The Dow Jones Industrial Average soared Monday even as yields rose. Famed fund manager Cathie Wood snapped up some potential bargains for Ark Invest. And Microsoft and Amazon.com joined a prestigious list amid encouraging action even as fellow Magnificent Seven stock Tesla plunged.
Meanwhile, a trio of other noteworthy stocks were looking strong as they eyed entry points. Ollie's Bargain Outlet, FTAI Aviation and NetEase all showed relative strength, having built bullish bases.
Stocks rallied even as Treasury yields gained ahead of the latest Fed meeting. The FOMC gathering takes place Tuesday and Wednesday, with Federal Reserve Chair Jerome Powell due to speak at the conclusion. The 10-year yield lifted 4 basis points to 4.88% while the two-year yield also climbed 4 basis points to 5.05%. The yield curve remains inverted.
The Treasury also announced it plans to borrow $776 billion in the last three months of 2023. This is below Wall Street expectations, as JPMorgan Chase analysts expected around $800 billion.
Nasdaq Pops As Small Caps Lag
Oanda senior market analyst Edward Moya said in a research note that "U.S. stocks are rallying as widening war fears eased a bit."
That may account for the tech-heavy Nasdaq flexing its muscles and rising 1.2%. On Semiconductor was a noteworthy laggard, however, cratering around 21.8% after the firm served up an outlook that disappointed Wall Street. It said it expects earnings of $1.13 to $1.27 a share while analysts expected $1.36 a share.
The S&P 500 also powered up 1.2%. Western Digital popped 7.3% after it said it will spin off its flash memory business. WDC plans to concentrate on its hard-drive business.
The S&P 500 sectors all made gains. Communication services, financials and consumer staples fared best on the stock market today. Energy made the slimmest gain.
Small caps underperformed, though the Russell 2000 still rose 0.6%. Growth stocks also lagged the major indexes, with the Innovator IBD 50 ETF rising 0.7%.
Dow Jones Today: McFlurry Of Buying In McDonald's Stock
Dow Jones industrials fared best out of the major indexes. While it closed slightly off highs it still rose 511 points, up 2%.
It rose amid a flurry of buying in McDonald's stock. The burger titan ended the session 1.7% higher after it served up an earnings and revenue beat. A bigger-than-expected rise in global same-store sales also was a highlight.
Nike was the top gainer on the Dow Jones today, though, as it rose 3.9%. Verizon Communications and Goldman Sachs also made solid gains. VZ rose 3.5% while GS gained 3.8%.
Walgreen Boots Alliance was the worst performer on the much-watched index, though it only fell 0.2%.
Cathie Wood Buys These Plunging Stocks
Buying on the dip can be a risky strategy for the inexperienced investor. But famed fund manager Cathie Wood took advantage of recent pullbacks to snap up some potential bargains, despite the risks.
More than 221,000 shares of payments stock Block were acquired by the Ark Invest's ARK Innovation ETF (ARKK) late Friday. The move has yet to pay off though, as the stock fell 2% Monday. It is down more than 39% so far in 2023.
ARKK also added nearly 106,000 shares of Beam Therapeutics. The stock closed up 2.6% today but remains down nearly 49% for the year.
And Wood's flagship ARK Innovation ETF also snapped up nearly 73,000 shares in Verve Therapeutics. The stock fared best of the three as it gained 6.5% but is down about 50% for 2023.
All three currently trade below their 50-day and 200-day moving averages, MarketSmith analysis shows. This is a distinctly bearish look.
Bargain hunting can be tempting for investors but IBD recommends buying stocks with strong earnings and price performance rather than laggards. Look for leaders in strong industries that are showing superior earnings growth and sales.
Other moves in ARK Invests ETFs included sales of some stock in DraftKings, Shopify and General Motors.
GM rose 0.5% while Stellantis fell 0.2% as an end to the ongoing autoworkers strike edged closer. Ford, which already inked a deal with the United Auto Workers union, lost 1.9%.
Amazon, Microsoft Stock Join This List
A couple of Magnificent Seven stocks won spots on the IBD Leaderboard Watchlist Monday. Dow Jones stock Microsoft has been added as it forms a new handle entry and constructs a base. It is eyeing a potential entry point of 346.20.
The relative strength line is looking mighty for Microsoft stock. It also trades above its moving averages.
Microsoft has gotten a boost thanks to its eye-catching forays into artificial intelligence, as it uses using OpenAI to add functionality to its Bing browser and Office products. Earnings are seen rising 14% in fiscal 2024 and 15% in fiscal 2025.
Amazon stock also won a spot as it holds gains from a recent earnings pop. It now seeks to clear a double-bottom base with an ideal entry point of 134.48.
But just because a stock has joined the Leaders Watchlist does not necessarily make it a good buy at the moment, especially given current conditions.
While most of the Magnificent Seven were making gains there was one notable laggard — Tesla stock. It plunged 4.8% for the session, closing near lows for the day. TSLA lost ground on the 200-day moving average in the process.
Outside Dow Jones: 3 Stocks Show Strength
The above moves underline the fact now is the time to be building up one's watchlist due to the challenging market conditions. Here are some other candidates.
Ollie's Bargain Outlet saw its relative strength line hit fresh heights as it builds a flat base with an ideal entry point of 80.94. Overall performance here is very strong, which is reflected in its IBD Composite Rating of 95 out of 99.
FTAI Aviation is moving closer to a flat base buy point of 37.98. It currently holds the fourth spot in the Aerospace/Defense Industry Group. FTAI ranks in the top 2% of stocks in terms of market performance over the past 12 months.
And gaming software play NetEase also saw its relative strength line hit new highs as it builds a flat base. The ideal buy point here is 110.82.
Big money has been snapping up NetEase shares of late, with its Accumulation/Distribution Rating coming in at A, according to MarketSmith data.
Please follow Michael Larkin on X, formerly known as Twitter, at @IBD_MLarkin for more analysis of growth stocks.
