The stock market makes the most profit; Microsoft drops after downgrade; 2 Stocks Best Buy Points

Stock indexes hit session highs in afternoon trade as the Nasdaq briefly hit its highest level since Dec. 22.


Market players will be watching the minutes of the Fed meeting, which will be released this afternoon, and the December jobs report on Friday.

The S&P 500 pared gains by 1% at 1:30 p.m. ET, while the Nasdaq was up 1%. The Dow Jones Industrial Average rose 0.6%. The Russell 2000 small-cap index also rose 1%.

Tech-heavy Nasdaq 100 tracker Invesco QQQ trust ETF ( QQQ ) lagged behind, up 0.4%. Microsoft (MSFT) was the biggest loser in the index as stocks traded 5% on heavy volume.

Volume on the NYSE and Nasdaq was higher than at the same time on Tuesday.

The price of crude oil decreased by 4.2% to 73.75 dollars/barrel. The Energy Select Sector SPDR ETF ( XLE ) ignored crude oil, gaining 0.1% and holding off December lows. Natural gas rose 4.2% and is selling at $4 per million British thermal units.

The SPDR Gold Trust ETF (GLD) rose 0.8% as the yellow metal gained new believers. The yield on 10-year Treasury notes fell 7 basis points to 3.73%.

Two Stock Best Buy Points

DR Horton (DHI) has broken out above a handle’s 92.55 buy point in a long base. But the volume was well below average. That, plus stock market risk, makes this a questionable breakout. Remember that breakouts fail in market corrections.

Clothing chain Buckle (BKE) broke above a handle’s 46.77 buy point in another long base. While price action was better, volume was also weak. Still, the apparel retailer is a group to watch, climbing to the top five in the IBD industry rankings from 120 three months ago. Ross Stores (ROST) and Abercrombie & Fitch (ANF) some are performing well, although company fundamentals remain weak.

European stock markets were higher on cooler inflation data, with Germany’s DAX up 2.2% and the Paris CAC 40 up 2.3%. London’s FTSE 100 declined, adding just 0.4% at the close.

The probability of a 25-point increase in the Federal Reserve at the February meeting is 69.2%. This would take the federal funds rate to a range of 4.5-4.75%. Meanwhile, 30.8% of market watchers are looking for a 50 basis point hike, according to the CME Group FedWatch Tool.

Natural gas stocks are feeling the pain

Natural gas rose on Wednesday, but the futures contract has fallen so far in 2023 and is currently trading near a 13-month low. Europe’s warm winter weather puts a lid on this volatile market.

The Oil & Gas-Transportation/Pipeline industry group fell below its 200-day moving average on Tuesday and fell more than 6% below its 50-day moving average. Many stocks in the group are under stress.

Liquefied gas carrier Flex LNG ( FLNG ) fell more than 2% as natural gas hit a low not seen since the days before Russia invaded Ukraine. Shares fell below the 200-day line.

Peer liquefied gas stock Dorian LPG (LPG) declined 2.9% and fell below its 50-day line.

Scorpion Tankers ( STNG ) fell 4.2%, falling below the 50-day line for the first time since Oct. 11. Torm (TRMD) decreased by 4.8% Teekay Tankers (TNK) lost another 4.1%.

Stock market: Microsoft tumbles a day after Apple

Microsoft fell more than 4% after UBS downgraded the Dow Jones component to neutral and cut its price target to 250.

Analyst Karl Keirstead noted challenges with Office 365 and the Azure cloud computing system. The decline follows Tuesday’s high apple ( AAPL ) sales, both of which indicate that major institutional investors are making big moves early in the new year.

Azure is entering a “steep growth slowdown,” Keirstead warned. He also noted that ubiquitous Office 365 installations are vulnerable to an economic slowdown. Concerns about the growth of cloud computing accounted for the largest portion of Microsoft’s downside for 2022.

Job Numbers Offer Clues for Fed

The December FOMC minutes are scheduled to be released at 2:00 PM ET.

Investors are looking for clues about the Fed’s next move. The current expectation is for the personal consumption expenditure price index, Jerome Powell’s favorite inflation gauge, to fall between 5.25% and 5.5% in the second quarter.

Eyes will also be on the non-farm payrolls report due out at 8:30 AM on Friday. This morning’s opening of 10.5 million jobs beat expectations of 10-10.33 million. However, the decline in openings since August is a sign that the Fed’s interest rate hikes are starting to take effect.

December’s Institute for Supply Management (ISM) manufacturing index came in at 48.1 versus a consensus of 48.4, down from November’s reading of 49.0. Numbers below 50 indicate an economic contraction.

The survey asks purchasing managers about the general direction of production, new orders, orders, inventories, employment, supplier deliveries, exports and imports.

Investors should wait for clear signs of a sustained stock market rally before making new purchases.

China Tech Stocks Rally

micron (MU) rose 7% on heavy volume and broke above its 21-day exponential moving average.

Dow Jones component Salesforce (CRM) gained 3.4% on news that it will lay off 10% of its employees. It also plans to reduce office space as part of its cost-cutting plan.

CRM stock rose above its 21-day exponential moving average on Wednesday for the first time since late November and is about 48% off its 52-week high.

Chinese e-commerce giant Alibaba ( BABA ) rose 10.9% after receiving approval for Ant Group to significantly increase its stake. BABA stock retraced its 200-day moving average by 6.8% on Tuesday.

China e-commerce fund (JD) Ant Group jumped more than 12% on news that Chinese regulators will ease policies against tech companies.

Dow Jones component Honeywell ( HON ) fell 1.6% after UBS doubled down on the conglomerate from buy to sell and cut its price target to 193.

IBD 50 Stock Carriers: Gold Miner Pops

The Innovator IBD 50 ETF ( FFTY ) was in line with the major stock market indices, up 0.8%.

A gold miner based in South Africa AngloGold Ashanti (AU) gained 5.6% as gold rallied after hitting lows in early November.

Dow Jones component Merck ( MRK ) added 1% after BofA Securities upgraded the pharmaceutical giant’s stock to buy and raised its price target to $130.


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