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Retailers, Banks Hit Dow Jones; Will These 5 Stocks Beat S&P 500 In 2019?

Wall Street initially reacted negatively to a pair of disappointing reports on the U.S. economy. But indexes rebounded off early lows. That hinted the confirmed uptrend in stocks today remains in force. The Dow Jones Industrial Average, hit by drops of one point or more by at least seven of its 30 components, fell around 0.4% at midday in New York.

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That kind of drop is manageable amid a confirmed market uptrend, sparked by a Day 7 follow-through on Jan. 4. Read more about this game-changing session in the Jan. 4 Big Picture column.

U.S. retail sales dropped 1.2% in December, marking the biggest month-on-month drop since September 2009, according to Reuters. Meanwhile, weekly first-time U.S. jobless claims bumped up to 239,000, ahead of the Econoday forecast of 225,000.

At around 12:45 p.m. ET, the Nasdaq gained nearly 0.3%, reversing from a first-hour loss of 0.6%. At the session high of 7448, the premier index for growth stocks is now just a 0.2% extra gain away from reclaiming the key 200-day moving average. It last closed above the 200-day on Nov. 8.

The S&P 500 slipped about 0.3% but the Russell 2000 gained a fraction. Volume is running mildly higher vs. the same time Wednesday on both main exchanges.

Meanwhile, Cisco Systems (CSCO), Canada Goose (GOOS), Yeti (YETI), Marathon Oil (MRO) and Chevron (CVX) are showing signs of emerging relative strength vs. the S&P 500. Strong breakouts to new highs would give these stocks the potential to outperform the large-cap benchmark over time.

In any IBD daily or weekly chart, or on MarketSmith, you can instantly check if a stock is beating the S&P 500 via the relative strength line, painted in blue. A rising RS line means a stock is either rising faster than the 500 on an up day or falling less on a down day in the market.

Cisco Leads The Dow Jones Today

Cisco powered up as much as 4.5% and notched a new 52-week high of 49.68. Shares also staged a new breakout, surpassing a 49.24 proper buy point in a five-month base that clearly shows the contours of a double-bottom base.

The telecom and internet gear innovator notched a 16% rise in profit for the January-ended fiscal second quarter. That marked a fifth quarter in a row of double-digit earnings growth. Sales picked up 5%. CEO Chuck Robbins told CNBC in an interview that he saw "tremendous balance around the world" in terms of product orders, up 11% in the EMEA region.

Cisco also increased its dividend by 6% to 35 cents a share and added $15 billion to its share buyback program. The new quarterly dividend would give Cisco stock an annualized yield of more than 2.8%. The S&P 500 carries a yield of around 1.95%.

In addition to Cisco, two consumer spending-related stocks deserve close watch. Canada Goose, a March 2017 IPO, got hit hard by sellers after reporting good fiscal Q3 results. Yet, for the week, shares are down just 4% after running up almost 50% since its Christmastime low. Watch for a new base to form.

The luxury winter coat and apparel maker notched a 52% jump in fiscal Q3 earnings to 70 cents a share. That's on top of a 48% EPS rise in the year-ago quarter. Sales rose 38% to $292.9 million, the highest total in any single quarter.

IBD Stock Checkup shows Canada Goose, a mid-cap growth stock with a market value of $5.8 billion, as having a respectable 94 Composite Rating on a scale of 1 (terrible) to 99 (terrific). The Composite Rating combines a data-driven analysis of fundamental, stock price strength and fund sponsorship factors. Canada Goose's 83 Earnings Per Share Rating is not great, but it masks solid EPS increases in six of the past seven quarters.

Plus, Canada Goose showed a meaningful 250 basis-point jump in after-tax margin to 26.8%.

Please read this Investor's Corner on the importance of finding growth stocks that showcase something new. That's the N in CAN SLIM, IBD's seven-point paradigm for growth stock investing.

Yeti Stock Breakout

Yeti, a seller of premium-priced outdoor products, including coolers and beverage containers, cleared a 19.30 buy point in a deep cup with handle. The base is first stage.

Austin-based Yeti reported a 375% leap in Q4 earnings to 38 cents a share as sales rose 19% to $241.2 million. The top line grew 28%, 39% and 7% vs. year-ago levels in the prior three quarters.

In The Dow Jones: Why Cisco Move Is A Breakout

In a double bottom, the stock undergoes two major sell-offs. The second sell-off must take shares below the low of the first sell-off.

So in the case of Cisco, a three-week slide in December resulted in a multi-month low of 40.25. That low undercut the 42.94 low seen during an initial sell-off in October, when IBD downgraded the stock market outlook at the time to "market in correction."

In The Energy Sector

Marathon Oil, a former member of IBD Leaderboard, rocketed up more than 8% in volume running more than four times usual levels. But the stock also still lies nearly 29% below a 52-week high. It's still in the early stages of forming a base.

The integrated oil industry group member posted a 114% increase in Q4 earnings to 15 cents a share as revenue grew 28% to $1.77 billion.

In the same group, Dow Jones 30 component Chevron is forming a long base and stands just 9% below a 52-week peak.

Notice on a daily chart how Chevron has formed a five-month double bottom within its long consolidation. From that perspective, the correct entry point is 122.53, 10 cents above the Dec. 3 intraday high.

Crude oil has made quite a rebound in 2019 after a harrowing bear-market-style decline in the fourth quarter of 2018.

WTI near-term futures rallied almost 1% to $54.43 a barrel, getting closer to a year-to-date peak of $55.26 set on Feb. 1. West Texas Intermediate has now jumped 28% from its Christmas Eve low near $42.

Biggest Losers On The Dow Jones

While bank and insurance names in the Dow Jones Industrial Average (namely JPMorgan Chase (JPM), Goldman Sachs (GS) and Travelers (TRV)) all lost roughly 1 point or more, the biggest decline belonged to Coca-Cola (KO).

The Atlanta-based beverage titan gapped down at the open and lost more than 3 points, or 7% and undercut its long-term 200-day moving average. Coke reported a 10% lift in fourth-quarter profits, meeting views. Sales sank 6% to $7.06 billion, reflecting stiff competition and a general trend away from sugary, fizzy non-alcoholic drinks.

Please follow David Saito-Chung on Twitter at @IBD_DChung for more on growth stocks, the economy and financial markets.

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