Bulls Sweep to New Highs

Stocks cruised higher on Thursday, with the S&P 500 (SPX) and the Nasdaq Composite surpassing records set in late January, as investors cheered slightly better labor data, notes Jon Markman of Pivotal Point.

The Dow climbed 1.1% to finish with a 330 point gain. The S&P 500 was also higher by 1.1%, rising for a fourth straight day and closing at a record high, while also recouping all last week’s losses. The Nasdaq 100 (NDX) was up by 1.2%. The financial and industrial sectors were the top gainers, with all but one sector, materials, in the green.

Breadth favored advancers over decliners 5-2. There were 629 new highs and 28 new lows, and topping the list were PayPal (PYPL), HCA Healthcare (HCA), Align Tech (ALGN), eBay (EBAY), KKR & Co (KKR), and recent IPO Qualtrics (XM).

Initial jobless claims fell to 779,000 during the week ended Jan. 30 from 812,000 a week ago, below the 830,000 estimates in a Bloomberg survey. The four-week moving average dropped to 848,250, breaking the string of recent increases as the early January spikes work their way out of the equation.

"The third consecutive week of decline, while still elevated, the ongoing improvement in claims suggests layoffs have slowed, a positive sign for the labor market, as well as the broad-based recovery effort," Stifel chief economist Lindsey Piegza said in a report. "Steps in the right direction are encouraging that the US economy could and will eventually return to a stronger jobs position amid a widespread vaccination effort to contain the virus."

Citing data from the Centers for Disease Control and Prevention, UBS said in a research note that the vaccination rate has risen in the US, and at the current pace, the country is on "track to reach herd immunity in late June." Great news. As per the CDC, the herd immunity threshold for SARS-CoV-2, the virus that causes COVID-19, is expected to range between 50% and 65%, the note said.

Meanwhile, new orders for US factory goods rose by 1.1% in December, above expectations for a 0.7% increase in a survey and following an upwardly revised 1.3% increase in November. Cool.

In corporate news, shares of Align Technology (ALGN) surged 13%, the most on the S&P, after fourth-quarter sales and earnings beat market expectations. The steepest decliner on the S&P was Qualcomm (QCOM) after the company reported fiscal first quarter sales that missed guidance, sending shares down by 9% even though earnings beat forecast.

L Brands (LB) was the second-highest gainer on S&P 500 after the company raised earnings guidance for the fourth quarter. Shares jumped by 9%.

Bottom Line: The rebound out of the GameStop low last week has been robust, with all sectors and market-cap cohorts participating and the new high list expanding. It’s a speculative environment, but that is not exactly the swear word that bears believe it to be. Stay in sync with our buy list during this seasonally positive stretch.

Learn more about Jon Markman at Pivotal Point.