Dow Jones Up, Beaten By Nasdaq Again; This Sector Revs Big Gains After Fed News

The Nasdaq composite rallied moderately on Wednesday, but a 0.4% lift proved enough to surpass a less than 0.2% gain by the Dow Jones Industrial Average.

Amid a widely expected announcement by the Federal Reserve that indicated it's ready to cut short-term interest rates by at least a quarter point next month, large caps generally attracted buying. The S&P 500 edged up 0.3%.

Software, meanwhile, delivered bigger gains than most of the other 33 sectors tracked by IBD in its stock research tables.

And looking at 197 industry groups tracked each day, desktop and enterprise software did especially well. On a price-weighted basis, these two groups rose more than 2%.

Design, security and database software firms also outperformed, each up 1.7% or more.

Stocks in IBD's Computer-Integrated Systems group also fared well.

Inside The Big Picture: These 3 Bearish Factors Are Crumbling

Beyond The Dow Jones: A New IPO Breakout

New IPO Parsons (PSN) thundered past a 33.77 proper buy point in a narrow IPO base. A breakout by the supplier of security technology and technical services to the U.S. Army and intelligence agencies on Tuesday lost steam.

But on Wednesday, the 75-year-old tech firm gripped big gains, rising more than 6%.

At one point, Parsons hit a session high of 35.77, almost 6% past the breakout point. Volume hit 1.1 million shares, the sixth largest since its May 8 debut on the NYSE at $27 a share.

A narrow IPO base carries more risk. But true market leaders with outstanding fundamentals, relative price strength and blossoming ownership by mutual funds, hedge funds, banks, pensions and the like can thrive on a breakout from this key chart pattern.

Parsons has made a wonderful turnaround in the bottom line since losing 13 cents a share in 2016. In 2017, the bottom line swung to a net profit of 98 cents a share. Then the small cap growth play grew earnings 130% to $2.26 a share last year.

The Street currently sees earnings falling 37% to $1.42 a share in 2019 and slipping another 5% in 2020.

In 2018, revenue jumped 18% to $3.56 billion, posting the biggest annual increase in at least four years.

Return on equity jumped to an outstanding 26% in 2018.

Leading The Dow Jones

Microsoft (MSFT) delivered a new high, reversing higher. The stock remains in buy range from a 131.47 buy point.

Read more about the action and fundamentals in Microsoft in the latest New Highs column.

Paylocity (PCTY), one of two enterprise software plays in Leaderboard, gushed more than 4% higher. It's rebounding nicely after a test of the 10-week moving average.

During a market in confirmed uptrend, a strong rebound off the 10-week line, following a sound breakout from a good base, can offer a secondary buy opportunity.

Oracle (ORCL) announced quarterly results after the close that beat on the top and bottom lines. Adjusted earnings of $1.16 a share rose 17% and beat the Street's consensus view of $1.07. Shares rose after hours.

Oracle's Composite Rating of 82 is decent but not fabulous. Focus on leading stocks that show a 90 Composite Rating or higher.

The Innovator IBD 50 ETF (FFTY) outpaced the major indexes, rose 0.9% and marked its highest close in 2019.

Please follow Chung on Twitter at both @SaitoChung and @IBD_DChung for more on growth stocks, breakouts, chart analysis and financial markets.