The Dow Jones Industrial Average suffered losses in late trading as Home Depot (HD), a component, disappointed investors with its most recent report. Warren Buffett's Berkshire Hathaway bought shares of a financial stock despite a banking crisis. House Speaker Kevin McCarthy attacked President Joe Biden before their debt ceiling discussion.
A few stocks broke out in spite of the mixed trading. Rambus (RMBS), GMS(GMS)and Advanced Micro Devices(AMD)all tested entries.
Treasury yields have risen. The yield on the 10-year bond rose by three basis points, to 3.54%. Meanwhile, the yield on the two-year bond jumped seven basis points up to 4.08%. This inverted the yield curve.
Biden Changes Plan After McCarthy Debt Ceiling Jibe
This morning, the long-awaited meeting between Congress and President Joe Biden on the debt ceiling took place.
McCarthy took the offensive before the powwow and aimed a jab at the schedule of the president. Biden will leave for Japan on Wednesday to attend a G-7 summit lasting three days.
McCarthy told reporters that there were 16 days left. "I don’t think I'd spend eight days out of the country."
Biden cut short his overseas commitments in response. Sources at NBC News say that Biden will return to the U.S. this Sunday, instead of going to Papua New Guinea or Australia as planned.
Democrats are seeking a debt ceiling increase that is unconditional, whereas Republicans want to see government spending cut before they agree. McCarthy stated that "a lot of hard work is needed in a very short time." He added that they would "work hard" to see this through.
He said that a Biden administration member will work with a team member to come up with a deal.
Treasury Secretary Janet Yellen said Monday that the U.S. may not be able to pay its bills by June 1, if Congress does nothing.
Edward Moya, senior market analyst at Oanda, said that investors are becoming anxious about the debt ceiling.
In a client note, he stated that Wall Street was bracing itself for a bad event. However, no one knew what it would be. It could be an impasse over the debt ceiling, persistent banking concerns, or weaker consumers as sticky inflation becomes more apparent.
Nasdaq reverses lower as small caps slump
The Nasdaq performed better than other major indices, but it still dropped 0.2% in late trading as indexes weakened. Baidu (BIDU), which reported its earnings, saw a 4% gain.
The benchmark S&P500 fell by 0.6%. Caesars Entertainment (CZR), which lags behind with a drop of 6.9%, was the worst.
S&P 500 was mixed, with a negative bias. The top performers were communication services and technology. Energy and real estate lagged behind the rest.
The Russell 2000 plunged 1.4%. The Innovator ETF 50 (FFTY), which tracks growth stocks, also fell behind.
Dow Jones Today: Home Depot disappoints, Nike lags
The Dow Jones was behind the other major indices. It finished the day down by 336 points or 1%.
Home Depot's stock fell by 2.1% after its most recent quarterly report. However, the real issue was not earnings.
Home Depot's EPS dropped 6.6% more than expected to $3.82, while sales declined 4% to $35.26 billion. This was the retailer's biggest sales miss in decades.
Home improvement retailer, The Home Depot, expects to see revenue and same-store sales decrease by 2% and 5% respectively, in comparison with fiscal year 2022. This was worse than the previous guidance.
Nike (NKE), however, was the Dow Jones' worst performer today, with a fall of 2.8%.
Warren Buffett buys this Finance Stock
Investors like to track 13F filings when looking for new stock ideas. Berkshire Hathaway is reported to have taken a new position in Capital One Financial.
Berkshire Hathaway reported the purchase of more than 9.9 million shares through a regulatory filing.
The new Warren Buffett stock includes one of the biggest issuers of U.S. credit cards, as well as consumer and commercial banking services.
COF closed at a lower level than the previous day's highs, but gained 2.1%. It has a low IBD Composite rating of 32 out 99.
Berkshire Hathaway increased its positions in Apple (AAPL), Bank of America (BAC), and Apple (BAC) by 2%. It also increased its Occidental Petroleum position (OXY), by 8%.
RH Stock Plummets On Buffett Axing
Berkshire Hathaway's latest portfolio changes did not bring all positive news to stocks.
RH (RH), previously Restoration Hardware, plummeted on the news that Buffett sold the stock during the last quarter. Oracle of Omaha does not seem to be a fan of the luxury furniture retailer, especially with the possibility of a recession.
Gary Friedman, the Chairman and CEO of the company, will be leading it at the end 2022.
RH's stock closed the day 8.8% lower. The stock flashed a buy signal when it fell below the 50-day average.
Stock has an RS Rating 31. The stock is down by a modest 4.7% in 2023.
Outside Dow Jones, AMD stock among breakouts
Advanced Micro Devices closed below a cup-base level of 102.53. It can be acted upon up to 107.66.
AMD's stock rose after a regulatory filing revealed that activist investor Daniel Loeb's hedge fund Third Point had taken a stake of 1 million shares.
AMD's IBD composite rating of 92 reflects the overall strong performance.
Rambus' relative strength line reached a new high after it passed a buy-point of 51.98. RMBS is rated 99 out of 100. Big Money has also been buying of late, as evidenced by the stock's B Accumulation/Distribution Rating.
GMS, a construction supplies company, is only a few points below the 62.29 mark. MarketSmith data shows that 76% of GMS's stock is held by institutional investors.