stock market’s attention will be on Dow Jones, S&P 500, and Nasdaq futures opening Sunday evening, especially focusing on Apple (AAPL) and Nvidia (NVDA). Berkshire Hathaway (BRKB) reported solid earnings but reduced its Apple stake. Nvidia’s next-generation Blackwell AI chips face delays due to design flaws.
Key Events and Developments
- Market Downturn: Last week saw sharp losses across the stock market, spurred by recession fears from weak economic data and Amazon’s (AMZN) consumer headwinds warning.
- Fed Signals Rate Cuts: Fed Chair Jerome Powell hinted at upcoming rate cuts, with markets predicting a 50-basis point cut in September and at least 100 basis points by year-end.
- Stock Performance: Key indexes like the S&P 500 and Nasdaq broke below critical levels. Amazon and Nvidia were among notable stocks with significant losses.
Berkshire Hathaway’s Earnings
- Earnings Growth: Berkshire Hathaway’s operating profit increased by 15.5% to $11.6 billion, driven by insurance underwriting and interest income.
- Apple Stake Reduction: Warren Buffett’s Berkshire sold nearly half of its massive Apple stock stake, contributing to cash levels soaring to $276.94 billion from $189 billion on March 31.
- Stock Buybacks: company bought back just $345 million of its stock; a reduction compared to prior quarters.
Nvidia’s AI Chip Delay
- Delay Impact: Nvidia’s next-gen Blackwell AI chips will be delayed by at least three months due to design flaws, affecting major buyers like Microsoft (MSFT), Google-parent Alphabet (GOOGL), and Meta Platforms (META).
- Stock Performance: Nvidia stock fell 5.1% last week amid reports of the Justice Department probing its AI dominance.
Market Reactions and Predictions
- Dow Jones Futures: Futures for Dow Jones, S&P 500, and Nasdaq will open at 6 p.m. ET on Sunday. Reactions to Buffett’s Apple sales and Nvidia’s chip delay will be pivotal.
- Market Fear Gauge: The CBOE Volatility Index (VIX) surged to its highest level since March 2023, indicating increased market fear which can signal a short-term bottom.
Stock Market Analysis
- Indexes: Dow Jones fell 2.1%, and Russell 2000 dropped 6.7%, both testing their 50-day lines on Friday. S&P 500 and Nasdaq lost 2.1% and 3.35%, respectively, falling below the 50-day lines.
- Sectors: Defensive growth sectors like discount retailers, insurance, and medical stocks held up better, as did utilities and consumer staples.
Stocks to Watch
- Apple (AAPL): Rose 0.9% last week, remaining near a key level despite Buffett reducing his stake.
- Meta Platforms (META): Increased 4.8% but fell below the 50-day line post-earnings.
- Neurocrine Biosciences (NBIX): Rose 4.3%, entering a buy zone after strong earnings.
- Ollie’s Bargain Outlet (OLLI): Rebounded from early losses, closing slightly up for the week.
- MercadoLibre (MELI): Rallied 7.5%, boosted by earnings, entering a buy zone.
What to Do Now
Investors should be cautious about new buys and consider reducing exposure to underperforming stocks. Despite market fear suggesting a potential bottom, key indexes and leading stocks need time to repair. Focus on updating watchlists and monitoring defensive sectors.
Resources
- IBD Live: Join experts analyzing leading stocks and market trends.
- Big Picture: Stay updated on market direction and key stock movements.
Nvidia and MercadoLibre are highlighted on IBD’s Leaderboard and IBD 50 list, respectively.