Stocks are in the midst of their best rebound since the October rally out to the August-September lows. Small caps, precious metals and material stocks have led the way thus far. But the rest of the market is quickly working to catch up.
The buying impulse pushed the major averages even higher on Thursday, nearing levels not seen since December. In the end, the Dow Jones Industrial Average added 0.3% to close in on the 17,000 level, the S&P 500 gained 0.4%, the Nasdaq Composite posted a 0.1% gain and the Russell 2000 finished higher by a percent.
Treasury bonds were stronger, the dollar was weaker, gold gained 1.7% and crude oil gained 0.1% to close at $34.70 a barrel. Market breadth — the percentage of stocks participating to the upside — has been steadily expanding. Among S&P 500 stocks, the percentage in uptrends has grown from a low of less than 25% in January to more than 66% now.
Energy stocks led the way with a 1.3% gain followed by financials, which gained 0.6%. Apparel and luggage maker Tumi Holdings Inc (NYSE:TUMI) gained 30.2% on reports Samsonite was nearing an agreement to acquire the company in a deal valued at close to $2 billion. Mining equipment maker Joy Global Inc. (NYSE:JOY) gained 20.8% on aggressive cost cutting and already depressed expectations.
Healthcare stocks were the laggards. Herbalife Ltd. (NYSE:HLF) lost 7% after identifying errant information in the company’s new “Active New Member” metric. SunEdison Inc (NYSE:SUNE) lost another 15.1%
Gold surged to fresh highs as the Gold Trust ETF (NYSEARCA:GLD) added 3.1% to return to early 2015 levels. The move into precious metals and the related mining stocks has been impressive over the last two months, driven by global financial volatility, worries about China and European banks, focus on negative interest rates in Asia and Europe and expectations the Federal Reserve will hold off on any further interest rate hikes until 2017.
I’ve been recommending a handful of precious metals stocks to Edge subscribers since November, with First Majestic Silver Corp. (NYSE:AG) gaining 6.7% to bring its total gain to more than 50%.
As breadth expands, a growing list of stocks look ready for big breakouts from multi-month declines.
These stocks include popular mega-cap stocks like Apple Inc. (NASDAQ:AAPL) which is pulling away from a three-month consolidation range to return to early January levels. Hype is building for the product announcement later this month (with a new 4-inch iPhone and new iPads reportedly on the docket) and the iPhone 7 launch later this year. Edge Pro subscribers are enjoying a 50%+ gain in their March $100 AAPL calls.
Looking ahead, all eyes are on Friday’s non-farm payroll report for clues so to what the Fed will due at its policy announcement on March 16.
Economists are looking for a job gain of 190,000 for the month and the unemployment rate to hold steady at 4.9%. A strong private-sector ADP employment report on Wednesday suggests an upside surprise would be most likely.
Ed Yardeni of Yardeni Research believes the Federal Reserve will not hike rates in March, as policymakers have turned slightly more cautious on the economic outlook and inflation. If so, the recent stock market uptrend should continue without pause.
Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters. A two-week and four-week free trial offer has been extended to InvestorPlace readers.
