End-of-quarter buying interest lifted the stock market Thursday, as traders scooped up leading chip stocks and market pros closed the books on the first quarter. The Nasdaq 100 is set to complete a bullish outside-month candlestick pattern, suggesting additional Big Tech gains in the second quarter.
The PHLX semiconductor index outperformed with a 1.9% rally, yielding a 3.2% gain so far this week.
More important, the index has rallied more than 27% in the first quarter, resuming long-term market leadership.
The IBD 50 is chock full of chip stock leaders, including Lattice Semiconductor, Rambus, Taiwan Semiconductor, Lam Research and Broadcom.
Window dressing also looks set to drive stocks higher.
Fund managers often use the last days of a volatile quarter to pile into winners and lighten up on losers, tidying up quarterly performance statistics. The banking crisis has receded for now, but the sector remains full of bearish bets, raising odds for a short squeeze that shakes out over-aggressive bears. All in all, it's a potent brew for a run-up into the first week of the second quarter.
Adding to good vibes, the Nasdaq 100 will complete a bullish outside-month pattern in March, barring a collapse into the weekend. This potent candlestick formation signifies strong action, in which the monthly price bar trades lower but then closes higher than the prior month. Invesco QQQ Trust ETF rose by nearly 1% Thursday at midday.
Stock Market Action
The Dow Jones Industrial Average faded into the lunch hour, up just 0.2%, while the S&P 500 added 0.4%. The Nasdaq jumped 0.6%. The Russell 2000 small-cap index turned tail after a morning uptick, down 0.1%. The Innovator IBD 50 ETF fared better than most major indexes, gaining 0.5%.
NYSE and Nasdaq volume surged compared with Wednesday's first half, in a bullish sign.
Last week's initial jobless claims rose by 7,000, to 198,000, reaffirming tight labor market conditions. The latest Q4 GDP revision, at 2.6%, confirmed ongoing economic resiliency.
Crude oil traded higher by more than 1%, up to $74.20 per barrel. Asian and European bourses rose sharply, in worldwide risk-easing conformity.
The 10-year Treasury note yield flattened to 3.57%. Odds for a 0.25% rate hike at the May Fed meeting now stand at 50-50, according to CME FedWatch.
The Nasdaq and S&P have remounted their 50- and 200-day moving averages. The Dow Jones is trading above the 200-day line but remains below the 50-day line. Finally, and standing out like a sore thumb, the Russell 2000 remains below the 50- and 200-day lines. This bearish divergence negatively impacts advance/decline readings.
China Stock Alibaba Could Set Off Firestorm
The SPDR S&P China ETF surged 1.1%. Baidu went the other way, dumping 2.2% after a delayed chatbot rollout.
This week's decision by Alibaba to break into six independent units could set off a reorganizational firestorm in China, with other big names breaking up or realigning. Overnight, Nasdaq 100 component JD.com proposed a spinoff and separate listing for the JD Property division on the Hong Kong exchange.
BABA stock rallied 4.3% into the noon hour while JD stock rocketed nearly 9%.
The Wall Street Journal considers this realignment a "win-win" for shareholders, especially for BABA, noting "that is why analysts have taken a 'sum-of-the-parts' approach to assess how much the company should be worth after splitting into different pieces. Cloud and global e-commerce are the segments that show the most promise and many analysts think they are the most valuable outside of Alibaba's core business."
Stock Market Today: Homebuilder Highlights
Charles Schwab slid 5.2% after a Morgan Stanley downgrade, but the stock remains well above the two-year low posted March 13.
IBD 50 single-family homebuilder Meritage Homes traded 2% from the 117.32 buy point in a handle. Home sales are holding up better than forecast so far in 2023, and rivals PulteGroup and Tri Pointe Homes have also joined this elite list. MTH shares are trading 0.1% higher at this hour.
MTH stock boasts a perfect 99 Composite Rating. The 97 Earnings Per Share Rating reflects rapid growth, while the A SMR Rating (sales + profit margins + return on equity) confirms good underlying fundamentals.
Monolithic Power Systems held 50-day line support within a handle this week, continuing to build a seven-month cup-with-handle pattern. Shares could turn the corner at any time and head straight for the 530.75 buy point. MPWR stock popped 1% in the first half.
Follow Alan Farley on Twitter at @msttrader.
