Even as yields increased, the Dow Jones Industrial Average rose on Monday. Cathie Wood, fund manager at Ark Invest, snatched up some bargains. Microsoft (MSFT), Amazon.com AMZN, and Tesla (TSLA), a Magnificent 7 stock, also joined the list.
Three other notable stocks also looked strong, as they aimed to enter the market. Ollie's Bargain Outlet, FTAI Aviation and NetEase all displayed relative strength while building bullish bases.
The stock market rallied even as Treasury yields rose ahead of the Fed's latest meeting on Tuesday and Wednesday. The 10-year yield increased by 2 basis point to 4.86%, while the 2-year yield also rose 2 basis points at 5.03%. The yield curve is still inverted.
Treasury announced that it also plans to borrow $776 Billion in the last quarter of 2023. JPMorgan Chase analysts had expected $800 billion.
Nasdaq Pops as Small Caps Lag
Nasdaq, the tech-heavy stock, was showing off its strength as it closed out with a gain of more than 1%. Onsemi's (ON) stock was the notable laggard, falling around 20% as a result of a disappointing outlook from the company. It expects earnings between $1.13 and $1.27 per share, while analysts were expecting $1.36.
S&P 500 rose by more than 1%. Western Digital (WDC), which announced it would spin off its Flash Memory business, soared nearly 8%. WDC will concentrate on its hard drive business.
S&P 500 sectors almost all showed gains. The best performers on today's stock market were communication services, financials, and consumer staples. The most difficult sector was energy.
Russell 2000, however, still rose by 0.5%. The Innovator IBD50 ETF (FFTY), which tracks growth stocks, also underperformed the major indexes.
Dow Jones Today: McFlurry of buying in McDonald's stock
Dow Jones Industrials was the best performing index, with a gain of nearly 2%.
The stock rose as a result of a rush to buy McDonald's. After announcing a revenue and earnings beat, the burger giant was up over 2%. Highlights included a larger-than-expected increase in global same-store revenue.
Verizon Communications (VZ), which rose by nearly 4%, was today's top Dow Jones gainer. Nike (NKE), and Goldman Sachs GS also had solid gains.
Cisco Systems (CSCO), the index's worst performer, was still a fractionally positive.
Cathie Wood Buys These Plunging Stocks
For the novice investor, buying on the dip is a risky move. Cathie Wood, a renowned fund manager, took advantage of recent pullbacks in order to grab some bargains.
Late Friday, the Ark Invest ARK Innovation ETF purchased more than 221,000 Block (SQ). The stock has fallen around 2% on Monday, indicating that the move is not yet paying off. The stock is down almost 40% in 2023.
ARKK has also acquired nearly 106,000 Beam Therapeutics shares (BEAM). The stock is up about 3% but still down almost 50% for the entire year.
Wood's flagship ARK Innovation ETF has also purchased nearly 73,000 Verve Therapeutics shares (VERV). The stock has risen by nearly 5%, but will drop more than 50% between now and 2023.
MarketSmith's analysis shows that all three are currently trading below their 50-day and200-day moving medians. This is a very bearish outlook.
Investors may be tempted to look for bargains, but IBD suggests that they buy stocks with strong price and earnings performance. Search for companies that have strong earnings and sales growth in industries with strong leaders.
Other moves made by ARK Invests in ETFs include sales of stock in DraftKings, Shopify and General Motors.
GM rose slightly, while Stellantis (STLA), which has been holding on to a small gain, also rose as the end of the ongoing autoworkers' strike neared. Ford (F), whose deal with the United Auto Workers union was already signed, dropped nearly 2%.
Amazon and Microsoft Stock Join this List
On Monday, IBD's Leaderboard Watchlist featured a couple Magnificent Seven stocks.
Dow Jones stock Microsoft was added to the list as it formed a handle entry and constructed a base. It's looking at a possible entry point of $346.20.
Microsoft's relative strength is a very impressive line. The stock also trades above the moving averages.
Microsoft's impressive forays in artificial intelligence have been boosted by its use of Open AI, which adds functionality to the Bing browser and Office. Earnings will rise by 14% and 15% respectively in fiscal years 2024-2025.
Amazon also earned a place, as the stock is up after a surge in earnings. It is now aiming to break a double bottom base at an ideal entry level of 134.48.
Just because a stock is on the Leaders Watchlist doesn't mean it's a good investment at this time, especially with the current market conditions.
Tesla's stock was the notable laggard, as most of Magnificent Seven made gains. The stock was down by more than 5% at the time of closing. TSLA also lost ground in relation to the 200-day average.
Outside Dow Jones, 3 stocks show strength
Due to the current market conditions, it is important to build up a watchlist. Here are some more candidates.
Ollie's Bargain Outlet has seen its relative strength line reach new heights, as it builds up a flat foundation with an ideal entry level of 80.94. The overall performance is excellent, as reflected by its IBD Composite rating of 95 out 99.
FTAI Aviation has been moving towards a base purchase point of 37.98. Currently, it holds the fourth position in the Aerospace/Defense Industry Group. FTAI is in the top 2% in terms of performance on the market over the last 12 months.
NetEase, a gaming software company, also saw their relative strength line reach new highs while building a flat basis. The ideal price to buy 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.