Dow Jones futures edged higher Sunday night, along with S&P 500 futures and Nasdaq futures.
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Warren Buffett’s Berkshire Hathaway (BRKB) reported a big jump in operating profit Saturday.
The stock market rally had its best week of 2023, as Treasury yields tumbled on generally weak economic data, Fed chief Jerome Powell’s comments and the Treasury slowing debt issuance. The Nasdaq staged a follow-through day on Wednesday, with the S&P 500 and Dow Jones providing further confirmation on Thursday.
A growing number of stocks flashed buy signals. It’s a time for investors to be adding exposure, but do so carefully. The market rally still faces several key resistance points.
Nvidia (NVDA) remains a key stock to watch. The AI chip leader retook the 50-day moving average Friday, closing in on a buy point.
Meanwhile, Lululemon Athletica (LULU), Shopify (SHOP), DraftKings (DKNG), Zscaler (ZS) and NetEase (NTES) are stocks in or near buy zones.
Additionally, Tesla (TSLA) rebounded from multimonth lows, but hit resistance at key levels Friday. Tesla stock, along with Shopify and DraftKings, are notable holdings in Cathie Wood’s Ark Invest ETFs.
Nvidia stock is on IBD Leaderboard, with DKNG stock joining the list on Friday. SHOP stock is on the Leaderboard watchlist. ZS stock is on SwingTrader. LULU stock and DraftKings are on the IBD 50. DraftKings was Friday’s IBD Stock Of The Day.
The video embedded in this article discusses the bullish weekly action in depth, while also analyzing DraftKings stock, Zscaler and NVDA.
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Dow Jones Futures Today
Dow Jones futures rose 0.1% vs. fair value. S&P 500 futures and Nasdaq 100 futures tilted higher.
The 10-year Treasury yield climbed a few basis points to 4.59%.
Crude oil futures rose slightly. Saudi Arabia on Sunday extended a voluntary production cut of one million barrels per day.
Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
Berkshire Earnings
Warren Buffett’s Berkshire Hathaway reported third-quarter operating profit shot up 41% to $10.8 billion. The conglomerate’s insurance businesses led the way, while the utilities, energy and railroad businesses had profit declines.
After-tax operating earnings rose 42% to about $7,436 per class A share, easily topping the FactSet consensus of $6,540.
Berkshire held a record $157.24 billion in cash, up from $147.4 billion as of June 30.
Warren Buffett continued to reduce its equity holdings, selling a net $5 billion in Q3, bringing the year-to-date total to about $23 billion.
Buffett’s sprawling firm bought back $1.1 billion of its stock vs. $1.4 billion in Q2. Year-to-date Berkshire buybacks total $7 billion.
BRKB stock leapt 6.1% last week to 351.81, rebounding from the 200-day line to test the 50-day. Shares are working on a flat base with a 373.34 buy point.
Apple stock is Berkshire’s biggest equity holding by far. Shares fell significantly in the third quarter and kept sliding in October. But AAPL stock rose 5% last week, holding the 50-day even with a Friday’s dip after less-than-stellar Apple earnings and guidance.
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Stock Market Rally
The stock market rally had a huge week, with the major indexes roaring back from multimonth lows
The Dow Jones Industrial Average ran up 5.1% in stock market trading, its best week in a year. The S&P 500 index leapt 5.85% and the Nasdaq composite jumped 6.6%, both their best weeks since early November 2022. All staged follow-through days to confirm the new rally as part of their best weekly gains in months.
The Dow Jones, S&P 500 and Nasdaq composite all cleared their 50-day lines on Friday, though not decisively.
Market breadth was very strong once again, after weeks of weak results. Advancers crushed decliners once again. New highs outpaced new lows for the first time in more than a month.
The small-cap Russell 2000 vaulted 7.6%, its best week in three years after tumbling to a three-year low. The Invesco S&P 500 Equal Weight ETF (RSP) leapt 5.9%. Both are moving toward their tumbling 50-day lines, still well below the 200-day.
The First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW) jumped 6.1%, finally getting above its 200-day line on Friday and up to its 50-day. The Nasdaq 100 leapt 6.5% to top its 50-day and it’s coming up to a trendline.
The 10-year Treasury yield plunged 29 basis points to 4.56%. The 10-year Treasury yield closed on its 50-day line after undercutting that key level for the first time since May.
U.S. crude oil futures tumbled 5.9% to $80.51 a barrel last week.
Market Rally Analysis
The major indexes have made a huge turnaround this week. An increasing number of stocks are flashing buy signals from a variety of market areas.
Wednesday’s Nasdaq follow-through day was encouraging, but market breadth wasn’t that impressive, while all the other key indexes were below their 200-day lines. By Friday’s close, all the major indexes were above their 50-day lines.
Clearly, tumbling Treasury yields have been a major catalyst for the new market rally, just as soaring yields drove the three-month market slide.
After a big run, and with the major indexes just above their 50-day lines, a market pause wouldn’t be a big surprise — especially if Treasury yields stop falling or rebound.
The Dow Jones tested a trendline from the start of the downtrend. The Nasdaq and S&P 500 breaking their downtrends would provide stronger evidence that this market rally has staying power.
ETFs
The iShares Expanded Tech-Software Sector ETF (IGV) sprinted 6.3%. The VanEck Vectors Semiconductor ETF (SMH) soared 8.1%, with Nvidia stock the No. 1 holding. Both SMH and IGV regained their 50-day lines.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) skyrocketed 18.6% last week and ARK Genomics ETF (ARKG) 17.1%. Tesla stock is a major holding across Ark Invest’s ETFs. DKNG and SHOP stock are top-10 Cathie Wood holdings as well.
SPDR S&P Metals & Mining ETF (XME) advanced 3.7% last week. SPDR S&P Homebuilders ETF (XHB) shot up 11%. The Energy Select SPDR ETF (XLE) rose 2.4% and the Health Care Select Sector SPDR Fund (XLV) gained 3.5%. The Industrial Select Sector SPDR Fund (XLI) rebounded 5.35%.
The Financial Select SPDR ETF (XLF) surged 7.4% and the SPDR S&P Regional Banking ETF (KRE) erupted 12.2%.
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Nvidia Stock
Nvidia stock undercut recent lows intraday Tuesday, but roared back, rising 11.1% for the week to 450.05. Shares cleared the 50-day line on Friday. NVDA stock has a 476.09 double-bottom buy point. Investors could use a trendline, currently around 460, as an early entry.
Note: On a daily or weekly chart, Nvidia has multiple volume spikes on the downside, but nothing on the upside.
If nothing else, investors should watch Nvidia as a bellwether for the market rally and the AI boom.
Stocks Near Buy Points
LULU stock popped 5.5% in the week to 407.93, rebounding from the 50-day line to retake a 406.94 buy point. However, this week’s gains were all in below-average volume. Several trendy apparel retail makers and retailers remain pockets of consumer strength.
SHOP stock gapped up 22% on Thursday on strong earnings, vaulting from multimonth lows within a 36%-deep double-bottom base, according to MarketSmith analysis. The official buy point is 67.60, but SHOP stock cleared a downward-sloping trendline on Friday. Investors could buy Shopify stock here, or look for a possible handle at some point.
DKNG stock vaulted 16.5% on Friday to 33.75 following strong earnings and guidance. Shares gapped above the 50-day line and cleared multiple early entries to its best close since December 2021. Actionable Friday morning, the online sports betting giant seems extended from the 50-day line. DraftKings stock has a 34.49 official buy point, but ideally it would pause and forge a handle. The relative strength line is already at a new high.
ZS stock jumped 6.5% to 164.37 last week. Friday’s 3.25% bounce in higher volume offered a buying opportunity in the cybersecurity play. Zscaler stock has been consolidating in a messy fashion since mid-June.
NTES stock rose 5.6% to 112.72, clearing a 110.82 buy point from a two-month flat base. Shares of the Chinese online gaming giant have rebounded from just below the 50-day line over the past two weeks. But NetEase stock is looking extended from the 50-day line.
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Tesla Stock
Tesla stock started the week by undercutting the 200 level for the first time since May, but rebounded for a 6.1% weekly gain to 219.96. On Friday, shares reclaimed the 200-day line, but hit resistance at the 21-day line.
In any case, Tesla needs to move decisively above its 50-day line before looking interesting again.
Since tumbling on the weak Q3 earnings and Elon Musk’s warnings on the Cybertruck and more, Tesla’s status as a growth company has come into more question. Tesla deliveries should rebound in the fourth quarter with deliveries of the new Model 3 starting in China and Europe. But heavy discounts on Model Y inventory are ramping up.
Tesla hiked wages by 4% at its Berlin-area plants late last week amid union efforts there, The Wall Street Journal reported Sunday. They’ll also get a year-end bonus and another pay hike in February.
In the U.S., the United Auto Workers is setting its sights on unionizing Tesla’s U.S. workforce. Tesla has relied on stock compensation to bolster relatively low wages.
With operating margins now like a traditional automaker, the bull case for TSLA stock depends heavily on moonshot bets on self driving, robotics and artificial intelligence.
What To Do Now
Investors should be taking advantage of the new market rally and recent buying opportunities. But do so gradually. If the market continues to make progress, you can add to your portfolio.
With earnings season past its peak and key economic news cleared, some big uncertainties have been lifted.
But it’s still possible that the new market rally will stall out around the 50-day line once again, especially if yields rebound yet again. A pause could be healthy, letting some recent big winners take a breather and perhaps forge new buying opportunities. Other stocks that haven’t moved out could set up.
It’s definitely a weekend to be running screens, building up a broad watchlist of interesting stocks. Focus in a smaller group of stocks that you may want to target early next week.
Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.
Please follow Ed Carson on X/Twitter at @IBD_ECarson, Threads at @edcarson1971 and Bluesky at @edcarson.bsky.social for stock market updates and more.
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