Dow Jones Surges Amid Yields Spike; Warren Buffett’s Asset Acquisition Slumps Berkshire Stocks

Stocks Extend Winning Streak Despite Surging Treasury Yields

The Dow Jones Industrial Average managed to stretch its winning streak to six-straight sessions on Monday despite a spike in Treasury yields. This was in contrast to Berkshire Hathaway (BRKB), which fell after Warren Buffett’s quarterly report revealed a reduction in share buybacks. On the other hand, Apple (AAPL) and Nvidia (NVDA) led the charge, along with other Magnificent Seven stocks, although Tesla (TSLA) lagged. Further attempts by several stocks to break out resulted in fading gains. However, Leaderboard stocks DraftKings (DKNG), Dell Technologies (DELL), and Consolidated Water (CWCO) all displayed bullish signals.

Fed’s Cook Warns of Market Stress as Yields Spike

Last week, stocks rallied strongly, experiencing their best gains of the year so far as Treasury yields plummeted. However, gains were more difficult to achieve on Monday as yields suddenly surged higher. The 10-year Treasury note rose by 9 basis points to 4.65%, while the 30-year jumped by 6 basis points to 4.82%. The 5-year yield increased by 11 basis points to 4.6%, and the 2-year surged by 11 basis points to 4.94%. Federal Reserve Governor Lisa Cook expressed hope that current interest rates would be “restrictive enough” to allow a return to the 2% inflation target. However, she also warned that nonbank financial institutions (NBFIs) could exacerbate market stress as financial conditions tighten. Cook stated, “Vulnerabilities at certain NBFIs could play a key role in amplifying stress associated with tightening financial conditions and slowing economic activity” during an event at Duke University.

Nasdaq Gains While Small Caps Suffer

The tech-heavy Nasdaq managed to eke out a 0.3% gain, reversing negative territory. This marked its best run since January, rising for seven consecutive sessions. Constellation Energy (CEG) performed the best, up by 6.5% after raising its earnings outlook. The S&P 500 also saw a small lift of 0.2%, continuing its six-day winning streak. However, Covid vaccine stock Moderna (MRNA) lagged, falling by 7%. Among the S&P 500 sectors, health, technology, and consumer staples performed the best, while real estate and energy suffered the worst losses. The bears dominated small caps, with the Russell 2000 plunging 1.3%. Growth stocks also fell, but managed to close off their lows.

Dow Jones Today: Disney Stock Lags Amid CFO Pick

The Dow Jones Industrial Average managed a modest gain of 0.1% or 35 points. Apart from Apple stock, Amgen (AMGN) was the top performer on the Dow, rising 1.1%, followed closely by Merck (MRK), with a 0.9% lift. However, Walt Disney (DIS) lagged, falling by 1.2%, despite the news of the appointment of PepsiCo’s longtime CFO Hugh Johnston as its new CFO. Walgreen Boots Alliance (WBA) was the worst performer on the Dow, falling by 1.5%. Goldman Sachs (GS) also underperformed.

Berkshire Stock Falls As Warren Buffett Builds A War Chest

Berkshire Hathaway’s third-quarter results were released over the weekend, providing further insight into Warren Buffett’s current market outlook. The company reported a 41% increase in operating profit to $10.8 billion for the third quarter, primarily driven by Geico. However, it also suffered a significant investment loss of $24.1 billion. Buffett continues to accumulate a substantial war chest, with the firm holding a record $157.24 billion in cash at the end of the third quarter, up from $147.4 billion in the second quarter. Berkshire has been increasing its position in short-term Treasury bills, owning over $126.4 billion worth at the end of the third quarter, compared to around $93 billion at the end of 2022. Additionally, Berkshire reduced its equity holdings, selling a net $5 billion in the third quarter and bringing the year-to-date total to about $23 billion. Share buybacks were also dialed back, amounting to $1.1 billion in the third quarter compared to $1.4 billion in the second quarter. Year-to-date, Berkshire’s buybacks totaled $7 billion. As a result, Berkshire Hathaway saw a 1.5% decline, crossing below its 50-day moving average as it continues to form a flat base with an ideal buy point of 373.34.

Magnificent Seven: Nvidia and Apple Rise, Tesla Lags

Nvidia and Apple were the top performers among the so-called Magnificent Seven on Monday, rising by 1.7% and 1.5% respectively. AAPL is trading above its 50-day moving average but has yet to reach the 198.23 entry point, while NVDA is nearing a double-bottom base buy point of 476.09. Dow Jones stock Microsoft also had a solid session, rising by 1.1% and trading in a buy zone above a 346.20 entry point. Amazon stock recorded a more moderate gain of 0.8% and remains actionable above a double-bottom base buy point of 134.48. Google parent Alphabet (GOOGL) and Meta Platforms (META) also saw positive gains of 0.9% and 0.4% respectively. The only laggard among the Magnificent Seven was Tesla, which closed slightly lower with a 0.3% dip, trading just below the 200-day moving average.

Outside The Dow Jones: Leaderboard Stock Among Breakouts

DraftKings ended the session in a buy zone above a consolidation entry of 34.49, with its relative strength line reaching new heights. Dell Technologies also experienced a surge in its relative strength line as it cleared a double-bottom entry of 70.77. Its solid performance is reflected in its IBD Composite Rating of 85 out of a possible 99. Consolidated Water tested a flat-base buy point of 31.85, finishing just above the entry. The water utility play ranks among the top 1% of issues in terms of price performance over the past 12 months.

For more analysis of growth stocks, follow Michael Larkin on X (formerly known as Twitter) at @IBD_MLarkin.

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