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Investors Business Daily
Investors Business Daily

Nasdaq Pares Gains After Hitting 2023 High As GDP Cheer Wanes; Small Caps Lead But Face Bearish Sign

The stock market faded from a morning rally, holding small gains at midday Wednesday. The Nasdaq composite backed off after it made a new high for the year. Small caps and the IBD 50 outperformed.

The Nasdaq's gain shrank to 0.1%. Earlier, the composite rose to the highest point since April 2022. The S&P 500 pared its gain to 0.2%. The Dow Jones Industrial Average added 0.1%.

Small caps led as the Russell 2000 jumped 1.1%, but it's again meeting resistance at the 200-day moving average. Volume was higher on the Nasdaq and NYSE compared with the same time on Tuesday. Winners topped losers by more than a 2-1 ratio on the NYSE and Nasdaq.

The Innovator IBD 50 ETF outperformed with a 1.6% increase and held most of its morning gains at midday. IBD 50 stock Cloudflare broke out of cup base with a 76.07 buy point.

Magnificent Seven stocks were lower or fading. Apple reversed modestly lower. The company is ending a partnership with Goldman Sachs on credit card and savings account offerings, The Wall Street Journal reported. Goldman stock rose 0.3%.

Nasdaq Higher After GDP Update

The stock market seemed to like a revised calculation of third-quarter gross domestic product that showed the economy grew 5.2%. That's higher than the initial estimate of 4.9%. The personal consumption expenditures in Q3 were revised lower, to 3.6% from 4%. But the GDP report lags more recent data showing some slowing in the economy.

At 2 p.m. ET, the Fed releases its Beige Book of regional economic conditions.

Las Vegas Sands fell 2.7% in heavy trading, gapping below its 50-day moving average. The casino company's largest individual shareholder, Miriam Adelson, is selling $2 billion in Sands stock to acquire a majority stake in the Dallas Mavericks NBA team, reports said. Entrepreneur Mark Cuban, of "Shark Tank" fame, is the team's current owner. He acquired the franchise in 2000. Early Wednesday, he had not commented on the deal.

In an SEC filing late Tuesday, Las Vegas Sands said, "We have been advised by the Selling Stockholders that they currently intend to use the net proceeds from this offering, along with additional cash on hand, to fund the purchase of a majority interest in a professional sports franchise pursuant to a binding purchase agreement, subject to customary league approvals."

UBS Group broke out of a cup base and is in buy range from the 26.97 buy point. The relative strength line is at a new high. climbed above a 101.35 handle buy point, but volume was mediocre.

Software Companies Beat Earnings Views

Several software companies reported earnings, causing some of Wednesday's bigger stock moves in the Nasdaq.

Workday shot up 12% and broke out of a cup base. It's slightly extended past the 252.72 buy point. The maker of human resources software reported late Tuesday third-quarter earnings and revenue that topped estimates. The company raised its fiscal 2024 revenue outlook as well. Subscription revenue rose 18% to $1.69 billion, slightly above views.

In cybersecurity, Okta fell nearly 4% even though its third-quarter earnings and revenue beat estimates.

Industry peer CrowdStrike climbed 9.7% to the highest level since April 2022 as it also topped revenue and earnings expectations. Annual recurring revenue — an important metric in the subscription-software industry — climbed 35%, edging past estimates. CrowdStrike's revenue outlook also edged above views.

In the retail sector, Foot Locker raced nearly 18% higher to the best level since May. The sneaker chain beat October-quarter expectations and raised same-store guidance for the fiscal year ending Feb. 3. It also raised the midrange of its sales guidance for the current fiscal year. The midrange forecast for adjusted earnings fell to $1.35 from $1.40.

Stock Market Cheers GM Moves

General Motors revved up 10% after the automaker announced it is raising its dividend and plans a $10 billion share buyback. The company also is restoring financial guidance following the United Auto Workers strike, and cut back on its goals for electric vehicles.

The stock regained its 50-day moving average, although the line remains in a steep decline and the stock is still more than 20% below its July high.

Phillips 66 rose more than 3% and is nearing the 125.19 buy point of a cup base. Activist investor Elliott Investment Management has taken a $1 billion stake in the refinery operator.

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