ford, Activision, News Corp., Pinterest Rally
Ford Motor gained 1.1%% after reporting a big earnings surprise, and despite being forced to slash production due to chip shortages.
Video game developer Activision Blizzard clocked an early 11% gain, after reporting a 23% fourth-quarter earnings gain, a 13% rise in revenue and strong 2021 full-year guidance. Activision shares are extended just beyond a buy range after clearing a flat base in December.
Video game peer TakeTwo Interactive picked up on the positive mood, jumping 3.8% in early action. Take Two is in a buy range on a rebound from support at its 10-week moving average.
News Corp. bolted 8.8% higher, after an 89% surge in earnings and a 3% revenue slip topped analyst estimates. Shares ended Thursday up almost 27% from a cup-base breakout in November.
Pinterest soared more than 6%, after reporting a 76% revenue gain and a 37% increase in its number of users.
Big biotechs Gilead Sciences and Regeneron Pharmaceuticals were both rising after their earnings reports.
Fintech play Bill.com Holdings rallied more than 24%, blasting the stock to a new high — 690% above its December 2019 initial offering price.
On the downside, Snap tumbled 6.1%, Peloton shed 5.9%, and Unity Software dived more than 11% after their earnings reports.
China Stocks Join GameStop Short Squeeze?
Among the targets of the recent social media/short squeeze trend among some retail investors, GameStop stock remained volatile, spiking 37% early Friday. AMC Entertainment gained a more modest 4%. Koss rebounded 10%
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Some small China-based issues trading in the U.S. and showing high levels of short-sale interest were making the kind of exaggerated early moves often associated with short-squeeze action. Learning tools and services provider Laix spiked 166% in early action. Aurora Mobile, a mobile data solutions platform, spiked 70%.
Both Laix and Aurora trade in American Depositary Receipts.
Confirmed Uptrend: A New Record For the Dow Jones Today?
The stock market on Tuesday reverted to a "confirmed uptrend" status, following a brief downgrade to "uptrend under pressure." The Nasdaq Composite, S&P 500 and Russell 2000 all sketched new highs Thursday. A gain of less than 1% for the Dow Jones today would put it at a new high.
For more detailed analysis of the current stock market and its status, study the Big Picture.
As might be expected, institutional investors are sending some mixed signals. The action on the Nasdaq and Russell show institutions are not being skittish, even as bouts of profit-taking stir stiff volatility. The S&P 500 is hauling five distribution days, indicating big money investors exiting the index. High levels of investor exposure are also flashing a caution sign.
The Dow industrials and S&P 500 have behaved reasonably, pulling back for tests of 10-week support, then turning up in four-day rallies. That left the S&P 500 less than 4%, the Dow only 2%, above their 50-day moving averages at Thursday's close.
Nasdaq Composite, Russell 2000 Extended
The Nasdaq, however, is more than 7% above its 50-day line, while the Russell is trading with an almost 10% gap. With new federal stimulus probably still at least five weeks away, those indexes face a long stretch of uncertainty before getting that $2 trillion bump.
For growth stock investors, the green light is still on for leading stocks breaking out past valid buy points. Recent breakouts have behaved well. Earnings news has been generally positive. The market is showing some resilience. Just be aware that there are some indicators signaling a potential pullback, and adjust your risk tolerance accordingly.
Find Alan R. Elliott on Twitter @IBD_Aelliott
