President Trump offered a plan Friday to reduce the prices of costly ethical drugs, and the speech spurred generally positive reactions within the pharmaceutical and related industries.
The biotech group was among the day's top three industries of the 197 tracked by IBD, rising 2.7%. Generic drugmakers rallied 2.5% as a group, while ethical drug stocks bounded up 2.4%, drugstores were up 1.7%, managed care up 1.6%, and wholesale drug supply up 1.4%.
Meanwhile, the major equity indexes played small ball throughout most of Friday's session. But they finished the week with smart gains as IBD upgraded the stock market current outlook to "Uptrend resumes" on Thursday. The Nasdaq composite rushed 2.7% higher for the week. The S&P 500 lifted 2.4%. Apple (AAPL) also posted a second straight weekly gain.
The iPhone giant halted a nine-session winning streak, but still closed the bullish week up more than 2% at 188.59. That's on top of a 13% jump the prior week in unusually heavy volume. The recent rally has hoisted Apple as much as 6% past a new proper buy point of 179.04 in a very mild seven-week double-bottom base. (Read the latest updates in stock market action by going to the Stock Market Today landing page.)
How The Indexes Fared
The Nasdaq composite edged 0.1% lower, but the S&P 500 inched nearly 0.2% higher. The Dow Jones industrial average rallied 0.3%, thanks to gains of 1 point or more from Big Pharma components Merck (MRK) and Pfizer (PFE). UnitedHealth Group (UNH), another Dow Jones industrial component, also rose 4.57, or 2%, to 238.28.
Merck is still trying to clear stubborn upside resistance at the long-term 200-day moving average. A 38 Relative Price Strength Rating means Merck is outperforming only 38% of all companies in IBD's database over the past 12 months.
Small Caps Advance
The small cap S&P 600 ticked 0.1% higher. At 986, the index is now up more than 5.3% since Jan. 1.
Strong corporate earnings in Q1, more signs of modest U.S. inflation, and valuation of equities vs. bonds still offer reasons to be bullish on stocks for the rest of the year.
"Even when you compare the earnings yield of the S&P 500 with yields on Baa corporate bonds, and not the 10-year Treasury bonds, the stock market still looks attractively valued," Leo Grohowski, chief investment officer at asset management giant BNY Mellon Wealth Management, told IBD in an interview. "But you should not invest on a snapshot view. Looking 12 to 18 months out, even with a cooling in the economy I cannot see the 10-year yield at 3% or lower."
The yield on the benchmark U.S. Treasury 10-year bond continued to hover below the critical 3% level, finishing the day around 2.97%. Grohowski forecasts the yield will end the year at 3.25%.
When To Buy Apple
Back to Apple; the megacap turnaround tech play is now trading roughly 5.3% above the 179.04 ideal buy point after a breakout from a double bottom base. Try to buy shares no more than 5% past the correct entry so that you avoid getting prematurely shaken out. Even large-cap leaders are prone to testing or even falling briefly below the breakout point after a strong upward thrust in price.
Apple's fundamentals continue to shine, with earnings climbing 11%, 18%, 24%, 16% and 30% vs. year-ago levels in the past five quarters. The Street sees fiscal Q3 profit rising 31% to $2.18 a share, which would mark a slight acceleration in growth.
Apple is now up almost 60% since it cleared a first-stage cup with handle base entry at 118.12 on Jan. 6, 2017.
Still A Market Leader
Inside the IBD 50, another pharmaceutical play rejoined the list of premier growth stocks. Supernus Pharmaceuticals (SUPN) blasted 14% higher to 57.05 as volume jumped nearly quadruple usual levels. Up three straight sessions, the stock is now extended 14% past a 49.85 correct buy point within a seven-month cuplike base.
In that base, Supernus formed a roughly two-week downward slanting handle in lighter trade. This handle on the base represents the final shakeout of weak holders before this week's huge breakout. The expert in treatments for epilepsy and ADHD posted a 158% leap in first-quarter earnings to 49 cents a share, crushing the consensus estimate by nearly 49%. Sales increased 57% to $90.4 million, a quarterly record.
IPG Photonics (IPGP), an industrial laser maker, and oil and gas play Wildhorse Resource Development (WRD), also joined the IBD 50 in recent sessions.
(Please follow Saito-Chung on Twitter at @IBD_DChung for additional commentary on top growth stocks, breakouts, sell signals, and financial markets.)
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