Stock market stuck in neutral ahead of inflation report; Buffett scolds Apple’s ‘concentration risk’
The stock market posted a small loss until Monday midday. Warren Buffett’s Berkshire Hathaway (BRKB) reported results for the first quarter at its annual shareholder meeting on Saturday. Bank shares received a boost.
According to Reuters, CFRA Research vice president Cathy Seifert issued a pessimistic note after the Berkshire meeting, warning Buffett to manage his huge apple (AAPL) exposure wise.
She warned that “portfolio management practices would suggest that there is definitely concentration risk in having so much Apple in that portfolio.”
Apple makes up an astounding 42% of Berkshire’s total portfolio, according to recent reports.
By The Numbers
The Dow Jones Industrial Average fell 0.2 percent while the Nasdaq lost less than 0.1 percent. The S&P 500 was relatively unchanged. The Russell 2000 matched the megacaps, falling 0.2%.
NYSE and Nasdaq volume shrank compared to the same time on Friday.
The Nasdaq 100-tracker Invesco QQQ Trust ETF ( QQQ ) was relatively flat, while the Innovator IBD 50 ETF ( FFTY ) rose 0.1%.
Crude oil rose 2.5% to $73.13 a barrel. Gold futures rose 0.5% to trade at the $2,030 level.
Bitcoin plunged 6.2% to $28,000. Cryptocurrency exchange Coinbase (COIN) fell in sympathy with crypto, losing 2.4%.
The 10-year US Treasury yield rose 5 basis points to 3.5%. The CME FedWatch tool shows nearly 90% odds of no rate hike at the June Fed meeting.
European shares were mixed, with Germany’s DAX retreating 0.1% and the Paris CAC up 0.2%. London’s FTSE rose the most, gaining 1.0% in afternoon trade.
Stock Exchange: Warren Buffett Weekend
Warren Buffett’s Berkshire Hathaway (BRKB) jumped 1.4% after figures for the first quarter that were announced at the annual meeting on Saturday. The holding company had operating income of $8.065 billion, up 12.6% compared to the previous year.
The company reported over $130 billion in cash and treasury bills on its balance sheet. The profit on insurance writing rose to 911 million dollars from 167 million dollars in the previous year.
He squashed the rumor that Berkshire is looking to take over Occidental Petroleum (OXY), saying “We’re not going to buy control.”
Berkshire owns over 20% of OXY shares. Shares in OXY fell 1.8 percent.
Buffett said the commercial real estate market is starting to see the effects of higher mortgage rates. Discussing the banking crisis, he said he is cautious about the sector, but stressed that customer deposits are safe.
Berkshire’s Burlington Northern Santa Fe (BNSF) rail and energy businesses reported revenue declines.
BKRB shares are in a long cup-with-handle base with a buy point at 331.94 on the weekly chart. A three-week tight pattern also formed in the handle, according to MarketSmith pattern recognition.
Berkshire Holdings Paramount Global (PARA) changed direction, up 0.1% after last week’s selloff, following a worse-than-expected first-quarter earnings report. Shares are below the 50-day line, a red flag.
The media and streaming services provider drastically cut its dividend. Buffett said it’s never good when a company cuts its dividend.
Important economic data out this week
Investors await midweek inflation reports and the US debt ceiling meeting on Tuesday.
Look for the consumer price index for April (CPI) on Wednesday at 8:30 a.m. ET. and the producer price index (PPI) on Thursday.
Econoday estimates a 0.4% increase in April CPI and core CPI, with the 5% year-over-year figures holding above March. April PPI is expected to increase 0.3% against a decrease of 0.5% in March. Year-over-year increases are forecast at 2.5%, down from 2.7% in March.
President Joe Biden will meet with members of Congress on Tuesday about an agreement on the debt ceiling. Secretary of State Janet Yellen said Sunday there are no good options to avoid the dire consequences if Congress fails to raise or suspend the nation’s debt ceiling, according to Barron’s.
The United States reached the debt ceiling of $31.4 trillion in January and has been maneuvering to pay its obligations. It could run out of money by June 1, Yellen warned last week.
The stock market: Regional banks get a boost
PacWest ( PACW ) rose 5.6% in heavy volume, despite a dividend cut. Peer regional bank western alliance (WAL) reversed course and added 1.7%.
Cloud security company Zscaler (ZS) surged over 21% after quarterly sales that were higher than expected. It also raised the revenue guidance for the full year.
Management expects $415 to $419 million for the current quarter, compared with last year’s $286.8 million. Analysts are projecting 121% EPS growth this year.
Six flags (SIX) surged over 21% in heavy volume, after the theme park operator reported better-than-expected first-quarter sales. The move sent shares back above the 50-day mark.
Tyson Foods (TSN) fell more than 15% in heavy volume, after reporting a surprise loss and lower-than-expected sales in the quarter ended in March.
Other stock market movers: Cruise Line shares in buy zone
Dow Jones component Walt Disney (DIS) rose 3.1% ahead of Wednesday’s earnings report. Morgan Stanley raised its price target to 120 from 115.
IBD 50 component Royal Caribbean ( RCL ) rose 2.7% and is in the 5% buy zone, extending to 80.22, after hitting the 76.40 buy point for a cup base. The relative strength line reached a 52-week high, as shown by the blue dot on MarketSmith.
The cruise line reported better-than-expected first-quarter sales and a smaller-than-expected loss on Thursday.
Platoon (PTON) rose 7% after BMO Capital upgraded the interactive fitness platform’s stock to market perform from underperform, with a price target of 9.50.
Also in the IBD 50, provider of cyber security Fortinet (FTNT) rose 2.5% after BofA Securities upgraded the stock to buy from neutral and raised its price target to 75 from 66.
IBD 50 stock Shockwave Medical (SWAV) fell 4% in heavy volume, on news talking between the medial device maker and Boston Scientific (BSX) has deteriorated. The BSX gained 3.4% on the news.
Uber technologies ( UBER ) rose 2.3% and is in the 5% buy zone, reaching 39.56, after hitting the 37.68 buy point for a cup base last week. The equity operator beat estimates for the first quarter last week.
American Airlines ( AAL ) rose 4.2% after JPMorgan Chase upgraded the airline’s shares to overweight from neutral, raising its price target to 29 from 26.
Catalent ( CTLT ) plunged over 26% in very heavy volume after postponing its third-quarter results. Catalent is the biggest S&P 500 loser today.
Follow Kimberley Koenig for more stock news on Twitter @IBD_KKoenig.
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