Dow Jones futures tilted higher early Friday, but S&P 500 futures and especially Nasdaq futures fell as Treasury yields picked up again.
XThe stock market rally had a strong session Thursday, as the S&P 500 index and Russell 2000 joined the Dow Jones in new high ground. The Nasdaq composite led with a strong gain but volume was light.
Arcelor Mittal stock and Regal Benoit (RBC) were among several "blue dot" breakouts Thursday, while Microsoft stock, Google parent Alphabet (GOOGL) and Dynatrace (DT) flashed buy signals.
On Wednesday, IBD declared that the uptrend had resumed with the Dow closing at a new high and many real economy stocks breaking out. The stock market rally broadened further Thursday. Nasdaq made a strong move, retaking some key levels, though it did not qualify as a follow-through day. Growth stocks rebounded.
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After the close, DocuSign (DOCU) and Ulta Beauty (ULTA) headlined key earnings reports. DOCU stock fell modestly late despite strong results and guidance. Ulta stock plunged on a weak outlook and the CEO's exit.
Meanwhile, Novavax (NVAX) reported a 96.4% efficacy rate vs. the original coronavirus strain in final analysis of a phase three U.K. trial. NVAX stock jumped overnight.
Stocks In Buy Zones
Global steel giant Arcelor Mittal (MT), power generator and motor maker Regal Benoit, contract electronics manufacturer Jabil Circuit (JBL), new shipping IPO Zim Integrated Shipping Services (ZIM) and Discover Financial (DFS) all broke out Thursday.
MT stock and the others all have relative strength lines at new highs, reflecting their outperformance vs. the S&P 500 index. RS lines at new highs while still in a base or breaking out is an especially bullish trend. So MarketSmith marks such stocks with a blue shaded dot at the end of the RS line.
Meanwhile, Dynatrace (DT) broke a downtrend, flashing a buy signal. Microsoft (MSFT) reclaimed a buy point and moved back some other levels. Google stock flashed some early buy signals.
Arcelor Mittal stock, Regal Benoit, Discover and Google joined Microsoft on IBD Leaderboard. Microsoft stock is on IBD Long-Term Leaders. Google stock is on the IBD 50 list. RBC stock was Thursday's IBD Stock Of The Day.
Dow Jones Futures Today
Dow Jones futures rose just a fraction vs. fair value. S&P 500 futures fell 0.4%. Nasdaq 100 futures lost tumbled 1.3%.
The 10-year Treasury yield rose six basis points to 1.59% early Friday, back near the top of its recent range.
Remember that overnight action in Dow futures and elsewhere doesn't necessarily translate into actual trading in the next regular stock market session.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live.
Coronavirus News
Coronavirus cases worldwide reached 119.16 million. Covid-19 deaths topped 2.64 million.
Coronavirus cases in the U.S. have hit 29.21 million, with deaths above 543,000.
President Joe Biden said late Thursday that he'll direct the states to make all adults eligible for the coronavirus vaccine by May 1. Vaccination rates continue to trend higher while vaccine supplies are surging.
Novavax said its Covid vaccine reported a 96.4% efficacy rate vs. the most-common strain in a phase three trial. In a phase 2b trial in South Africa, the Novavax vaccine had a 55.4% efficacy rate vs. HIV-negative participants, as the B1.351 variant dominant there has proved harder to block among various vaccines.
However, the Novavax vaccine was 100% effective in preventing severe disease, including all hospitalizations and deaths.
Novavax won't seek U.S. approval until data from a U.S. trial is out, but that presumably will show strong results as well.
Novavax stock spiked more than 20% overnight. NVAX stock skyrocketed in late January to early February on preliminary vaccine results, but gave almost all of that back before a recent bounce.
Earlier Thursday, new research showed further evidence that the Pfizer (PFE) and BioNTech (BNTX) coronavirus vaccine is extremely effective.
Stock Market Rally
The stock market rally broadened out, with more indexes at record highs, more stocks breaking out and the growth names continuing to recover from steep sell-offs. President Biden signed the $1.9 trillion spending bill into law on Thursday.
The Dow Jones Industrial Average rose 0.6% in Thursday's stock market trading. The S&P 500 index gained 1% and the small-cap Russell 2000 advanced 2.3%, both to record highs. The Nasdaq composite jumped 2.5%, retaking its 21-day exponential moving average and 50-day line.
Before Thursday's open, the 10-year Treasury yield fell as low as 1.48% and later rose to around 1.54%. The yield closed up 1 basis point at 1.53% following a 30-year Treasury auction. Yields fell Wednesday after a 10-year Treasury auction.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) rallied 4.5%, while the Innovator IBD Breakout Opportunities ETF (BOUT) popped 4.75%. Both are rebounding above their 50-day lines. The iShares Expanded Tech-Software Sector ETF (IGV) climbed 3.1%, with Microsoft stock its biggest holding. The VanEck Vectors Semiconductor ETF (SMH) advanced 4.2%.
Reflecting more-speculative story stocks, Ark Innovation ETF jumped 6.2% and Ark Genomics ETF 5.6%.
Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.
Blue Dot Specials
Arcelor Mittal stock ran up 7.7% to 26.77, breaking out past a 25.85 buy point from a cup base in the heaviest volume since June 30. The relative strength line for MT stock is at a new high. That makes Mittal stock a blue dot special.
Regal Benoit stock rallied 3.6% to 148.82, above a 147.07 buy point from a cup base. Volume was the heaviest in years for RBC stock.
Zim Integrated Shipping stock spiked 14.5% to 23.35, hitting a new high and clearing a 22.68 buy point from an IPO base. Volume was the heaviest since Feb. 2, the fourth day of trading for ZIM stock. The ZIM IPO came public at 15 a share and quickly ran up before pausing, strong action for a new issue. Zim is profitable with booming EPS growth in the latest quarter. It's due to give its first-ever earnings report as a public company on March 22.
Discover Financial stock climbed 2.7% to 102.27, above a 101.06 buy point. Volume was below average for DFS stock, continuing a trend.
Jabil Circuit stock jumped 5.25% to 47.71, clearing a 42.28 buy point from a flat base in above-average trade. That follows a strong JBL stock uptrend from early November to mid-January. Note that Jabil earnings are due next Tuesday, so that doesn't leave much room for JBL stock to get much of a cushion.
IBD Stock Of The Day Powers Into Buy Zone Amid Faster Growth
Tech Stocks Flashing Buy Signals
Dynatrace stock popped 5.9% to 54.11, breaking a downtrend starting with its Feb. 9 peak of 56.77. With the market correction, DT stock fell back slightly into its old base, but found support at its 50-day line and quickly rebounded. That's far better than most growth software names. Investors could take a small position now, perhaps using a close below Wednesday's low of 50.46 as a sell signal.
Microsoft stock rose 2% to 237.13, once again retaking its 232.96 buy point and its 21-day line. MSFT stock is just 2.2% above its 10-week line, offering a possible entry as a Long-Term Leader. Microsoft stock could be forming a new base with a potential 246.23 entry. Keep in mind that the RS line for MSFT has lagged for several months. But, it's held up better than most techs in the past few weeks.
Google stock climbed 3.2% to 2,100.54, rebounding again from its 21-day line. GOOGL stock has a 2,145.24 three-weeks-tight entry. Investors could make an early entry here, with Google stock closing above any prior weekly close. Also, the RS line is just below last week's record high.
Stock Market Rally Analysis
On Wednesday, the Dow Jones moved to a new high. That day's price-and-action move was strong enough to be a follow-through day, but IBD decided that the Dow had never fallen enough to be considered a correction. So the market direction moved to "Uptrend Resumes," with a strong bias toward real economy stocks.
So the question heading into Thursday was how the divided market would behave. Would the Nasdaq join the uptrend or would it pull down the broader market once again.
On Thursday, the Dow Jones moved further into new high ground, while the S&P 500 and Russell 2000 also hit highs.
The Nasdaq composite rallied strongly above key levels. But Nasdaq volume fell slightly vs. Wednesday. So Thursday didn't qualify as a follow-through day to confirm the Nasdaq market rally.
Rising Treasury yields have pressured growth stocks and were a big catalyst for the sell-off in recent weeks. So that's a concern for the longevity of any market rally, especially growth stocks, especially if the 10-year Treasury yield moves above its recent range in the 1.4%-1.6% zone.
What Investors Should Do Now
With the market back in an uptrend, investors should be looking to add exposure. Look for stocks that are breaking out or sending other bullish signals. Most of those will be real economy names, with Dynatrace, Microsoft and Google stock exceptions.
Most growth stocks have significant repair work to do. Yes, if you buy these names as they rebound off the bottom and they keep running, you'll see big gains. But if the Nasdaq reverses, the selling can be just as fierce. The goal isn't to buy at the lowest possible price, but at a price where your odds of success are higher.
Investors also could buy ETFs, such as SPY or a broad sector ETF. More-aggressive traders might step into QQQ or a growth ETF such as IGV, SMH or FFTY as a way to play a growth rally with few individual names in position.
Don't feel compelled to step on the gas, especially in this unusual split market. You might want to save some powder for growth stocks if and when those names become actionable again. Also, if the Nasdaq resumes heavy selling, the broader market would come under pressure.
Let the stock market pull you in. If the rally gains steam and more stocks break out, you'll gradually increase your exposure.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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