Stock Market Holds Most Gains; Microsoft Down After Downgrade; 2 Stocks Top Buy Points

The stock market indexes came off session highs in early afternoon trading as the Nasdaq momentarily hit the highest level since Dec. 22.

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Market players will be watching the Fed meeting’s minutes, due out later this afternoon, and the December job reports on Friday.

The S&P 500 reduced its gain to 1% at 1:30 p.m. ET while the Nasdaq was up 1% too. The Dow Jones Industrial Average added 0.6%. The Russell 2000 small-cap index was also up 1%.

The tech-heavy Nasdaq 100-tracking Invesco QQQ trust ETF (QQQ) lagged with a 0.4% increase. Microsoft (MSFT) was the biggest drag on the index as the stock sold off 5% in heavy volume.

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

Crude oil shed 4.2% to $73.75 per barrel. The Energy Select Sector SPDR ETF (XLE) ignored crude, gaining 0.1% and holding at its December lows. Natural gas rallied 4.2% and is trading at $4 per million British thermal units.

The SPDR Gold Trust ETF (GLD) jumped 0.8% as the yellow metal gains new believers. The 10-year Treasury note yield dropped 7 basis points to 3.73%.

Two Stocks Top Buy Points

D.R. Horton (DHI) edged above the 92.55 buy point of a handle in a long base. But volume was well below average. That, plus stock market risk, makes this a questionable breakout. Remember, breakouts in market corrections have a tendency to fail.

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

European stock markets were higher on cooler inflation data, with the German DAX up 2.2% and the Paris CAC 40 gaining 2.3%. The London FTSE 100 lagged, adding just 0.4% at the close.

Odds for a 25-basis-point hike by the Federal Reserve at the February meeting stand at 69.2%. That would take the fed funds rate to the 4.5%-4.75% range. Meanwhile, 30.8% of market watchers are looking for a 50-basis-point hike, according to the CME Group FedWatch Tool.

Natural Gas Stocks Feel Pain

Natural gas crept higher Wednesday but the futures contract is down so far in 2023, and is currently trading near a 13-month low. Warm European winter weather is putting a lid on that volatile market.

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

Liquefied gas transporter Flex LNG (FLNG) is down more than 2%, as natural gas hit lows not seen since the days before the Russian invasion of Ukraine. The stock dropped below its 200-day line.

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

Scorpio Tankers (STNG) tanked 4.2%, dropping below the 50-day line for the first time since Oct. 11. Torm (TRMD) sank 4.8% while Teekay Tankers (TNK) lost another 4.1%.

Stock Market: Microsoft Dumps One Day After Apple

Microsoft took a steep dive, dropping more than 4% after UBS downgraded the Dow Jones component to neutral, lowering the price target to 250.

Analyst Karl Keirstead cited challenges with Office 365 and the Azure cloud computing system. The decline follows Tuesday’s high-percentage Apple (AAPL) sell-off, while both suggest that major institutional investors are making big moves at the start of the new year.

Keirstead warned that Azure is entering a “steep growth deceleration.” He also noted that ubiquitous Office 365 installations are vulnerable to an economic slowdown. Worries about cloud computing growth drove the biggest chunk of Microsoft’s 2022 downside.

Jobs Numbers Offer Clues For Fed

The December FOMC minutes are scheduled for release at 2 p.m. ET.

Investors are looking for clues on the Fed’s next move. Right now, the expectation is for the personal consumption expenditures price index, Jerome Powell’s favorite inflation indicator, to drop to between 5.25% to 5.5% in the second quarter.

Eyes will also be on Friday’s nonfarm payroll report, due out at 8:30 a.m. ET. This morning’s November job openings tally of 10.5 million beat expectations for 10 to 10.33 million. However, openings have declined since August, a sign the Fed’s interest rate hikes are starting to take effect.

The December Institute for Supply Management (ISM) manufacturing index hit 48.4 vs. 48.1 consensus, a drop from November’s 49.0 reading. Numbers below 50 indicate an economic contraction.

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

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

Chinese Tech Stocks Rally

Micron (MU) gapped up 7% in heavy volume, and rose above its 21-day exponential moving average.

Dow Jones component Salesforce (CRM) popped 3.4% on news 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 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 Ant Group was granted approval to largely increase its holdings. BABA stock retook its 200-day moving average Tuesday, on a gap-up of 6.8%.

Chinese e-commerce stock JD.com (JD) soared over 12% on the Ant Group news, on hopes that Chinese regulators are easing policies toward tech companies.

Dow Jones component Honeywell (HON) dropped 1.6% after UBS double downgraded the conglomerate to sell from buy, and lowered its price target to 193.

IBD 50 Stock Market Movers: Gold Miner Pops

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

South Africa-based Gold miner AngloGold Ashanti (AU) gained 5.6% as gold has been on the rise since hitting a low in early November.

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

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