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Stock Market Rally Continues, But Investors Should Remain Cautious

Strategic Insights

— 1 min read

The stock market rally maintained its upward momentum Thursday, with the S&P 500 index climbing 0.3% and the Dow Jones Industrial Average advancing 0.6%. However, investors should remain cautious as the rally has made huge strides over the past five sessions, and a pause or pullback wouldn't be a surprise. Leading stocks are showing better action, but many are now extended, at least from early entries or moving averages.

Key Takeaways:

  • The S&P 500 index came right up to its 200-day moving average, closing just below that key level.
  • The Nasdaq held support at its 50-day line and moved a little higher from that area.
  • The Dow Jones and Russell 2000, above all their moving averages, are working toward their December highs.
  • Investors see the light at the end of the tunnel for Fed rate hikes, but a quarter-point rate hike on Feb. 1 is still expected.
  • Exxon Mobil stock rose 1.7% to 113.22, just below a 114.76 buy point, according to Investor's Business Daily.
  • Celsius Holdings stock is still actionable from Wednesday's jump, rebounding from the 50-day line and breaking a short trendline.
  • The chip sector has regained momentum, with the VanEck Vectors Semiconductor ETF climbing 1.5%.
  • Earnings season could upend the market rally, or slam specific sectors or stocks.
  • Investors should focus on stocks that are "ready" or nearly so, and be cautious not to chase extended names.

Statistics:

  • The S&P 500 index climbed 0.3% in Thursday's trading session.
  • The Dow Jones Industrial Average advanced 0.6%.
  • The Nasdaq composite rose 0.6%.
  • The Russell 2000 jumped 1.7%.
  • U.S. crude oil prices rose 1.3% to $78.39 a barrel.
  • Copper climbed 0.8% on Thursday.
  • The 10-year Treasury yield tumbled 11 basis points to 3.45%.
  • Markets have almost fully priced in a quarter-point rate hike on Feb. 1.
  • Investors expect another quarter-point hike in March, to a 4.75%-5% range.

Sources:

  • Investor's Business Daily
  • Yfinance
  • The Wall Street Journal
  • MarketWatch

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