The Dow Jones Industrial Average and other major indexes held the bulk of earlier gains at the closing bell Wednesday as two Federal Reserve officials talked of possible rate cuts. Meanwhile, a holding in Cathie Wood's ARK Invest portfolio surged after the company beat analyst estimates and raised its sales outlook. And Alibaba stock plunged on quarterly results.
Dow Jones stocks eased off the day's highs, and finished 0.4% higher. The S&P 500 climbed 0.8% and nearly touched the 5,000 level, while the Nasdaq stayed ahead of the pack with a 1% gain on the stock market today.
Volume on the New York Stock Exchange tracked higher but was lower on the Nasdaq compared with Tuesday. Breadth improved on the NYSE, but decliners outnumbered advancers by less than 2-to-1 on the Nasdaq. Among the S&P 500 sectors, technology and consumer discretionary gained but consumer staples lagged.
Small caps pared earlier losses and were down slightly as the Russell 2000 is finding support at the 50-day moving average. The Innovator IBD 50 exchange traded fund outdid the small-cap index with a 1.1% gain. Shares are topping a buy zone from a handle's entry at 24.95
Also, the yield on the benchmark 10-year Treasury note rose 1 basis point to 4.11%.
Shares of Alibaba tumbled 6% after the China e-commerce giant reported results for its December-ended quarter. Revenue rose 5% to $36.7 billion, but earnings per share of $2.67 declined from the prior year's $2.79. Alibaba broke a two-day winning streak as the stock fell back near its 50-day moving average.
Fed Officials Talk About Rate Cuts
In economic news, Boston Fed President Susan Collins said Wednesday she could see rate cuts coming later this year. Collins addressed a gathering at the Boston Economic Club.
Meanwhile, Richmond Fed President Thomas Barkin called for patience with rate cuts. The Fed official said he was not worried about market expectations, and added, "If markets can work with you, that's better than markets working against you."
Also, the Mortgage Bankers Association said its Market Composite Index for the week ended Feb. 2 rose 3.7% from the week before. The index measures mortgage loan application volume, and fell 7.2% the previous week.
Dow Jones Stocks
On the Dow Jones index, shares of Walt Disney surged nearly 8% after hours as its fourth-quarter results came in above views. Shares finished the regular trading day in a buy zone from a flat base's buy point of 96.51.
Health care leaders showed mixed action on the Dow. Amgen was the worst performer on the index, falling more than 6% after reporting its fourth-quarter results on Tuesday. But managed-care provider UnitedHealth gained 1.7%.
Among tech players in the Dow Jones index, Apple was flat while Cisco dipped slightly. But Microsoft ended the day more than 2% higher.
Stocks Moving Today; Cathie Wood Holding Surges
Roblox, a top holding of Cathie Wood's ARK Invest, surged more than 10% higher after the game company beat fourth-quarter views. It also raised its outlook for the full year and current quarter. Average daily active users rose 22% annually. Revenue was higher by 30% in the fourth quarter, though the company saw a loss of 52 cents per share.
Roblox stock is a holding in three of Wood's exchange traded funds: ARK Innovation, ARK Next Gen Internet and ARK Fintech Innovation. According to the company's disclosures, Roblox ranks eighth in weight in the ARK universe. Shares are approaching a buy point of 46.25 in a double-bottom base.
Wood specializes in buying stocks on the dip. While bargain-hunting can be tempting for investors, 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.
Outside Dow Jones: Snap Craters
Outside the Dow Jones index, IBD Leaderboard stock ELF Beauty fell nearly 5% despite a beat-and-raise report.
Among internet content providers, Snap lost more than a third of its value after it reported fourth-quarter earnings. Shares plummeted nearly 35%, crashing below their 50-day and 200-day lines and severely undercutting the stock's base.
In restaurants, Chipotle Mexican Grill surged more than 7%. The company said sales during the fourth quarter increased 15% while earnings of $10.36 per share were 25% higher. KFC parent Yum Brands rose nearly 2% after fourth-quarter results. The stock is holding near its 200-day moving average.
In cybersecurity software, Fortinet beat lowered expectations for both sales and earnings. Shares broke out ahead of earnings on Tuesday, then surged into a buy zone Wednesday with a gain of nearly 4%. The stock's entry is at 67.36.
And Uber initially fell but wiped out those early losses with a slight gain on Wednesday. The ride-hailing company reported its first full year of profits since its initial public offering.
AI Play Skyrockets As S&P 500 Tests 5,000 Level, But It's A 'Lockout' Rally
These Stocks Are Breaking Out
Expedia tried to break out of a flat base at 155.84, ahead of earnings that are due Thursday. Also, security software maker Tenable broke out after posting fourth-quarter results, but pared much of those gains. It ended the day just above a 49.77 entry.
Emerson Electric gapped up and broke out of a flat base with a buy point of 98.09 after its earnings report. Shares surged through a buy zone with an advance of more than 10%.
In building and construction products, three stocks broke out. Griffon gapped up from a flat base and zoomed through a buy zone from a 62.45 entry. Shares moved on the company's quarterly results.
Meanwhile, Masco moved into a buy zone with a 69.66 entry. The action follows a breakout from fellow building supplies company and IBD Leaderboard holding Terex.
In transportation, Old Dominion Freight Line also broke out, but then settled back just below a buy point of 438.05.
Finally, insurer Assurant broke out from a flat base on a weekly chart with a buy point of 173.60. Shares stayed above that entry with a 3.8% gain.
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