An improving economic backdrop and a few standout earnings reports helped send some of the major indices back into record territory Thursday.
Initial jobless claims for the week ending Jan. 30 came in at 779,000 – lower than expected, and 33,000 fewer than the prior week's claims, which were sharply revised downward to 812,000.
"Altogether, the signal from this week's claims data is one of modest further improvement following recent deterioration," write Barclays' Michael Gapen and Pooja Sriram. "Trends in initial claims in early 2021 point to some improvement in the rate of job separations in January, though this week's readings will be reflected in February employment conditions given the timing of the survey week for employment conditions (the week that includes the 12th of the month)."
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Also noteworthy were factory orders, which improved by 1% month-over-month in December, exceeding expectations.
On the earnings front, PayPal Holdings (PYPL, +7.4%) took off after reporting Wednesday night that fourth-quarter profits tripled amid continued pandemic-driven adoption of digital payments.
"We continue to appreciate PYPL's growth and positioning for a post-Covid world, which is accelerating the secular trends of e-commerce and digitization of cash and payments," writes Chris Kuiper, analyst at CFRA, adding that "we are particularly interested in PYPL's foray into crypto assets, which we think could become a much bigger opportunity."
"However, shares continue to embed very high growth expectations, therefore we remain neutral."
Interestingly, eBay (EBAY, +5.3%), which PayPal split from in 2015, also had itself a day after robust holiday sales fueled a Q4 earnings beat. Those and other strong tech performances led the Nasdaq Composite (+1.2% to 13,777) and S&P 500 (+1.1% to 3,871) to new closing highs. The Dow Jones Industrial Average finished with a strong 1.1% gain to 31,055.
Other action in the stock market today:
- U.S. crude oil futures continued their ascent, finishing a full 1.0% higher to $56.23 per barrel.
- Gold futures tumbled 2.4%, settling at $1,791.20 per ounce.
- Bitcoin prices, at $37,068 on Wednesday, advanced 1.2% to $37,528. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m. each trading day.)
Small Caps Keep Punching Above Their Weight
But the stars of Thursday's show – and 2021, for that matter – were small-cap stocks.
The Russell 2000 also clinched a new high, advancing 2.0% to 2,202, which puts the index up 11.5% for the year-to-date. A couple days ago, we pointed out that January was a tough one for the broader market, but Bank of America reminds investors that the Russell 2000 was the only segment that gained in January (+5.0%), and its analysts remain bullish for several reasons.
"Small cap profits should bounce back stronger than their decline, and guidance trends are strongest here of the three size segments," they say, also pointing to stimulus, sentiment and support for smaller businesses as other catalysts for further gains.
Investors can harness some of these effects in mid-cap stocks, which boast advantages such as more diversified revenue streams and better financial stability. But if you're willing to roll with the volatility punches the small-cap space can throw, these 11 smaller firms could fit the bill.
Because of their size, they don't get as much media attention, so they fly under a lot of investors' radar, but they boast the potential for an electrifying year ahead.
Kyle Woodley was long Bitcoin as of this writing.
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