Institutions bought U.S. equities furiously and large caps dominated the action in stocks today. Key indexes rose 1.5% or more as Wall Street applauded the Federal Reserve's decision to stand pat on short-term interest rates. Comments from the U.S. central bank suggest it does not want to raise the cost of money to the extent that it could usher in a new economic recession.
XThe Nasdaq composite stormed 2.2% higher while the S&P 500 rose nearly 1.6%. The Russell 2000 lagged with a 1.1% lift. Volume jumped on both exchanges, according to early data.
The four FANG stocks, representing more than a trillion dollars in market value, enjoyed a solid advance as the quartet rose on average more than 3.5% for the day.
Meanwhile, a growing bunch of aerospace firms are showing strength amid rising demand for industrial plays.
Boeing (BA), Lockheed Martin (LMT) and TransDigm (TDG) — whose first letters form the acronym BLT — have been dishing up tasty gains lately.
Boeing staged a breakaway gap after forming a narrow handle on its cup-style base that also can be interpreted as a double bottom. The handle's highest price of 367.32, plus 10 cents, provides a 367.42 correct buy point. But Boeing has yet to clear the cup's left-side high.
Boeing rose after the company beat earnings estimates.
TransDigm, the newest member on IBD Leaderboard, gained another 2% after vaulting 7% on Tuesday following bullish fourth-quarter preliminary results. Volume nearly doubled above normal levels both days. That's a telltale sign that institutional appetite for shares is rising fast.
IBD Stock Checkup gives TransDigm an 82 Composite Rating on a scale of 1 (worst) to 99 (best). An even worse Earnings Per Share Rating of 71 factors into the so-so Composite Rating. Yet while an 82 is not terrific, it also masks the strong potential for an acceleration in TransDigm's profit growth.
Will Profit Growth Rev Up At TransDigm?
Earnings in the December-ended fiscal first quarter are likely to rise 29% to $3.38 a share. That would mark the highest year-over-year gain in 10 quarters. Earnings had expanded just 9%, 6%, 4%, 12%, 7% and 8% in the prior six quarters.
Look at the entire fiscal year ending in September this year, and analysts on consensus see the Cleveland-based company's earnings growing a total 24% to $16.54 a share, then lift another 14% to $18.85 in FY 2020.
Lockheed Martin, the F-35 fighter jet maker and laggard among the trio, is making efforts toward a sixth up week in a row. Multiple up weeks within a base is bullish. Lockheed Martin has also retaken its 10-week moving average but is not yet near a proper buy point.
The stock shows an annualized dividend yield of 3%, spanking a 2.04% yield for the S&P 500.
Lockheed has made an outstanding long-term run since the market bottomed in 2009. In the week ended March 29, 2013, the large cap cleared a nine-week flat base with a 96.62 buy point. Shares have risen steadily since then, gaining as much as 275% to a 52-week peak of 363.
Outside The Dow Jones: This Industry Group Still Rocks
Security software stocks continued to lead the upside. (See the daily performance of all 197 IBD industry groups in the Data Tables section of Investors.com.)
SecureWorks (SCWX), a small cap in its universe with a $1.8 billion market value, barreled about 9% higher and reached as high as 21.97 on Wednesday.
Shares have now catapulted more than 15% past a 19.01 proper buy point in an eight-week cup without handle base.
Notice on a daily chart how the stock's relative strength line has bolted into new high ground. That's bullish. A rising RS line means a stock is smashing the current return of the S&P 500.
Fortinet (FTNT), one of SecureWorks' peers in IBD's security software industry group, also beat the major indexes Tuesday. The longtime true market leader rallied 2.7% and is sculpting a new base. Shares peaked at 94.37 Oct. 1 before beginning a normal correction.
According to IBD Stock Checkup, Fortinet garners a top-notch 99 Composite Rating on a scale of 1 (horrible) to 99 (wonderful).
Some Medical Plays Suffer Big Selling
On the downside, Illumina (ILMN) tanked more than 4% and notched a new multi-month low of 268.62. Volume jumped more than twice its 50-day average. The DNA analysis systems provider posted a shocking 8% drop in fourth-quarter earnings to $1.32 a share, missing the Thomson Reuters consensus view by 4 cents. One reason for the year-over-year drop may be the very tough year-over-year comparison. In Q4 of 2017, profits jumped 69% to $1.44 a share.
Revenue rose 11% to $867 million in Q4. That marked the smallest gain in six quarters and a third quarter in a row of growth deceleration.
Innoviva (INVA), part of the IBD 50, plunged as much as 15% to a session low of 17.05 before rebounding back above its fast-rising 50-day moving average. The developer of drugs to treat respiratory diseases did not make any filings to the SEC.
Through Wednesday's action, the IBD 50 has garnered an 8.5% gain year to date. The S&P 500 is up 7%.
In Other Financial Markets
Gold and silver rallied. Crude oil futures climbed well past $54 a barrel as the U.S. dollar cooled vs. the euro.
Investors bought back long-dated U.S. Treasuries as Federal Reserve Chair Jerome Powell hinted that the central bank's initiative to remove Treasury bonds, agency debt and mortgage-backed securities would not necessarily stick to a strict schedule this year.
The yield on the benchmark 10-year note fell 2 basis points to 2.70%. The spread between three-month T-bills and the 10-year bond is still relatively healthy at 28 basis points, up from 24 basis points on Jan. 2.
Please follow Chung on Twitter at @IBD_DChung for more on growth stocks, breakouts, sell signals and financial markets.
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