Early gains faded for the Nasdaq composite Wednesday, hurt by a 20% decline in Tesla stock. But the Dow Jones outperformed, helped by bullish gains for IBM and UnitedHealth Group.
The stock market today was also encouraged by ADP data that showed private payrolls increased 291,000 in January, well above expectations of 154,000. The data comes ahead of Friday's jobs report, which is expected to show nonfarm payrolls up 158,000. The unemployment rate is currently at 3.5%.
In afternoon trading, the Dow Jones was up 1.2%. The Russell 2000 small-cap index was up 1.3% and the S&P 500 added 0.8%. The Nasdaq pared a 1.1% intraday gain to just 0.1%. Volume on the NYSE and Nasdaq was slightly higher vs. the same time Tuesday.
After a breakout in mid-December over a 361.30 buy point, Tesla finally succumbed to some profit-taking. Even with today's decline, the stock is still 8% above its 10-day moving average, a short-term support level. Sellers came into Tesla after the company said that February Model 3 deliveries in China would be delayed due to the coronavirus outbreak.
After giving up support at its 50-day moving average Friday, the VanEck Vectors Semiconductor ETF rallied for the third straight session, up 1.6%. Several semiconductor stocks outperformed in the Nasdaq 100, including Microchip Technology, Texas Instruments and Analog Devices. Results from Qualcomm are due after the close today.
But the iShares Expanded Tech Software ETF gave back 1.4%. IBD's enterprise software industry group was one of the day's worst performers, down 2.8%, weighed down by weakness in Paylocity, which slumped 10.5% on earnings. Six software-related groups showed losses of more than 1%.
Paycom Software, one of several leaders in the enterprise software group, reports earnings after the close today.
Dow Jones Movers
UnitedHealth stock gapped above its 50-day moving average, putting the stock in an alternate buy zone. Shares jumped 5.2%. Managed care firms rose as a group, helped by strong earnings from Humana. Centene, a member of the MarketSmith Growth 250, is also finding bullish support at its 50-day line.
IBM continued its rapid ascent, rising 5%. The stock has been rallying on news that Arvind Krishna will take over the CEO post in April, replacing Ginni Rometty. Krishna currently leads IBM's cloud-computing business.
Walt Disney moved above its 50-day moving average early but reversed sharply lower by 3.7%. Late Tuesday, the company reported earnings and said Disney+ subscribers now total 26.5 million.
Check Out IBD Stock Lists and other IBD content to find dozens more of the best stocks to buy or watch.
Exxon Mobil and Chevron also rose sharply in the Dow Jones, helped by rising oil prices. U.S. crude oil futures were up nearly 4% to $51.50 a barrel. Oil notched a monthly decline of 15.5% in January.
Other Stock Market Gainers
Software giant Cerner broke out over a 76.42 buy point, fueled by strong earnings. Shares were up 6% to 78.48.
In the retail sector, Burlington Stores extended gains after reclaiming its 50-day moving average Tuesday, rising 1.7%. Support at the 50-day line creates an alternate buy zone after a powerful breakout from a flat base in late November. Burlington Stores is the IBD Stock Of The Day.
LGI Homes cleared a well-formed cup-with-handle base, rising 6% to 86.50. It's still in the 5% buy zone from the 83.78 buy point.
Follow Ken Shreve on Twitter @IBD_KShreve for more stock market analysis and insight.
