The stock market rally fell toward key support but roared back on Friday, led by Apple (AAPL), Tesla (TSLA) and bank stocks. The Nasdaq is close to hitting 2023 highs once again. But we’ve been here before. Dow Jones futures open Sunday evening, along with S&P 500 futures and Nasdaq futures.
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Warren Buffett’s Berkshire Hathaway (BRKB) reports earnings Saturday.
Buying opportunities remain limited. Dow Jones giant Visa (V), Advanced Micro Devices (AMD) and TJX Cos. (TJX) are hovering around entries. Visa stock is in a buy zone, but also could have other entries. AMD stock, fueled by Microsoft (MSFT) AI buzz, is on the cusp of an early entry. So is TJX stock.
Tesla stock is still some distance from a buy point, but worth watching again.
Despite huge rebounds 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 remain cautious about adding exposure until the market rally — still “under pressure” — shows more power and breadth. But that could come soon.
Microsoft stock is on IBD Long-Term Leaders.
The video embedded in the article discussed another complicated market week and analyzed DraftKings (DKNG), Visa and TJX stock.
Dow Jones Futures
Dow Jones futures open at 6 p.m. ET on Sunday, along with S&P 500 futures and Nasdaq 100 futures.
Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live
Stock Market Rally
The stock market rally retreated for most of the week, but rebounded Friday to close mixed.
The Dow Jones Industrial Average sank 1.2% in last week’s stock market trading. The S&P 500 index retreated 0.8%. The Nasdaq composite eked out a 0.1% gain. The small-cap Russell 2000 fell 0.4%.
The 10-year Treasury yield lost a fraction to 3.445% for the week, amid some big daily moves.
U.S. crude oil futures tumbled 7.1% to $71.34 a barrel this past week, even with Friday’s jump of just over 4%.
ETFs
Among growth ETFs, the Innovator IBD 50 ETF (FFTY) dipped 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%. MSFT stock is a core IGV component. The VanEck Vectors Semiconductor ETF (SMH) edged up 0.6%. AMD stock is a major SMH holding.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) popped 4.1% last week and 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 the 21-day moving average. It still needs to retake its 50-day line to start approaching possible buy points. Meanwhile, Tesla archrival and frenemy BYD (BYDDF) is setting up near a proper buy point. Cathie Wood’s Ark owns a small stake in BYD stock.
SPDR S&P Metals & Mining ETF (XME) slumped 1.9% last week. The Global X U.S. Infrastructure Development ETF (PAVE) climbed 1.4%. U.S. Global Jets ETF (JETS) descended 0.7%. SPDR S&P Homebuilders ETF (XHB) edged down 0.2%. 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) declined 2.5% for the week, but did bounce 2.4% on Friday. XLF is largely made up of banking giants, but Berkshire Hathaway is its top holding and Visa stocks is a major component.
The SPDR S&P Regional Banking ETF (KRE) rallied 6.3% on Friday but still plunged 10.1% for the week. KRE hit a 31-month low on Thursday. PacWest stock skyrocketed 82% on Friday, but still fell 43% for the week. WAL stock leapt 49% on Friday, retreating 27% for the week.
Friday night, PacWest slashed its quarterly dividend to 1 cent a share from 25 cents.
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Berkshire Hathaway Earnings
Berkshire Hathaway reported operating earnings of $8.065 billion, up 12.6% vs. year earlier. Insurance underwriting and insurance investment income jumped, while the BNSF rail operation and its energy company saw earnings declines.
Net earnings, including short-term investment gains, spiked 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.
Equity investments rallied in the first quarter. Apple stock, by far Buffett’s largest individual holding, hit an eight-month high Friday after topping earnings views.
Berkshire has also substantially increased its Occidental Petroleum (OXY) stake over the past year. Buffett said Saturday that Berkshire will not take full control of the oil producer. OXY stock has struggled for months amid weak oil prices. Occidental earnings are due Tuesday.
The company sold a net $10.4 billion in stocks.
Berkshire stock buybacks grew to $4.4 billion, the most since Q1 2021, up from $2.8 billion in Q4. Still, its cash hoard swelled to $130.62 billion from Q4’s $128 billion.
BRKB stock is working on a 331.94 buy point on a 13-month cup-with-handle base. Investors also could view it as a shelf above a bottoming base. The handle is part of a three-weeks-tight on a weekly chart.
Stocks Near Buy Points
Visa stock bounced Friday from its 50-day line to retake a 227.51 double-bottom buy point. Shares dipped just 0.4% for the week to 231.78, extending tight action. V stock has a four-weeks-tight pattern with a 235.67 entry. Visa and rival Mastercard (MA) are expected to deliver solid earnings growth for the next two years, benefiting from strong cross-border payments. MA stock also is in a buy range.
AMD stock edged up 0.5% to 89.84 for the week amid big swings. Shares plunged Wednesday on weak AMD guidance, then roared back Thursday on a report that it’s teaming up with Microsoft on an AI chip. Microsoft later denied that it’s developing an in-house AI chip but didn’t say if it’s funding AMD efforts. On Friday, shares extended 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 downward-sloping trendline.
As for Microsoft stock, the Dow tech titan rose 1.1% for the week to a fresh 52-week high.
TJX stock dipped 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 could use 79.81 as a legitimate early entry. That’s just above a handle that’s fractionally too low to be proper. That “handle” also is a three-weeks-tight with the same 79.81 entry.
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Market Rally Analysis
The stock market rally had some notable shifts 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 bounced back strongly Friday on banks, Apple, Tesla and the April jobs report. Friday’s gains came on lower volume though.
The Nasdaq briefly hit a three-month high Friday, just below the 2023 peaks. But the major indexes have been threatening to do so for weeks.
Winners crushed losers on Friday, but the Nasdaq advance/decline line has been hitting lows with the NYSE A/D line also deteriorating.
The First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW) did get back above its 50-day line and 21-day line Friday, cutting its weekly loss to just 0.35%. The Invesco S&P 500 Equal Weight ETF (RSP) fell 1.45% for the week, though it did bounce Friday to just between its 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 remain a major wild card. If the regional bank crisis ends and bank stocks recover significantly over time, it would be a big boost for the overall market, as Friday showed. But the risk of a renewed waterfall sell-off will likely remain for a considerable time.
Markets also rallied Friday on a robust jobs report that might have slammed stocks just a few days earlier. With the Fed seemingly on pause, investor concerns are shifting to recession risks. Will that continue indefinitely, or is that just a blip?
But if the major indexes can break decisively higher — with breadth — the market rally could have room to run.
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What To Do Now
The market rally remains under pressure, with the indexes rangebound and broad market conditions weak.
Not many stocks have been working consistently. Buying opportunities have been sparse lately, with many of those from big earnings gaps that are especially risky in an uneven market. Many stocks that have advanced end up round-tripping solid gains.
If the Nasdaq can lead the indexes into 2023 highs, more stocks will make bullish moves that are closer to buy points, then continue to advance. Investors could gradually pick up their exposure.
So investors need to be ready. Watchlists need to be updated after earnings left some promising stocks greatly extended and many others sharply lower. It’s unclear which sectors will lead.
But also be ready for the downside. While the market ended on a high note Friday, ultimately the market didn’t make any progress. 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 the market direction and leading stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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