Major stock market indexes bounced back from early Thursday losses, lifting into the green in a lightly traded session. Dow Jones restaurant leader McDonald's probed on all-time high while retail giant Walmart hit a 2023 high.
Initial jobless claims rose to 228,000, well above 203,000 expectations. More important, last week's surprisingly low 198,000 was revised higher, to 246,000, adding to fears of a deteriorating labor market. Many analysts dismissed the bearish numbers as a "methodology revision."
This follows a JOLTS report earlier this week showing that job openings fell below the 10 million mark for the first time in two years.
Regardless of its accuracy, the data triggered a mixed reaction ahead of Friday's March nonfarm payrolls report, which is forecast to fall to 245,000 jobs. February's 311,000 handily beat expectations.
U.S. and European markets will be closed for Good Friday, Passover and the Easter holiday. So there will be few opportunities for individual investors to digest the news and hedge their exposure before the weekend.
This once-a-year anomaly could trigger a volatile session on Monday (U.S. markets will be open while Europe remains closed until Tuesday).
Stock Market Action
The Dow Jones Industrial Average rose by 0.1% Thursday afternoon, while the S&P 500 and Russell 2000 small-cap index matched 0.4% gains. The Nasdaq found buyers after a tough two days, rising 0.6%. The Innovator IBD 50 ETF highlighted growth-stock investor anxiety, still down nearly 0.6%.
NYSE and Nasdaq volume slumped compared with Wednesday's session as light holiday trading kicked into gear.
Crude oil held steady at $80.50 per barrel. Gold futures traded above the $2,000 level for the third day in a row. Most Asian and European bourses closed higher, despite mixed U.S. price action.
The 10-year Treasury note yield fell less than a basis point to 3.28% in quiet trading.
The Nasdaq, S&P 500 and Dow Jones remain well above their 50-day moving average and 200-day moving averages, supporting IBD's report of a "market in confirmed uptrend."
However, the Russell 2000 is stuck below those resistance levels after failing a key test earlier this week. This bearish divergence raises a red flag because it negatively impacts market breadth readings.
And this cautionary signal runs even deeper. The spread between the broad-based Nasdaq composite and the tech-heavy Nasdaq 100 is now at its widest since the 1980s, according to Die Welt Senior Editor Holger Zschäpitz. This historic gap will likely close in coming months, analysts say.
Dow Jones Leaders Hit New Highs
Dow Jones component McDonald's rallied to an all-time high Wednesday and consolidated gains Thursday. The breakout topped the 281.77 buy point of a 97-day consolidation base.
Sales growth decelerated at the fast-food giant for five consecutive quarters until Q4 2022's minor uptick. Even so, it's forecast to see 5% and 11% earnings growth for 2023 and 2o24, respectively. MCD stock traded 0.2% higher.
Walmart rallied 0.6% to a four-month high.
CFRA analyst Arun Sundaram viewed this week's Investor Day as a positive sign, noting "WMT seems to be entering a new phase now that the operating environment is normalizing from Covid-19, supply chain bottlenecks, excess inventory, and record inflation. The company is now focused on growing profitably and expanding margins over the next three to five years. "
He raised his 12-month price target to 169.
Dow Jones Transportation Average member FedEx tested Wednesday's rally high after Raymond James upgraded the stock to outperform from market perform with a 285 target. The shipping giant announced over $4 billion in cost cuts midweek and raised the dividend 10%. Those initiatives are likely to include many layoffs.
FDX stock rallied 1.2%.
IBD 50 Downgrades
Two IBD 50 stocks fell after analyst downgrades.
Super Micro Computer plummeted as much as 10.2% before trimming that big loss to 7.1%. Wedbush downgraded the tech superstar to underperform from neutral with a 65 price target. The call stings because the stock traded above 100 on Thursday morning.
Latin America's largest online retailer, MercadoLibre, slid 0.3% after New Street downgraded the stock to neutral from buy, dropping the target to 1,350.
IBD 50 single-family-home specialist Meritage Homes sold off after clearing the 117.32 entry point in a cup-with-handle base Tuesday.
Home sales have held up better than forecast so far in 2023, but recession fears will impact the industry's outlook. PulteGroup and Tri Pointe Homes have also joined this elite list. MTH shares traded 1.7% lower.
MTH stock, a member of IBD Leaderboard, boasts a perfect 99 Composite Rating. The 97 Earnings Per Share Rating reflects rapid growth, while the A SMR Rating (sales + profit margins + return on equity) confirms good underlying fundamentals.
Follow Alan Farley on Twitter at @msttrader.
