Small caps woke from their 2018 slumber Thursday, as the Russell 2000 led the market upward. It was the first session this year that small caps set the day's pace.
[ibd-display-video id=3077571 width=50 float=left autostart=true] The Russell 2000 jumped 1.7%, while the Dow and the Nasdaq advanced 0.8% each. The S&P 500 added 0.7%.
Volume fell on the Nasdaq and rose on the NYSE.
Market technicals improved as the Dec. 14 distribution day dropped off the Nasdaq because of price gains. This leaves each major index with only one day of distribution, a minor amount.
Among the smaller stocks Thursday, LegacyTexas Financial ( LTXB ) knifed above a 45.04 buy point in a 10-month cup base.
The stock staged a positive reversal, turning an early 5% loss into a 1.7% gain at the close. Volume was below average for the thinly traded stock.
LegacyTexas has some quality support. Wells Fargo Small Cap Value Fund ( SMVAX ), which has an IBD fund rating of B+, owns LegacyTexas shares, as do other top-rated funds.
The Street expects LegacyTexas to post a 6% increase in 2017 earnings and then a 37% pop in 2018.
Georgia-based United Community Banks ( UCBI ) cleared a 30.57 buy point in a yearlong consolidation. Volume was double its usual pace.
The Street sees earnings rising 10% in 2017 and then 28% in 2018.
Seacoast Banking ( SBCF ) rose above a 27.23 buy point in a shallow pattern. The gain was more than 4%, but Seacoast closed just under the buy point. Volume was strong, but the stock is on the thinly traded side.
The Street pegs Seacoast's earnings increase at 19% in 2017 and 40% in 2018.
ConnectOne Bancorp ( CNOB ) popped above a 28.30 buy point in volume 32% above average. The stock is thinly traded.
Analysts expect earnings to decline 11% in 2017 and then increase 43% in 2018.
The Common Ingredient In Bank Stocks
What do the above bank stocks have in common? The Street expects earnings growth to step up in 2018. And this isn't just for the small and often thinly traded bank stocks.
This expected step-up in earnings growth in 2018 includes many of the big money-center banks, such as JPMorgan Chase (JPM), Citigroup (C) and Wells Fargo (WFC) to name a few.
Meanwhile, two IPOs showed wild action Thursday.
September initial public offering Secoo Holdings (SECO) gapped up 49% but then retreated to a 1.6% gain. The small cap crossed far above its 12.80 buy point but then closed well under the entry. The China-based company provides a high-end e-commerce marketplace.
Secoo lost money in 2015-16, but the Street expects a profit of 52 cents a share in 2017 and 86 cents a share in 2018.
Altair Engineering (ALTR), a November IPO, swung 3% higher in late morning trade and then reversed to a 5% loss. The stock closed in its 5% buy zone from a 25.69 buy point, but the reversal was bearish.
Other stocks breaking out Thursday included Kirby (KEX) of the shipping industry group, oilfield services provider Keane Group (FRAC) and PetMed Express (PETS). Only Keane, though, attracted breakout-quality volume.
The nice thing about the current market is the number of stocks breaking out. Many are not among last year's favorites, which suggests rotation is underway.
Check the movement in IBD's industry group ratings in the data tables . Then look for the top two stocks within the group.
Another place to check is the groups providing the most new highs . So far this week, the chief suppliers of new highs have been in the finance, retail and bank sectors.
First-time jobless claims came in at 261,000, about 7% more than expected.
On Friday, the U.S. Bureau of the Census will release retail sales data for December. The Street expects a 0.5% increase. The range of estimates runs from 0.2% to 0.7%.
Banks reporting results Friday include Wells Fargo, JPMorgan and PNC Financial (PNC). Going into Thursday's session, the bank sector was up 3.55% so far in 2018. Eleven sectors are up more than that. If the bank stocks are to move closer to a leadership role, they are going to have to deliver on the earnings front for Q4.
View the General Market Indicators chart page here .
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