Markets rallied Thursday, and these hard-hit stocks could finally have their day in the sun

The stock market continued its volatile week on Thursday, but investors were pleased to see major market benchmarks recoup their losses from Wednesday. Most of the factors that affect market sentiment are not going to change quickly, and with earnings season still a couple of weeks away, many traders are using technical measures and other short-term strategies to guide their decisions. earnings for the S&P 500 ( ^GSPC 1.43% ), Dow Jones Industrial Average (^ DJI 1.02% )and Nasdaq Composite (^IXIC 1.93% ) They were between 1% and 2%.


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Data source: Yahoo! Finance.

The sector of the market that attracted the most attention from investors today was one that has been struggling for a long time. marijuana stocks have been hit hard over the past year, but the news from Washington could signal a long-awaited milestone that would transform the nature of business.

Yes, cannabis can

the great time for marijuana stocks came mid-afternoon, when reports confirmed earlier rumors that the US House of Representatives would introduce a bill for a vote next week.

The legislation would decriminalize cannabis at the federal level. Even though the Justice Department has been largely willing to allow states to regulate medical and recreational cannabis within their borders without much in the way of federal enforcement, marijuana’s status on the government’s list of controlled substances The federal government has had other impacts that have limited the growth of the industry. For example, it has been difficult for cannabis growers and retailers to gain access to traditional financial services such as banking due to concerns that financial institutions will violate the terms of their statutes if they work with companies that technically violate federal law.

Person with mask, lab coat and gloves handling cannabis plant.

Image source: Getty Images.

In addition, the proposed bill would impose taxes that would go toward funding community support programs for areas that have been disproportionately impacted by drug control measures. It would also retroactively eliminate criminal convictions for those charged with federal crimes related to marijuana possession.

Big Moves for Marijuana Stocks, But Will They Stick?

The news definitely helped marijuana stocks perk up. At the end of the ordinary session, tilray (TLR 21.85% ) had jumped 22%, while canopy growth and Aurora Cannabis both had risen 11%. Smaller cannabis growers also saw big gains, which helped send the ETFMG Alternative Harvest ETF up to 8% on the day.

Gains continued in after-hours trading. Alternative Harvest ETF was up another 5%, while Tilray added another 16% gain and Canopy was up another 11%. Aurora recovered 12% after hours as of 5:30 pm ET.

Despite the huge rise in marijuana stocks, investors should remember that the industry has already been down this road once. In fact, the House has passed a bill similar to this in the past, only to have it rejected by the Senate. There is also some question as to whether President Joe Biden would sign a bill even if it passed both houses of Congress.

Even with the gains, many marijuana stocks are still down 50% to 75% or more from where they were trading just a year ago and even further below their all-time highs. That might have them hoping for some relief with this news, but long-term investors should still tread carefully in the space.

This article represents the opinion of the author, who may not agree with the “official” recommendation position of a premium Motley Fool advisory service. We are motley! Questioning an investment thesis, even one of your own, helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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