Investors were cautious to open today’s session keeping an eye on rising rates and volatility from earlier in the week. The NASDAQ traded down to its 50-day moving average at the bell but held support for a second day, reversed course, and finished with a solid gain. Turning the market around was a second day of dovish testimony from Fed Chair Jerome Powell as he emphasized that the economy had a long ways to go before the Federal Reserve would back off its accommodative monetary policy. Powell stated the Federal Reserve wants inflation anchored at 2% and that employment was far below the Fed’s target. The major averages crossed back into positive ground during Powell’s testimony and rallied into the close with the DJIA, DJ Transportation Index and NYSE finishing at new all-time highs. Leading the charge was Energy (XLE), surging +3.54% and Financials (XLF), up +1.94%. Year-to-date the Energy ETF (XLE) is up +32.7%, while the Financial ETF (XLF) has gained +13.8%. Both sectors however, ended the day overbought with their respective 14-day RSI above 75. Industrials (XLI) and Technology (XLK) also outperformed with Technology snapping a five-day losing streak after the Philadelphia Semiconductor Index spiked +3.24%. Rate sensitive Utilities (XLU) and Consumer Staples (XLP) finished in the red. Earnings were mixed with Lowe’s (LOW) blowing away estimates, but TeleDoc (TDOC) and TJX Co. (TJX) disappointing. All three stocks traded lower however, on the results. Dow components Boeing (BA), Chevron (CVX) and Goldman Sachs (GS) led the blue chip index to a new record high surging 424.51 points (+1.35%) to 31961.86. The S&P 500 jumped 44.06 points (+1.14%) to 3925.43, while the NASDAQ picked up 132.77 points (+0.99%) closing at 13597.97. The small cap Russell 2000 was the strongest performer surging +2.38%.

Breadth was bullish with advancing issues beating declining issues 2:1 on the NYSE and 2.6:1 on the NASDAQ. Advancing volume was 77% on the NYSE and 74% of the NASDAQ. The VIX dropped 1.77 (-7.66%) and finished at 21.34. Crude oil prices jumped 1.58 (+2.56%) and the April contract closed at $63.25 a barrel. Gold prices eased 3.90 (-0.22%) and finished at $1802.00 an ounce. Bitcoin (BTC) ended the session at $48,750, down -4.00%.

Chairman Powell continues to fuel the rally with his dovish testimony, and with a $1.9 trillion stimulus relief package on the way and coronavirus cases on the retreat, more upside seems to be in the cards. Despite recent weakness in over weighted, big cap tech shares, money is finding its way into cyclicals and reopening stocks that can trade higher. In addition, underlying breadth remains positive in a market led by small caps and transports which bodes well for the market going forward. However, the leading sectors are overbought and due for some profit taking.

Earnings releases to watch for on Thursday include: Air Transport Services (ATSG), Ambev SA (ABEV), American Tower Corp )AMT), Adtodesk (ADSK), Best Buy Co. (BBY), Caesars Entertainment (CZR), Cleveland-Cliffs (CLF), Dell Technologies (DELL), etsy Inc (ETSY), First Solar (FSLR), Groupon (GRPN), HP Inc (HPQ), Keurig Dr Pepper (KDP), Medifast (MED). Moderna (MRNA), Netease (NTES), Norwegian Cruise Lines (NCLH), Plug Power (PLUG), salesforce.com (CRM) and VMware (VMW).

Thursday’s Market Moving Economic Calendar: Durable Goods Orders, GDP, Jobless Claims, Pending Home Sales and Kansas City Fed Mfg Index.

By David L. Blake, CMT