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Dow Jones Jumps 400 Points As Stocks Rally On Debt Deal; Breakouts To Watch

Stocks held solid gains Thursday afternoon as the Dow Jones Industrial Average rallied 400 points to again touch its 50-day moving average.

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The Nasdaq rallied 1.3%, the Dow Jones industrials rose 1.1% and the S&P 500 advanced 1% in the stock market today. Small caps tracked by the Russell 2000 outperformed, up 1.7%. Volume was lower on both major exchanges vs. the same time Wednesday.

Among exchange traded funds, Innovator IBD 50 (FFTY) gained 1.4%, while the Nasdaq 100-tracking Invesco QQQ Trust (QQQ) rose 1.5%. The IBD 50 ETF, which tested its 200-day line last week, is now trying to regain the 50-day line.

Stocks extended their gains after Senate Majority Leader Chuck Schumer announced lawmakers reached a short-term deal to extend the debt limit through early December. That would buy time to avert a government default that Treasury Secretary Janet Yellen had said could trigger a recession.

"We have reached agreement to extend the debt ceiling through December. And it's our hope that we can get this done as soon as today," Schumer said this morning.

U.S. Stock Market Today Overview

Index Symbol Price Gain/Loss % Change
Dow Jones (0DJIA) 34779.06 +362.07 +1.05
S&P 500 (0S&P5) 4405.49 +41.94 +0.96
Nasdaq (0NDQC ) 14687.17 +185.26 +1.28
Russell 2000 (IWM) 223.54 +3.67 +1.67
IBD 50 (FFTY) 47.49 +0.66 +1.41
Last Update: 3:04 PM ET 10/7/2021

Early Thursday, the Labor Department reported initial jobless claims of 326,000 in the week ended Oct. 2. That was down from the prior week's 364,000 claims and also below economist forecasts for 328,000 claims.

The U.S. economy continues to recover from the Covid-19 pandemic, which triggered nationwide lockdowns over a year ago. A resurgence in cases fueled by the more contagious delta variant has recently started to slow down as vaccinations rise.

Cumulative Covid-19 cases worldwide have topped 237 million, with over 4.8 million deaths, according to Worldometer. In the U.S., cases are approaching 45 million with nearly 728,000 deaths.

Growth Stocks To Watch

Endava (DAVA) soared 6% in above-average trade to a new high. It's now slightly extended from a 143.60 buy point of a seven-week consolidation first cleared on Tuesday, according to MarketSmith chart analysis. The buy range topped out at 150.78. Endava, with a 99 Composite Rating, leads the 47-stock computer tech services group. It was discussed on IBD Live this morning.

U-Haul parent Amerco (UHAL) gapped up and rose more than 3% to break out past a 677.44 buy point of a six-week flat base. The stock remains in potential buy range up to 711.31. Amerco is holding above its 21-day and 10-week moving average lines, a bullish sign.

Resources Connection (RGP) surged 14% in heavy trade to a three-year high, after the accounting consulting firm delivered a solid fiscal Q1 beat late Wednesday. Shares are now well extended from a 16.60 buy point of a flat base first cleared on Wednesday.

Marvell Technology (MRVL) soared 5% early Thursday, before paring its gain by half. Morgan Stanley boosted its price target on the fabless chip designer to 63 from 61. Marvell stock blasted past a 64.17 flat-base buy point but is still in buy range up to 67.38.

Keep in mind that with the market in correction, all purchases are highly risky. While investors should hold off on aggressively buying stocks until the uptrend resumes, initiating very small positions in certain top-performing industry groups is still a viable option. It's best to avoid sectors showing severe weakness.

Dow Jones Movers

UnitedHealth Group (UNH) led winners on the Dow with a 3% pop as it works on a flat base with a 431.46 buy point. Analysts expect earnings to rise 25% to $4.40 a share when the managed care giant reports Q3 results next week.

Home Depot (HD), Dow Inc. (DOW) and Walgreens Boots Alliance (WBA) gained nearly 3% each.

Home Depot gapped up and rose 2.6% to climb back above a 338.65 buy point of a flat base. It also moved further above the 50-day line after breaching support last week. On Wednesday, Walmart announced Home Depot will use the discount giant's Walmart GoLocal same-day and next-day delivery service.

Dow Inc. remains below its 50-day and 200-day lines despite Thursday's 2.8% advance. Late Wednesday, the chemicals giant announced plans to invest more than $3 billion in a strategy aimed at improving underlying earnings growth.

Among other blue chip winners, Nike (NKE), Cisco (CSCO) and Caterpillar (CAT) added more than 2% each.

Follow Nancy Gondo on Twitter at @IBD_NGondo

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