The Dow Jones Industrial Average erased Monday’s loss as Apple (AAPL) and Microsoft (MSFT) popped higher. Senate Majority Leader Chuck Schumer moved to break the debt ceiling gridlock. Facebook (FB) gained, even as whistleblower Frances Haugen testified before a Senate panel.
Meanwhile a cluster of stocks managed to pass buy points amid the stock market rally. Clearfield (CLFD), Focus Financial Partners (FOCS), EOG Resources (EOG) and Robert Half International (RHI) all staged breakouts.
However Oanda senior market analyst Edward Moya says there are still plenty of reasons to be cautious.
“Turnaround Tuesday might not lead to a substantial rally as Evergrande uncertainty remains, DC drama will last a couple more weeks, Treasury yields are consolidating ahead of Friday’s employment report, and Shanghai markets are closed for Golden Week,” he said in a note to clients.
Chuck Schumer Makes Debt Ceiling Move
Senate Majority Leader Schumer is gunning to hold a debt ceiling vote by Wednesday. Stakes are high, with Treasury Secretary Janet Yellen previously warning Congress it must raise the debt limit by Oct. 18.
Schumer threw down the gauntlet to Senate Democrats in a terse missive.
“Let me be clear about the task ahead of us: we must get a bill to the president’s desk dealing with the debt limit by the end of the week. Period,” he said in his letter to colleagues.
Winning over the support of Senate Republicans remains a major stumbling block. Sixty votes are needed, but the 100 seat Senate is evenly split.
Senate Minority Leader Mitch McConnell last week blocked Democrat efforts to hold a vote to increase the debt limit with just a simple majority of senators.
He has pointed out that Democrats could raise the debt ceiling on their own by reopening the reconciliation process, saying it is “the path they will need to take.”
Nasdaq Gains, Small Caps Lag
The Nasdaq posted the best gains out of the major indexes Tuesday, closing up 1.3%. Netflix (NFLX) was the biggest gainer, rising more than 5%. It came after Cowen reiterated its outperform rating on the streaming giant.
The S&P 500 also squeezed out a solid gain, rising 1.1%. Medical devices stock Abiomed (ABMD) turned in the best gain here, popping nearly 6%.
U.S. Stock Market Today Overview
Last Update: 4:02 PM ET 10/5/2021
The S&P sectors were nearly all green, with financials turning in the best gains. Technology was another notable upside mover. Real estate and utilities were the only laggards.
Small caps lagged the other indexes, with the Russell 2000 rising just 0.3%.
In contrast, growth stocks excelled. The Innovator IBD 50 ETF (FFTY) closed with a gain of 1.5%, though this did not make up for Monday’s shellacking.
Dow Jones Erases Loss As Apple Stock Pops
The Dow Jones Industrial Average turned in a solid gain of 0.9%. It managed to erase Monday’s losses as it rose more than 300 points.
Apple stock rebounded after turning in the worst performance on the index Monday.
It pulled away from its 200-day moving average after rising nearly 2% but remains under its 50-day line.
Microsoft was also in rally mode, rising about 2%. The software stock is forming a new flat base but is now well shy of the ideal buy point of 305.94.
But strength in financials helped Goldman Sachs (GS) finish the day as the index’s top dog. The stock surged almost 4%.
Facebook Stock Gains As Whistleblower Testifies
Facebook stock managed to move higher, despite the fact whistleblower Frances Haugen testified before the Senate consumer protection subcommittee on Tuesday.
Haugen, who previously worked as a product manager handling civic misinformation issues at the company, claimed Facebook puts profits ahead of the health and safety of users.
She alleged that algorithms steer users toward high-engagement posts, which often contain more harmful content. The effects of products such as Instagram on vulnerable users, such as teenage girls, have previously been cited.
Haugen called for more regulation to solve the problem.
“The severity of this crisis demands that we break out of previous regulatory frames,” she said.
And it looks like there could be more trouble ahead for Facebook. The subcommittee’s Chairman Richard Blumenthal (D., Conn.) said Facebook and other large tech companies are facing a “moment of reckoning,” and called on the firm’s founder and CEO Mark Zuckerberg to give testimony.
Nevertheless, Facebook stock managed to rise nearly 3%, which pulled it further clear of its 200-day moving average.
These Stocks Pass Buy Points
A number of stocks were making bullish moves amid the positive action.
Fiber optics firm Clearfield broke out of a flat base on a weekly chart, according to MarketSmith analysis. The ideal buy point was 47.02.
The relative strength line hit a new high, which is a positive. It is in the top 5% of stocks in terms of market performance over the past 12 months.
Focus Financial Partners is actionable after passing a cup-with-handle entry of 54.85.
Earnings performance is the biggest strength here, but an Accumulation/Distribution Rating of B- reflects moderately strong buying by institutional investors of late.
Oil stock EOG Resources is just under a cup entry of 88.09 after moving above this level during the session.
Energy stocks got a boost after OPEC and a Russia-led group of oil producers decided against a big boost in production on Monday.
Human resources firm Robert Half International briefly moved above a flat-base buy point of 104.83, but closed below the entry.
Earnings are currently lagging stock market performance, but RHI stock could do well as economies bounce back from coronavirus lockdowns.
Buying risk remains high however, as the market is still in a correction.
Please follow Michael Larkin on Twitter at @IBD_MLarkin for more on growth stocks and analysis.
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