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4 Dow Jones Stocks Lead Market Up

The rally in stocks today showed some wobbles, but Wall Street firmed up some in the final minutes of the last trading day in 2018. Investors continued to hunt for bargains amid one of the worst December performances in recent history. The Dow Jones industrial average paced the gains Monday, closing the day up more than 1.1% and finishing near session highs.

At 23,328, the 30-stock Dow industrials ended the year down 5.6%. It rose 25.1% in 2017.

The Nasdaq composite and the S&P 500 traded pretty much in lockstep all day. The former finished ahead 0.8% while the latter ended up almost 0.9%.

At 6635, the tech-rich Nasdaq composite ended the volatile year down less than 4%. The S&P 500, at 2506, closed 2018 down a little more than 6.2%.

Canadian oil and gas firms, movie, discount and variety retail, gold mining, biotech, specialty enterprise software, oil refining, fertilizer and medical software firms paced the market’s upside, each rising 1% or more. Specialty consumer product, oil and gas royalty trust, mortgage REIT and dairy stocks fell 1% or more on a price-weighted basis.

To see the daily performance of all 197 IBD industry groups, go to Stock Lists at Investors.com, then click on Data Tables. When you go to the exact web page for the daily performance of these 197 industry groups, you can change the date within the URL address to see performance on other trading sessions.

In The Dow Jones Industrials, Medical And Consumer Stocks Rule The Roost

Within the 30-stock Dow Jones industrial average, at least four components have shown impressive relative strength in recent months: McDonald’s (MCD), Merck (MRK), Pfizer (PFE) and Verizon Communications (VZ). All four also show a Relative Price Strength Rating of 90 or higher and rising relative strength lines.

You can track a stock’s relative strength vs. the S&P 500 in a flash by going to any IBD chart, as well as on MarketSmith, and view the RS line, drawn in blue.

A rising RS line means that a stock is outperforming the S&P 500, both on up days and on down days. That is, if the S&P 500 is down for the day but a stock fell less, its RS line will rise.

The RS Rating differs from the RS line. The rating shows what percentage of companies in IBD’s database that a given stock has outperformed in price over the past 12 months. A 99 rating is the best; it means a stock is in the top 1% in relative stock price performance.

Both McDonald’s and Verizon spent some time this year in IBD Leaderboard as sturdy defensive big-cap plays as traditional high-growth stocks corrected sharply in Q4. McDonald’s recently made a round trip of an 11% gain after breaking out at 172.10 last month. Watch for a potential base on base to form.

In The Dow Jones: Merck Wins Big In 2018

Merck recently reclaimed its 50-day moving average and 10-week moving average, a good sign. The ethical drug giant has advanced a nifty 21% since lifting out of a giant saucer-with-handle base with a 63.06 buy point.

An investor who bought at the correct entry can take at least partial gains when the profit hits the 20% to 25% level. Those with supreme conviction can decide to hold longer but also be aware of defensive sell signals.

The Street sees Merck’s earnings rising 11% to $4.34 a share this year and climbing another 9% to $4.71 in 2019. Merck shows an outstanding record of profitability despite a maturing growth rate in the top line. The return on equity jumped to 28.9% in 2017, the highest in at least nine years.

In Stock Checkup, Merck gets a top-flight A on a scale of A to E for the SMR Rating, which analyzes Sales growth, Margins and Return on equity. The overall Composite Rating is a meaty 94 on a scale of 1 (awful) to 99 (awesome). Read this Investor’s Corner to learn more about the proprietary Composite Rating.

Pfizer Headed For A 20% Advance In 2018

Pfizer and Eli Lilly (LLY) are working on a new drug that could replace the deadly opioid medicines that have been severely abused in the U.S. According to a new IBD technology news story, one analyst thinks the partners have a potential multibillion dollar market opportunity.

“In our 2019 preview we said the biggest surprise could be that the safety for Pfizer and Lilly’s tanezumab will be better than expected, and this drug could replace opioids for the treatment of pain,” Cantor Fitzgerald analyst Louise Chen said in a report to clients, as reported in this new article.

Pfizer shares cleared a seven-week flat base with a 45.91 entry point on Nov. 30, but the stock retreated fast amid the market correction. Since Pfizer undercut the low of that flat base, the blue chip reset its base count.

Watch to see if Pfizer can show enough institutional demand to rebound back above the 50-day moving average.

Nasdaq Today And The Big Picture Next Year

Chip stocks have helped the Nasdaq cut some of its recent losses. The iShares PHLX Semiconductor (SOXX) ETF rallied 0.7% on Monday to mark a fourth straight gain.

Broadcom (AVGO) is aiming at a fourth straight gain and has rallied more than 8% over that time frame. The wireless, industrial and data center semiconductor leader has fashioned a two-week handle on its aircraft carrier-sized saucer base.

Saucer bases tend to wear investors out, rather than shake them out. But many large caps in stock market history formed the saucer base before breaking out to new highs and outstanding stock profits.

To get IBD’s take on the key seven factors that will influence stock prices in 2019, read this new IBD Weekly front-page story.

For dividend hunters, check out this feature on utility stocks and the prospects for both these dividend-heavy plays and growth stocks in 2019.

In Other Financial Markets

Despite a positive tweet by President Donald Trump citing “big progress being made” on bilateral trade talks with No. 2 world economy China, institutions continued to duck into safe-haven assets, including U.S. Treasuries.

The yield on the benchmark 10-year bond dove as much as 4 basis points to 2.68%.

That marked the lowest yield since late January.

West Texas Intermediate crude oil futures rose 1.1% to $45.81 a barrel but still fell more than 24% for the year. Gold edged a touch higher. Silver futures rose more than 0.6% to $15.54 an ounce.

Please follow Chung on Twitter at @IBD_DChung for more on growth stocks, chart analysis, breakouts and financial markets.

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