Stocks rebounded Thursday, as markets clawed back some of Wednesday’s heavy losses. An improved reading on weekly jobless claims countered a mild miss in fourth-quarter GDP data. Earnings news stirred early action, with Tesla, Apple, Facebook and American Airlines all active. Trade was briefly halted in GameStop and Koss stock, which tripped circuit breakers as recent flash-investing action widened. Meanwhile, Intel and Visa sprung to the top of the Dow Jones today.
The Dow industrials surged more than 400 points in early trade, up 1.4%. The S&P 500 soared 1.2%, while the Nasdaq held to a 0.7% gain on the stock market today.
American Airlines (AAL) dominated the S&P 500, up 28% but after reporting a narrower-than-projected loss, and becoming another apparent entry to the Reddit investing collective. United Airlines (UAL) and Delta Airlines (DAL) each rose 7%. United topped the Nasdaq 100.
Earnings News: American Airlines, Comcast, ServiceNow Rally
Tesla (TSLA) stock stumbled 4.9% lower after reporting late Wednesday its earnings fell short, but the company confirmed new Model S and X vehciles were on the way.
Facebook posted a 2.2% gain, climbing further up the right side of its 22-week base. Fourth-quarter sales and earnings topped views, but guided to only modest revenue increases in 2021.
ServiceNow (NOW) rebounded 6.7% after blowing past analyst expectations with a 22% earnings gain and a 31% rise in revenue for its fourth quarter. The stock is looking to snap a four-day decline, and is trading in a six-week flat base with a 566.84 buy point.
Comcast (CMCSA) rallied more than 3% after topping fourth-quarter views and raising its dividend.
Chico’s, Tootsie Roll Join The GameStop Flash Rally
Small caps also rebounded Thursday, with the Russell 2000 up 1.1% in early trade. At the top of the Russell, GameStop (GME) surged more than 30% after trade was briefly halted, in a slightly cooled-off version of the volatile trade that has driven shares up 434% so far this week. GameStop appears to be an early indicator of a new stock market wrinkle, one which pits social media investing collectives against institutional short sellers in technical valuation wars.
Other stocks appeared to have made their way onto the flash-mob radar early Thursday. Candymaker Tootsie Roll Industries (TR) eased to an 8% gain, after an early spike. Tootsie Roll vaulted 55% in early trade Wednesday, then narrowed its advance to 11%. Apparel retail chain Chico’s (CHS) soared 17% in early trade, after rallying 34.8% on Wednesday.
Dow Jones Today: Apple, McDonald’s, Dow Earnings
Apple stock dropped 2.4%, to the bottom of the Dow Jones today, after halving its early decline. The company reported late Wednesday that strong sales of iPhones, wearables and services drove fiscal first-quarter sales and earnings well beyond Wall Street targets.
McDonald’s (MCD) traded flat after reporting mixed fourth-quarter results, with earnings below expectations and revenue just meeting analyst targets. McDonald’s shares are basing, but must win a long-term struggle to regain support at their 10-week moving average before they can form the right side of the pattern.
Specialty chemicals maker Dow (DOW) scored a strong fiscal first-quarter win, reporting its first quarterly sales gain and announcing it had reduced debt by $2.6 billion for the year. Dow went public as a restructured entity in April 2019.
Visa (V) bats cleanup on the Dow Jones today, with its fiscal first-quarter report due out after the close.
GDP Misses Target, Weekly Jobless Claims Dip
Fourth-quarter GDP rose 4%, the Commerce Department reported Thursday. That was slightly below the 4.1% pace forecast by economists, on the heels of the pandemic-distorted 33.4% rebound in the third quarter. Personal Consumption Expenditures also increased less than expected, up 2.5% vs. the Econoday consensus of 3%, following the 41% bounce in the third quarter.
First-time unemployment claims took a welcome downturn, with the Labor Department reporting a drop to 847,000 in the week ended Jan. 23. Economists had projected a decrease to 875,000, following two disappointing weeks in which first-time unemployment claims rebounded and held above 900,000.
International trade, retail inventories, new home sales and the Kansas City Federal Reserve’s manufacturing index are among the other reports due out on Thursday.
Dow Jones Today: Testing Support
The Dow Jones today opens in a test of support at its 50-day moving average. Wednesday’s powerful pullback deposited the Dow a fraction above that line, below which the index has not closed since the Nov. 4 start of the current stock market rally. The Nasdaq is also testing support, but at its 21-day exponential moving average. The 21-day line also has been a support level for the Nasdaq since the index’s follow-through day in early November.
The S&P 500 dived below its 21-day line, and may be headed for a test of support at its 50-day line. The index finished a bit more than 1% above that level on Wednesday.
For more detailed analysis of the current stock market and its status, study the Big Picture.
Friday marks the final trading day of January. After Wednesday’s pullback, the Dow industrials were tracking toward a moderate loss for January, down 1% for the month through Thursday. That is identical to its January performance a year ago, which was just beginning to reflect the impact of the gathering coronavirus storm.
Over the past 21 years, the Dow has gained in 10, fallen in 11 Januarys. In those 11 years, it has averaged a January decline of just over 4%, so even though this year is starting on a down note, it is still above average. A down January doesn’t appear to bode either well or ill for the year, with the market up in five, down in six of the 11 years that opened with a soft January.
The Nasdaq, despite Monday’s sharp pullback, remains up 3% for January. The S&P 500 has a 0.1% loss, and the Russell 2000 is up 6.8% for the month.
Find Alan R. Elliott on Twitter @IBD_Aelliott
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