The Dow Jones Industrial Average rallied nearly 100 points Friday before reversing lower, as 2020’s final payrolls report showed the U.S. economy lost jobs in December. Apple stock rallied, while Nio and Tesla surged in morning trade. Tesla unveiled a new Model Y. Sarepta Therapeutics crashed 50% on mixed gene therapy results.
Dow Jones Today: Jobs Report
On Friday, the Dow Jones Industrial Average fell 0.3% after reversing lower, while the S&P 500 gained 0.2%. The tech-heavy Nasdaq composite advanced 0.6% in midday trade.
Early Friday, the Labor Department reported nonfarm payrolls fell by 140,000. That was sharply below consensus estimates for a 50,000 increase, according to Econoday. The unemployment rate held steady at 6.7%.
According to the Worldometer data tracker, the cumulative number of confirmed coronavirus cases in the U.S. topped 22.1 million on Friday. Total virus-related deaths rose past 374,000.
The cumulative total of worldwide Covid-19 cases confirmed since the start of the outbreak topped 88.6 million Friday, with more than 1.9 million virus-related deaths.
Stock Market Rally Extended?
Looking back at the current uptrend, November was a key month for the stock market. IBD’s The Big Picture flagged the new uptrend following the market’s bullish follow-through day on Nov. 4. Meanwhile, the first week of January 2021 shows major stock indexes at record highs. Be sure to check out IBD’s Stock Market Outlook for 2021.
Thursday’s Big Picture cautioned that the Nasdaq was getting extended, “Keep in mind the Nasdaq is sharply extended from its 50-day moving average, ending more than 7% above it on Thursday. Historically, when the Nasdaq is about 6% above its 50-day line, it will typically begin to pull back.
Pullbacks, even sharp ones, would be considered a natural part of a sustained uptrend. But it’s not an imminent sell signal by any means. Indexes can remain extended for a long time. Ahead of the September correction, the Nasdaq closed 11.6% above the 50-day line on Sept. 2 after being more than 6% above that level for weeks.”
Investors should continue to use the stock market’s strength to buy breakouts. Be patient and wait for powerful breakouts instead of chasing extended stocks. If the new breakouts work, then add more exposure. But if breakouts start to fail, then you can back away.
In particular, focus on stocks with strong relative strength. Find them by using the relative strength line. The RS line measures a stock’s price performance vs. the S&P 500. If the stock is outperforming the broader market, then the RS line angles upward. If a stock is performing worse than the broad market, then the line will point lower.
Stocks To Watch: IBD Long-Term Leaders
Stocks to watch include IBD Long-Term Leaders, companies with stable earnings growth and price performance. Veeva Systems (VEEV) is the latest addition to the list, as it looks to regain its 10-week line. Shares rose 1% Friday.
Dow Jones Stocks To Watch: Visa Rallies
Last Wednesday’s IBD Stock Of The Day, Visa, is about 1% below a 217.75 buy point in a flat base, according to IBD MarketSmith chart analysis. Shares broke out on Dec. 30, but quickly ran into stout resistance.
Shares moved up 0.8% Friday.
Stocks In Or Near Buy Zones: Chipotle, Pinterest, Qorvo
IBD Leaderboard member Chipotle Mexican Grill regained its 1,366.76 double-bottom buy point Thursday as it bounced off its 50-day line, according to IBD MarketSmith chart analysis. Shares tacked on 2% Friday morning.
Per Leaderboard commentary, “The new base is second stage, which boosts the chances of a good advance from here. After a breakout, one would like to see the relative strength line rise into new high territory, but the line hasn’t quite made it to new highs.”
IBD SwingTrader stock Pinterest continues to rebound from its 10-week line, posting a nearly 2% rise on Friday.
According to IBD Stock Checkup, Pinterest stock shows an 89 out of a perfect 99 IBD Composite Rating. The Composite Rating — an easy way to identify top growth stocks — is a blend of key fundamental and technical metrics to help investors gauge a stock’s strengths.
5G leader Qorvo is just out of the 5% buy zone above a 171 buy point in an ascending base. Shares advanced 1.4% Friday, moving out of buy range following Wednesday’s breakout move. The buy area tops out at 179.55.
Qorvo was discussed in Thursday’s IBD Live show.
Sarepta Stock Crashes
Late Thursday, Cambridge, Mass.-based Sarepta Therapeutics announced mixed results for its gene therapy that targets a form of muscular dystrophy. Sarepta stock crashed 50% Friday morning.
The biotech company said its gene therapy produced large amounts of a key protein needed for muscle function and strength. That protein is deficient in children born with Duchenne muscular dystrophy. But the increases didn’t lead to statistically significant improvements in muscle function after one year.
Chinese Tesla rival Nio surged 7% to break out above a 57.30 buy point in a short cup base.
Shares are on pace for a 17% weekly gain after finding support at their 50-day line last week.
IBD Leaderboard stock Tesla again surged to more record highs after the company listed a Model Y Standard Range option, or SR, for $41,990. That’s $8,000 cheaper than previous base model, the Model Y LR, at $49,900
Tesla stock soared 8% Friday morning, on pace to extend a win streak to 11 sessions. Friday morning, Tesla stock hit a record high at 884.49. Shares have climbed as much as 88% from a 466 buy point in a cup with handle.
Dow Jones Leaders: Apple, Microsoft
In recent weeks, Apple shares have moved above aggressive entries at 125.49 and 122.09.
Apple is an IBD Leaderboard stock. Per Leaderboard commentary, “The alternate entry is in the lower half of the base but the RS line is improving. Apple nearly doubled from its breakout in April and will be tough to replicate that run. The base is third stage, which is a reason to have lower expectations this time around.”
Software giant Microsoft moved up 0.1% Friday after bullishly retaking its 50-day line on Thursday. Shares continue to trace a new base with a 228.22 buy point.
Be sure to follow Scott Lehtonen on Twitter at @IBD_SLehtonen for more on growth stocks and the Dow Jones Industrial Average.
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