The Dow Jones is roaring, but don’t go wild just yet. Berkshire Hathaway’s profits soar.
The stock rally fell against key support but roared back on Friday, led by apple (AAPL), Tesla (TSLA) and bank stocks. The Nasdaq is close to reaching its 2023 highs again. But we’ve been here before. Dow Jones futures open Sunday night, along with S&P 500 futures and Nasdaq futures.
Warren Buffett’s Berkshire Hathaway (BRKB) will announce the results on Saturday.
Purchase options remain limited. The Dow Jones giant Visa (V), Advanced Micro Devices (AMD) and TJX Cos. (TJX) hovers around entries. The Visa share is in a buy zone, but may also have other entries. AMD stock, powered by Microsoft (MSFT) AI buzz, is on the verge of an early entry. So is TJX stock.
Tesla stock is still a long way from a buy point, but worth another look.
Despite big returns on Friday, PacWest Bancorp (PACW) and other regional banks had terrible weeks. So keep an eye on PACW stock, Western Alliance Bancorp (WAL) and regional banks in general.
Investors should be cautious about increasing exposure until the market rally – still “under pressure” – shows more strength and breadth. But it may come soon.
Microsoft stock is on the IBD Long-Term Leaders.
The video embedded in the article discussed another complicated market week and analyzed DraftKings (DKNG), Visa and TJX shares.
Berkshire Hathaway earnings
Berkshire Hathaway reported operating income of $8.065 billion, up 12.6% compared to the prior year.
Operating income reflects results from companies that Berkshire owns and operates. These include insurance and reinsurance, utilities and energy, freight, manufacturing and retail.
On a per-share basis, analysts expected Berkshire earnings of $3.58, up 12.5%, according to the FactSet consensus.
Income from insurance insurance and insurance investments increased, while BNSF’s rail operations and the energy company saw earnings decline.
Net income, including short-term investment gains, rose to $35.5 billion from $5.58 billion a year earlier, crushing views for $8.1 billion. Warren Buffett says investors should focus on operating results.
Stock investments rose in the first quarter, including Apple.
The Apple share is by far Buffett’s largest single holding. Berkshire has also significantly increased its stake in Occidental Petroleum (OXY) over the past year. Apple shares hit an eight-month high Friday after topping earnings views. The OXY share has struggled for the past six months amid weak oil prices. Western income is due on Tuesday.
Warren Buffett’s company was a net seller of shares in the quarter, reaping a net $10.4 billion from share sales.
Berkshire share buybacks grew to $4.4 billion, the most since Q1 2021, up from $2.8 billion in Q4.
Still, cash holdings swelled to $130.62 billion from Q4’s $128 billion.
Warren Buffett (92) and deputy chairman Charlie Munger (99) expressed skepticism about artificial intelligence at today’s annual shareholder meeting.
BRKB stock is working with a 331.94 buy point on a 13-month cup with handle. It has also been on pause just above a bottom base.
Dow Jones Futures
Dow Jones futures open at 6 PM ET on Sunday, along with S&P 500 futures and Nasdaq 100 futures.
Keep in mind that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular session.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live
Stock market rally
The stock rally retreated for most of the week, but rebounded on Friday to close mixed.
The Dow Jones Industrial Average fell 1.2% in last week’s trading. The S&P 500 retreated 0.8%. The Nasdaq composite rose 0.1%. The small-cap Russell 2000 fell 0.4 percent.
The 10-year Treasury yield lost a fraction to 3.445% for the week amid some big daily moves.
US crude futures fell 7.1% to $71.34 a barrel in the past week, even with Friday’s jump of just over 4%.
Among growth ETFs, the Innovator IBD 50 ETF ( FFTY ) fell 0.3% last week, while the Innovator IBD Breakout Opportunities ETF ( BOUT ) fell 1.2%. The iShares Expanded Tech-Software Sector ETF ( IGV ) retreated 1.1%. The MSFT share is a core component of IGV. The VanEck Vectors Semiconductor ETF ( SMH ) rose 0.6%. AMD stock is a great SMH holding.
Reflecting more speculative stock stocks, the ARK Innovation ETF ( ARKK ) rose 4.1% last week and the ARK Genomics ETF ( ARKG ) gained 2.6%. Tesla stock is the No. 1 holding across Ark Invest’s ETFs. TSLA stock jumped 5.5% on Friday, just below its 21-day moving average. It still needs to catch up to the 50-day line to start approaching possible buy points. Meanwhile, Tesla archrival and frenemy BID (BYDDF) sets up near a proper buying point. Cathie Wood’s Ark owns a small stake in BYD stock.
The SPDR S&P Metals & Mining ETF ( XME ) fell 1.9% last week. The Global X US Infrastructure Development ETF (PAVE) rose 1.4%. The US Global Jets ETF (JETS) fell 0.7%. The SPDR S&P Homebuilders ETF (XHB) was down 0.2 percent. The Energy Select SPDR ETF (XLE) plunged 5.8%. The Health Care Select Sector SPDR Fund (XLV) was just above break-even.
The Financial Select SPDR ETF ( XLF ) fell 2.5% for the week, but bounced 2.4% on Friday. XLF is largely made up of banking giants, but Berkshire Hathaway is the top holding and Visa shares are a major component.
The SPDR S&P Regional Banking ETF ( KRE ) rose 6.3% on Friday, but still plunged 10.1% for the week. KRE hit a 31-month low on Thursday. PacWest shares rose 82% on Friday, but were still down 43% for the week. WAL stock surged 49% on Friday, retreating 27% for the week.
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Shares close to buy points
Visa stock bounced off its 50-day line on Friday to reclaim a 227.51 double-bottom buy point. Shares fell just 0.4% for the week to 231.78, extending tight action. The V share has a four-week tight pattern with an entry of 235.67. Visa and rival MasterCard (MA) is expected to deliver solid earnings growth over the next two years, benefiting from strong cross-border payments. The MA share is also in a buy area.
AMD shares rose 0.5% to 89.84 for the week amid wide swings. Shares plunged Wednesday on weak AMD guidance, then roared back Thursday on a report that it is teaming up with Microsoft on an AI chip. Microsoft later denied that it is developing its own AI chip, but did not say whether it is funding the AMD effort. On Friday, stocks extended their gains, closing back above the 50-day line. A move above Thursday’s high of 91.64 would mark a decisive move above the 50-day line and a downtrend line.
As for Microsoft stock, the Dow tech titan rose 1.1% for the week to a new 52-week high.
TJX shares fell 0.4% to 78.50 last week, continuing to find support at the 50-day line. The official buy point is 83.23, but investors can use 79.81 as a legitimate early entry. It is just above a handle that is fractionally too low to be correct. That “handle” is also three-week tight with the same 79.81 entry.
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Market rally analysis
The stock rally had some notable changes during the week, but ultimately closed narrowly mixed.
The major indexes fell during the week to test their 50-day or 10-week lines, but rebounded strongly on Friday on banks, Apple, Tesla and the April jobs report. However, Friday’s rise came on lower volume.
The Nasdaq hit a brief three-month high on Friday, just below the 2023 highs. But the major indexes have been threatening to do so for several weeks.
Winners crushed losers on Friday, but the Nasdaq’s advance/decline line has hit new lows with the NYSE’s A/D line also deteriorating.
The First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW) bounced back above its 50-day line and 21-day line on Friday, paring its weekly loss to just 0.35%. The Invesco S&P 500 Equal Weight ETF ( RSP ) fell 1.45% for the week, although it bounced on Friday to just between the 200-day and 50-day lines.
Market leadership has been narrow, with few buying opportunities. Many of Friday’s big movers were stocks below their 200-day lines.
Banks are still a big wild card. If the regional banking crisis ends and bank stocks recover significantly over time, it will be a big boost for the overall market, as Friday showed. But the risk of a renewed waterfall is likely to remain for a long time.
Markets also rose Friday on a robust jobs report that might have beaten stocks just a few days earlier. With the Fed seemingly on pause, investor concerns are shifting to recession risks. Will it continue indefinitely or is it just a blip?
But if the major indexes can break decisively higher – with breadth – the market rally may have room to run.
Time the market with IBD’s ETF market strategy
What to do now
The market recovery is still under pressure, with the indices limited and broad market conditions weak.
Not many stocks have performed consistently. Buying opportunities have been scarce of late, with many of them from large income gaps that are particularly risky in an uneven market. Many stocks that have advanced end up making solid gains.
If the Nasdaq can lead the indexes into 2023 highs, more stocks will make bullish moves that are closer to buy points and then continue to advance. Investors can gradually increase their exposure.
So investors need to be ready. Watchlists need to be updated after earnings sent some promising stocks sharply higher and many others sharply lower. It is unclear which sectors will lead.
But also be ready for the disadvantages. While the market ended on a high note Friday, the market ultimately made no headway. A decisive break lower for the market or individual stocks would be a strong signal to exit.
Read The Big Picture every day to stay in sync with market direction and leading stocks and sectors.
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