Dow Jones Wavers On Fed’s Preferred Pivot Sign; Buffett Unloads Shares; Fake Tweet Slams Health Care

The Dow Jones Industrial Average took a breather after Thursday’s 3.7% gains. After opening 0.2% lower, the blue chip index was down 0.7% at noon. 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 by 0.5%

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

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

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

Fed’s Preferred Yield Curve Inverts

The difference between the current yield on the three-month Treasury bill and its expected yield in 18 months has turned negative by 14 basis points. The Fed watches this indicator closely so a pivot to rate hikes may come earlier than expected. The difference was a positive 2 basis points during the last Fed meeting.

Powell has said this type of inversion indicates “the Fed’s going to cut, which means the economy is weak.” The minus 14 basis point inversion adds to Thursday’s cooler inflation numbers and buoys optimism for Dow Jones and other indexes.

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

Bond markets are closed on Friday for Veterans Day.

The U.S. dollar continued to weaken after its sharpest plunge since 2009 on Thursday, down more than 1%.  Investors are likely moving to riskier assets.

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

News of easing Covid restrictions in China is adding to the market’s rosier outlook. The Asian nation shortened the quarantine time and reduced Covid-related penalties on airlines. The yuan climbed to a one month high at 7.10 per dollar.

Stocks Moving Outside Dow Jones

Warren Buffett’s Berkshire Hathaway (BRKB) has unloaded more than 90 million shares of US Bancorp (USB). The fund now owns 52.5 million shares, or a 3.5% stake, down from 119.8 million and 8%. BRKB stock was higher by more than 1% and trading above its 200-day line.

Long-term bull and Wedbush analyst Dan Ives downgraded Tesla (TSLA) shares, dropping 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 automaker to rescue Twitter, adding to the $15 billion sold earlier this year. The new owner does not rule out bankruptcy and is trying to offset declining ad revenue by stepping up subscriptions, according to reports. Tesla shares had fallen over 1% today but pared losses at noon.

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

The analyst sees diminishing market share and slowing PC demand dimming the chip-maker’s outlook. Shares of Intel sold off nearly 1% but reversed to post a 0.5% gain.

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

Health care stocks plunged amid broad selling in defensive stocks.

A fake tweet promised free insulin for diabetic patients contributed to insulin maker Eli Lily’s (LLY) 4% dive.

Dow Jones stocks, Johnson & Johnson (JNJ) and Amgen (AMGN) fell 3%, along with Harmony (HRMY.) Humana (HUM), Cross Country (CCRN) and Vertex (VRTX) plunged 6%.

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

Stocks To Watch and Buy

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

IBD Leaderboard stock, Albemarle (ALB) is in a buy zone above a buy point of 308.34. BJ Wholesale (BJ) is falling in 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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