The Dow Jones Industrial Average went into the final hour of trading with the wind at its back Tuesday, but its 0.5% gain was not the best among major indexes on the stock market today. The popular index ended trading up 0.4% as the rally faded in the dying minutes of the regular session.
A sharp drop in long-term interest rates supported the advance in stocks. The benchmark U.S. Treasury 10-year bond fell 14 basis points to 4.65%. This follows last week's surge to as high as 4.88%, in which the 10-year yield capped a five-week run.
Yields rise when bond prices fall. The coupon — or regular interest payment owned to bond holders — stays fixed until the bond's maturity.
The Dow Jones' rise slightly underperformed a 0.6% rise in the tech-dominated Nasdaq composite. And the blue chip index proved inferior to gains of 1.1% posted by the Russell 2000 and a 0.9% rebound by the SPDR S&P Mid Cap 400 Index exchange traded fund.
The S&P 500, meanwhile, floated 0.5% higher. At one point the large-cap benchmark hit a session high of 4,385, tallying a 14.2% gain year to date. That's far better than a 1.7% advance by the Dow Jones industrials over the same time frame and a paltry 1% gain from the Russell 2000.
Turnover Turns Higher
Volume jumped 13% vs. Monday on the Nasdaq and grew 9% on the New York Stock Exchange, preliminary data showed. Equally important, the broad advance comes two days after IBD noted a key inflection point.
As noted in this Friday Big Picture column, the Nasdaq posted a follow-through day on the eighth day of a new rally attempt.
The follow-through day, based on decades of IBD market research, has proven to be the earliest signal that the stock market has bottomed. It does not guarantee a tradable rally every time. However, going back to 1900, every major market bottom and subsequent bull run featured a strong follow-through day.
The Nasdaq's 1.6% gain in heavier turnover on that Oct. 6 session indicates that more institutional investors likely are deploying more capital into stocks. Another positive market indicator? Breadth is improving.
Winners led losers on the Nasdaq by more than a 2-1 margin. On the New York Stock Exchange, advancing stocks beat decliners by 3 to 1.
Stock Market Forecast For Next 6 Months: What Investing Pros Are Watching Today
Dow Jones Today
Within the Dow Jones industrials, which is price-weighted, at least 11 of the index's 30 components posted a gain of 1 point or higher.
They included Goldman Sachs and charge card titan American Express, both of which rallied at least 2 points. Another was Coca-Cola. It was the only Dow Jones component among the eight stocks that was up at least 1 point, and rose in above-average turnover. Also making the climb was JPMorgan Chase.
Among the 11 Dow Jones stocks that moved a point higher, only three hold a respectable combination of 80 or higher for both the Earnings Per Share Rating and the Relative Strength Rating: Walmart, credit and debit card processing juggernaut Visa, and JPMorgan.
The Relative Strength Rating compares a stock's 12-month performance with all other companies in the IBD database. Generally, the best stocks hold an RS Rating of 80 or higher when they break out to new highs and launch market-beating rallies.
With an EPS rating of 95 and RS rating of 85, Morgan reports third-quarter results early Friday. The stock currently is carving out a new shallow base that has only a 12% decline from its recent high. That's small enough of a correction to qualify as a potential flat base. So for now, JPM's proper buy point stands at 159.38.
Watch to see if JPM stock can bullishly rebound back above its falling 50-day moving average. Wall Street sees the money center's earnings rising 33% this year to $16.05 a share, but then dipping 7% in 2024.
Walmart, also a Dow Jones stock, is trying to halt a three-week losing streak. The stock is testing support near the 200-day moving average.
Cheap Stocks To Buy And Watch Now
Defense Stocks Outperforming
Meanwhile, defense industry consultant Booz Allen Hamilton got some airtime on Tuesday's IBD Live show. The McLean, Va.-based firm has been rising sharply in recent weeks and quickly building the right side of a new cup. Shares rose 1.4% in volume that jumped 34% above its 50-day average.
For now, BAH shows a new entry point of 125.19.
Earnings growth has accelerated at Booz Allen. Starting with its fiscal fourth quarter of 2022 — which ended in March that year — earnings jumped from a 3% year-over-year decline to gains of 6%, 6%, 5%, 17% and 30% in the past five quarters. Revenue has averaged 12.3% on a year-over-year basis over this six-quarter period.
Also outside the Dow Jones 30, other defense-related names are doing well this week. Lockheed Martin has jumped 8.6% since Monday.
But as the weekly chart shows, LMT is still living below its long-term 40-week moving average. This is visible on a MarketSmith weekly chart. Ditto for Lockheed shares and the 200-day moving average on the daily chart.
Meanwhile, Kratos Defense, a small cap based in Round Rock, Texas, is definitely outperforming LMT. Its Relative Strength Rating of 96 is far superior to the 46 for Lockheed.
Kratos is quickly approaching a 17.31 buy point in a two-month cuplike structure. KTOS also got analyzed during IBD Live on Tuesday.
Investor's Corner: The Seven Most Important Words On Wall Street
Please follow David Chung on Twitter: @saitochung and @IBD_DChung
