Losses grew in late trading for the Dow Jones Industrial Average as component Home Depot (HD) disappointed investors with its latest report. Warren Buffett-led Berkshire Hathaway (BRKB) bought shares in a financial stock despite the banking crisis. House Speaker Kevin McCarthy blasted President Joe Biden ahead of their debt ceiling meeting.
XSome stocks tried to break out despite the mixed action. Rambus (RMBS), GMS (GMS) and Advanced Micro Devices (AMD) all tested entries.
Treasury yields moved higher. The 10-year yield rose three basis point to 3.54% while the two-year yield spiked seven basis points to 4.08%, making the yield curve more inverted.
Biden Changes Plan After McCarthy Debt Ceiling Jibe
The long-awaited debt ceiling meeting between congressional leaders and President Joe Biden took place this afternoon.
McCarthy went on the offensive ahead of the powwow, taking a shot at the president's schedule. Biden is getting set to leave the country on Wednesday for a three-day G-7 meeting in Japan.
"We've got 16 more days to go," McCarthy told reporters. "I don't think I would spend eight days somewhere out of the country."
Biden responded by cutting short his overseas engagements. He will now return to the U.S. on Sunday instead of heading to other planned visits to Papua New Guinea and Australia, a source told NBC News.
Democrats want the debt ceiling raised unconditionally, while Republicans are looking to secure government spending cuts before agreeing. After the meeting McCarthy said there is "a lot of work to do in a short amount of time." He also said they will "work hard to make this come to fruition."
He also said a member of the Biden administration will be working with a member of his team to hammer out a deal.
Treasury Secretary Janet Yellen warned Monday the U.S. could become unable to pay its bills as soon as June 1 if Congress doesn't act.
Oanda senior market analyst Edward Moya said the debt ceiling issue is raising anxiety among investors.
"Wall Street is bracing for something bad to happen, but no one has an idea on what will be that catalyst," he said in a note to clients. "It could be a debt ceiling impasse, persistent banking fears, or a much weaker consumer as sticky inflation becomes more noticeable."
Nasdaq Reverses Lower As Small Caps Slump
The Nasdaq fared better than the other major indexes but still fell 0.2% as indexes faded in late trading. Baidu (BIDU) impressed with a gain of 4% following its earnings report.
The benchmark S&P 500 fell 0.6%. Caesars Entertainment (CZR) lagged with a dip of 6.9%.
The S&P 500 sectors were mixed with a bias to the negative. Communication services and technology were the top performers. Real estate and energy lagged the most.
Small caps were mauled by the bears, with the Russell 2000 plunging 1.4%. Growth stocks also lagged, with the Innovator IBD 50 ETF (FFTY) losing 1.1%.
Dow Jones Today: Home Depot Disappoints, Nike Lags
The Dow Jones lagged the other major indexes. It ended the day down 336 points, or 1%.
Home Depot fell 2.1% following its latest quarterly report, though earnings were not actually the issue.
Home Depot reported a better-than-expected EPS drop of 6.6% to $3.82 as sales fell 4% to $37.26 billion. It was the retailer's worst sales miss in decades.
The home improvement retailer expects revenue and same-store sales to decrease 2% and 5%, respectively, compared with fiscal 2022. This was worse than its previous guidance.
Despite this, it was Nike (NKE) that was the worst performer on the Dow Jones today, falling 2.8%.
Microsoft (MSFT) led the upside as it rose 0.7%. It is currently extended, MarketSmith analysis shows.
Warren Buffett Buys This Finance Stock
Many investors like to keep track of 13F filings for stock ideas. And it has emerged that Berkshire Hathaway has taken out a new stake in Capital One Financial (COF).
Berkshire Hathaway has reported a purchase of over 9.9 million shares in a regulatory filing.
The latest Warren Buffett stock is one of the largest issuers of credit cards in the U.S., and also provides consumer and commercial banking products.
COF stock closed off highs for the day but still gained 2.1%. Nevertheless, it holds a poor IBD Composite Rating of 32 out of 99.
In addition to its new holding, Berkshire Hathaway also increased positions in Bank of America (BAC) and Apple (AAPL) by 2% each. It also boosted its Occidental Petroleum (OXY) position by 8%.
RH Stock Plummets On Buffett Axing
But it was not all good news for stocks following the latest changes to the Berkshire Hathaway portfolio.
RH (RH), formerly Restoration Hardware, plunged on news that Buffett dumped the stock in the last quarter. It seems the Oracle of Omaha is not enamored with the luxury furniture retailer's prospects with a possible recession looming.
At the end of 2022, Berkshire owned 2.36 million shares in the company, which is led by Chairman and CEO Gary Friedman.
RH stock ended the day down 8.8%. It flashed a sell signal as it plummeted below the 50-day moving average.
The stock holds an RS Rating of 31. It is down a moderate 4.7% so far in 2023.
Outside Dow Jones: AMD Stock Among Breakouts
Advanced Micro Devices cleared a 102.53 cup-base entry and closed below that level. It is actionable as high as 107.66.
AMD stock popped after a regulatory filing showed hedge fund Third Point, which is run by activist investor Daniel Loeb, has taken a 1 million-share stake.
Overall strong performance is reflected in AMD's IBD Composite Rating of 92.
Rambus saw its relative strength line reach a fresh high after it cleared a buy point of 51.98. RMBS has a perfect Composite Rating of 99. Big Money has also been buying of late, as evidenced by the stock's B Accumulation/Distribution Rating.
Construction supplies play GMS is just below its 62.29 entry. Institutional ownership is very high: 76% of its stock is owned by funds, according to MarketSmith data.
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