Dow Jones Waves On Fed Option Pivot Signal; Buffett Unloads Shares; Fake Tweet Slams Health Care

The Dow Jones Industrial Average took a breather after Thursday’s 3.7% gain. After opening 0.2% lower, the blue chip index was down 0.7% at midday. The S&P 500 pared earlier gains of 0.5% to trade 0.1% higher. The Nasdaq also gave up half of its early gains and was up nearly 0.7% at noon ET.




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The Russell 2000 gained 0.5%. The Innovator IBD Fifty (FFTY) also rose 0.5%

Volume on the NYSE and the Nasdaq was lighter compared to the same time on Thursday.

Crude oil rose 2% on news of China’s relaxed Covid restrictions, rising to $88.65 a barrel.

The University of Michigan’s Consumer Sentiment Index came in at 54.7, down from 59.9 last month, indicating deeper weakness in the economy.

Inverted Fed Preferred Production Curve

The difference between the current yield on the three-month Treasury bill and the expected yield in 18 months has turned negative by 14 basis points. The Fed watches this indicator closely so it is possible that a pivot for rate hikes will come sooner than expected. The difference was a positive 2 basis points during the last Fed meeting.

Powell said that this type of inversion “indicates that the Fed will be cutting, which means the economy is weak.” The minus 14 basis point inversion adds to cooler inflation numbers on Thursday and provides hope for the Dow Jones and other indexes.

The yield curve between the 3-month T-bill and the 10-year Treasury note has been inverted for some time.

Bond markets are closed Friday for Veterans Day.

The US dollar continued to weaken after its steepest fall since 2009 on Thursday, down more than 1%. Investors are likely to shift to riskier assets.

Bitcoin inched up after the FTX debacle and is trying to maintain the $17,500 level.

The news of easing of Covid restrictions in China is contributing to the better market outlook. The Asian nation shortened quarantine time and reduced Covid-related penalties on airlines. The yuan climbed to a month high at 7.10 per dollar.

Stocks Moving Outside the Dow Jones

Warren Buffett Berkshire Hathaway (BRKB) more than 90 million shares United States Bancorp (USB). The fund now holds 52.5 million shares, or a 3.5% stake, down from 119.8 million and 8%. BRKB stock was up more than 1% and was trading above its 200-day line.

Downgrade Dan Ives, long term bull and Wedbush analyst Tesla (TSLA) shares, reducing the price target to $250. The analyst maintained his buy rating on the stock.

CEO Musk sold nearly $4 billion in shares of the EV car maker to rescue Twitter, adding to the $15 billion sold earlier this year. The new owner has not ruled out bankruptcy and is reportedly trying to offset declining advertising revenue by increasing subscriptions. Tesla shares fell over 1% today, but losses were unabated at midday.

JP Morgan (JPM) analyst Harlan Sur resumed coverage Intel (INTC) with an Overweight rating and a $32 price target. The rating is a sharp reversal from previous research and a target of $64.

The analyst sees declining market share and slowing PC demand reducing the chip maker’s outlook. Intel shares sold off nearly 1% but reversed to post a 0.5% gain.

Also in Dow Jones, Walgreens (WBA) upgraded to buy from Deutsche Bank analyst George Hill and a $50 price target, up from $41. Shares rose nearly 5%.

Health care stocks fell amid a broad selloff in defensive stocks.

A fake tweet promised free insulin to diabetic patients who helped an insulin maker Eli Lily on (LLY) jumped 4%.

Dow Jones stocks, Johnson & Johnson (JNJ) and Amgen (AMGN) fell 3%, along with Harmony (HRMY.) Humanitarian (HUM), Terrestrial (CCRN) and head (VRTX) fell 6%.


What To Do As The Market Rally Gained Steam; 5 Stocks Near Buy Points


Stocks to Watch and Buy

Leader of Dow Jones United Health Care (UNH) dove above 5%. The stock is in a cup-and-handle base with a buy point of 553.23. Caterpillar (CAT) in a cup base with a buy point of 238.00.

IBD Stock Leaderboard, Albamarle (ALB) in buy zone above buy point 308.34. BJ wholesale (BJ) falling into a cup base with a buy point of 79.79. Watch for a handle formation that could present a lower entry.

Follow VRamakrishnan @IBD_VRamakrishnan on Twitter for more stock market news.

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