The Dow Jones Industrial Average rallied even after a key Fed official tempered expectations on interest rate cuts. Apple led the Magnificent Seven higher after an analyst upgrade, while Tesla dipped. A trio of Bill Ackman stocks, including Alphabet and Chipotle Mexican Grill are near potential buy points.
A plucky pair of stocks attempted breakouts amid the mixed action. Elastic and Marvell Technology both tested entries.
Fed Official Makes Interest Rate Claim
Stocks bounced after earlier trimming morning gains. Atlanta Federal Reserve President Raphael Bostic expects policymakers to start cutting rates in the third quarter of this year, saying Thursday that inflation is well on its way back to the central bank's goal. Bostic is a voting member of the Federal Open Market Committee, which decides rate policy.
His remarks appeared to cut into stock gains, but indexes bounced back in late trading.
"Because I'm data dependent, I have incorporated the unexpected progress on inflation and economic activity into my outlook, and thus moved up my projected time to begin normalizing the federal funds rate to the third quarter of this year from the fourth quarter," Bostic told business leaders in Atlanta Thursday.
At the end of last week the CME FedWatch Tool saw an 80% likelihood of a rate cut in March. It now sits at around the 56% level.
There was plenty of other economic data to digest. First-time jobless claims surprisingly dropped to 187,000. This was down 16,000 on the previous week and below analyst expectations. It was also the lowest reading since September 2022.
Meanwhile, housing starts in December fell less than expected to 1.46 million at an annualized rate, according to the Commerce Department. This was above the 1.425 million estimate and just below the 1.525 million in November. Permits in December popped to 1.495 million, above views and higher than the 1.467 million in November.
In addition, the Philadelphia Fed manufacturing index inched up to -10.6 in January from the previous month's revised reading of -12.8. It had been expected to improve to -6.7. However this was not as weak as the Empire State Index data released earlier in the week.
Nasdaq Jumps, Small Caps Reverse Higher
The Nasdaq composite fared the best out of the major indexes, ending the day up 1.4%. Fastenal fared well here, popping 7.2%. It was up after a top- and bottom-line beat. The firm said it had seen higher unit sales due to growth at "on-site locations."
The S&P 500 gained 0.9%. Southwest Airlines impressed as it soared 6.8%.
S&P 500 sectors closed the session mixed with a slight upside bias. Technology and communication services fared best in the stock market today. Real estate and utilities, defensive areas, lagged the most.
Small caps managed to fight off the bears; the Russell 2000 reversed higher to gain more than 0.5%. Growth stocks also impressed, with the Innovator IBD 50 ETF rising 0.7%.
Dow Jones Today: Boeing Stock Climbs, UNH Lags
The Dow Jones showed grit and reversed higher. It ended the day with a gain of 202 points, or 0.5%.
Boeing stock was the top component. It pulled 4.2% higher after it announced an order for 150 of its 737 Max airplanes early from India-based Akasa Air. BA stock has been under pressure following a fuselage panel blowout on a 737 Max 9 jet during an Alaska Airlines flight on Jan. 5.
Other strong gainers included Walt Disney and Intel. DIS rose 2.1% while INTC gained 1.5%.
In contrast, UnitedHealth lagged on the Dow Jones today as it fell 1.6%, though it closed well off lows.
Chevron and American Express were among the other losers on the index. CVX fell 0.9% and AXP lost 0.7%.
These Bill Ackman Stocks Eye Entries
Investors should always keep an eye on the holdings of the best investors. This group includes billionaire hedge fund titan Bill Ackman.
A trio of issues held by Ackman's Pershing Square Capital Management are in or near buy zones. This includes Google parent Alphabet, which is in a buy zone above a cup-with-handle entry of 139.42, MarketSmith analysis shows.
Earnings performance is a key highlight feature of GOOGL stock. It holds a very strong EPS Rating of 97 out of 99. The tech stock ended the day up 1.4%.
One reason to be cautious is Q4 earnings are due Jan. 30. An approach highlighted by Investor's Business Daily is to use options as a strategy to reduce risk around earnings. It's a way to capitalize on the upside potential of a stock's move around earnings, while reducing the downside risk.
Another Ackman holding, Chipotle Mexican Grill, has arguably formed a flat base on its weekly chart with an ideal buy point of 2,348.41. It will take a couple of more days for the pattern to form on its weekly chart.
Overall performance here is very strong, with its IBD Composite Rating coming in at 97 out of 99. CMG is in the top 10% of stocks in terms of price performance over the past 12 months.
The third Ackman stock near a buy zone is railroad stock Canadian Pacific Kansas City. The stock currently sits below a cup-with-handle entry of 80.41.
Overall performance is also not ideal. It has only outperformed 39% of stocks over the past 12 months and it holds a lackluster EPS Rating of 63 out of 99.
IBD recommends buying stocks with strong earnings and price performance rather than laggards. Look for leaders in strong industries that are showing superior earnings growth and sales, such as those in the IBD 50.
Magnificent Seven: Apple Stock Pops, Tesla Drops
The so-called Magnificent Seven were all mostly higher today. Apple stock fared best with a lift of around 3.3%. It muscled higher after Bank of America upgraded it to buy from neutral, citing a multiyear iPhone upgrade cycle and the potential for services revenue growth.
Meta Platforms rose 2.1% while Nvidia popped 1.9%. Both are extended and members of the prestigious IBD Leaderboard list of top stocks.
E-commerce giant Amazon.com gained 1.2% and is trading above its buy zone from a 145.86 entry. Dow Jones stock Microsoft turned in a lift of 1.2% as it trades in a buy zone above a 384.30 flat-base entry.
Tesla lagged, though, dropping 1.7%. The Elon Musk-led firm did manage to finish the day off lows though. It is trading below its major moving averages, MarketSmith analysis shows. TSLA stock is falling amid a barrage of price cuts.
Futures Rise; This AI Play Surges
Bitcoin Falls, Cathie Wood ETF Struggles
It was another tough session for cryptocurrency bulls. Bitcoin was down around 4% and was trading at around the $41,000 per-token level.
The well-established Grayscale Bitcoin Trust and BlackRock's spot bitcoin ETF, the iShares Bitcoin Trust both closed the session down 4.4%.
Another noteworthy fund is ARK 21Shares Bitcoin ETF. This is the offering from Ark Invest, which is led by popular fund manager Cathie Wood. This find finished the day down 4.5%.
Other bitcoin stocks also got punished. Coinbase fell 7.1%, Riot Platforms dived 5% and Marathon Digital skidded 6.9%. RIOT is now down more than 30% so far in 2024.
Outside Dow Jones: Elastic Stock Tests Buy Point
With stocks still in a confirmed uptrend it is important for investors to keep an eye on stocks breaking out of proper bases.
Elastic is in a buy zone after clearing a flat-base buy point of 118.24.
Elastic offers cloud-based search software being used in AI applications.
Overall performance is strong, earning it a Composite Rating of 99. Elastic was a featured stock on Wednesday's edition of IBD Live.
Chip stock Marvell Technology is in a buy zone after clearing a buy point of 67.99. Its EPS Rating of 57 is weak, though.
Semiconductors in general got a boost after Taiwan Semiconductor beat Q4 views and management said it expects to return to sales growth in Q1.
Please follow Michael Larkin on X, formerly known as Twitter, at @IBD_MLarkin for more analysis of growth stocks.
