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Stock Market Today: Small Caps Up Big; Which Stocks Will Follow Apple As New Turnaround? | Stock News & Stock Market Analysis

U.S. stocks continued to hold strong gains in late afternoon trading Thursday following a passage of a Republican-led overhaul of the tax code in the House of Representatives.

The Tax Cuts and Jobs Act, highlighted by a shrinking in the number of tax brackets and much lower corporate tax rates, looks poised for fierce debate within the Senate.

XAutoplay: On | OffThe Nasdaq composite led the way, rising 1.4% and trading near session highs. The S&P 500 and Dow Jones industrial average gained 0.9%. Small caps outperformed; the S&P SmallCap 600 stretched 1.7% higher.

Top performing industry groups included data storage, up 5.8% with the help of NetApp (NTAP); home furnishings retail, up 8.8% thanks to RH (RH); and medical software, up more than 3%. Major discount retailer, semiconductor equipment, integrated computer systems and retail apparel and shoes stocks also shined, up more than 2% each.

Volume is running slightly higher on the Nasdaq vs. the same time Wednesday but is down on the NYSE.

Meanwhile, Cisco Systems (CSCO) showed unusual power, gapping up and advancing more than 6% to 36.30 and getting slightly extended from a 34.20 buy point in a nicely formed saucer with handle.

The networking and telecom equipment titan is now on track to staging a potential turnaround similar to what Apple (AAPL) has achieved over the past 12 months.

The new base that Cisco formed can be counted as early stage. For most stocks, early-stage bases carry higher odds of success after a breakout occurs.

Cisco is reaching price levels not seen since 2001 after reporting fiscal second-quarter results, positive guidance and new switches for the datacenter.

Cisco, the best growth stock in the 1990s, is likely seen today as a solid income play. Its annualized dividend yield of 3.4% is based on a quarterly cash payout of 29 cents a share and smokes the 1.9% yield of the S&P 500.

The question for growth-stock hunters will be whether Cisco can achieve a reacceleration in top- and bottom-line growth that has been exhibited by fellow megacap Apple.

Cisco reported flat earnings at 61 cents a share, but it does represent acceleration from a 3% dip in the July-ended fiscal fourth quarter. However, revenue fell 2% to $12.14 billion, extending a streak of shrinking sales to seven quarters.

In contrast, Apple has achieved acceleration in the top line for four straight quarters, going from a 9% drop in sales in the fourth quarter of fiscal 2016 to gains of 3%, 5%, 7% and 12% in the past four periods.

Earnings per share, in turn, have lifted from a 15% dive to increases of 2%, 11%, 18% and 24% for the iPhone marketer.

The Street sees Apple’s profit for the fiscal year ending next September to accelerate, rising 24% to $11.44 a share; in fiscal 2017, profit rose 11% to $9.21 a share despite some reports on concerns regarding the speed of ramping up production of new iPhones.

Apple is now slightly extended after recently clearing a new cup with handle at 160.97. The 5% buy zone goes up to 169.02.

Apple is also up 45% after breaking out of a first-stage cup with handle at 118.12 on Jan. 6-9. That breakout was covered extensively in IBD’s Stock Market Today columns.

The IBD 50 is a great place to find small, mid- and large-cap firms showing double-digit or even triple-digit growth. Cisco rival Arista Networks (ANET) is just one example. The datacenter-focused networking gear maker rose another 3% to 232.37, stretching gains from an August breakout from a narrow flat base at 163.07.

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