Dow Jones futures were little changed Monday morning, along with S&P 500 futures and Nasdaq futures.
Berkshire Hathaway jumped on strong earnings released Saturday, as Warren Buffett issued his annual shareholder letter.
The stock market rally powered higher last week thanks to Nvidia earnings and guidance lifting AI plays. The S&P 500 and Dow Jones hit record highs while the Nasdaq composite is getting close. Nvidia itself soared, flirting with yet another milestone.
Advanced Micro Devices, Lennar, Manhattan Associates, Microsoft and MongoDB are stocks setting up or potentially actionable. AMD stock, MongoDB and Microsoft are AI plays.
Still, investors should be cautious about new buys, especially with AI stocks now. The market rally is on the cusp of being extended, even with Friday's pause. Many of the hottest stocks, including Nvidia, are greatly stretched. A longer stock market pause or pullback could be constructive.
Nvidia stock is on IBD Leaderboard. Microsoft stock is on SwingTrader and IBD Long-Term Leaders. Nvidia, Microsoft and MongoDB are on the IBD 50. Nvidia, MongoDB, AMD and Manhattan Associates stock are on the IBD Big Cap 20.
The video embedded in this article discusses the big market week and analyzed Lennar, Manhattan Associates and AMD stock.
Dow Jones Futures Today
Dow Jones futures edged lower vs. fair value. S&P 500 futures were flat and Nasdaq 100 futures edged higher.
The 10-year Treasury yield edged down to 4.24%. Crude futures fell slightly.
Remember that overnight action in Dow futures and elsewhere doesn't necessarily translate into actual trading in the next regular stock market session.
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Warren Buffett Letter
In Warren Buffett's annual letter to shareholders, the billionaire saw few opportunities to deploy capital at home or abroad, with no chance for "eye-popping performance."
With Buffett not finding great opportunities to invest, Berkshire's cash hoard swelled to a fresh record of $167.6 billion in the fourth quarter from Q3's $157 billion.
Berkshire Hathaway Earnings
Berkshire Hathaway's operating profit grew 28% vs. a year earlier to $8.48 billion. Q4 operating profit per class A share swelled 30% to $5,881, topping the FactSet consensus of $5,717.
Berkshire bought back $2.2 billion worth of its own shares in Q4 and $9.2 billion for the year.
Berkshire Hathaway Class B shares gained modestly in premarket trade. BRKB stock rose 2.8% to 417.22 last week, a fresh high and the sixth straight weekly gain. Berkshire stock is on the cusp of hitting a $1 trillion valuation.
Stock Market Rally
The stock market rally extended a pullback to start the week but roared back with Nvidia.
The Dow Jones Industrial Average popped 1.3% in last week's stock market trading with the S&P 500 index jumping 1.7%, both setting all-time highs. The Nasdaq composite gained 1.4%, hitting a two-year high but closing just below the 16,000 level on Friday. It's also just under its late 2021 peak.
The small-cap Russell 2000 fell 0.8%, still in a range from the end of last year.
All of these indexes rebounded from around their 21-day exponential moving averages.
The Invesco S&P 500 Equal Weight ETF climbed 1.2% to a record high. The First Trust Nasdaq 100 Equal Weighted Index ETF advanced 0.7%, just tipping into new-high ground.
Those underscore that market leadership is relatively broad, extending below AI and tech names.
However, the Nasdaq is 4.9% above its 50-day line and the S&P 500 5%. That's right on the edge of being extended again. The indexes could certainly get more extended, but the risk of a pullback would increase.
The market rally has been reluctant to take an extended pause, only making brief tests of the 21-day line. But whenever the Nasdaq quickly rebounds, it's extended again within a day or two.
So it's no surprise that bullish sentiment has been high. The bulls vs. bears reading has been hitting multiyear highs, just below excessive levels, even before this week's punch to new highs.
The 10-year Treasury yield fell 4 basis points to 4.26% for the week, skidding 7 basis points on Friday from a three-month high.
U.S. crude oil futures fell 2.5% to $76.49 a barrel for the week, thanks to Friday's 2.7% slide.
ETFs
Among growth ETFs, the iShares Expanded Tech-Software Sector ETF fell 1%, but slashed weekly losses after tumbling Wednesday on Palo Alto Networks. MSFT stock is a major IGV component with Manhattan Associates also in the ETF. The VanEck Vectors Semiconductor ETF jumped 3.4% to a record high. Nvidia and AMD are huge SMH holdings.
SPDR S&P Metals & Mining ETF fell nearly 1% last week. The Global X U.S. Infrastructure Development ETF rose 1.9% to a fresh high, extending its win streak to seven weeks. U.S. Global Jets ETF ascended 0.75%. SPDR S&P Homebuilders ETF popped 3% to a record high, with LEN stock a holding. The Energy Select SPDR ETF climbed 0.5%.
The Health Care Select Sector SPDR Fund rose 1.5% and the Industrial Select Sector SPDR Fund advanced 1.9%, both to record highs.
The Financial Select SPDR ETF gained 1.6% to a two-year best. Berkshire Hathaway is the top holding in XLF.
Reflecting more-speculative story stocks, ARK Innovation ETF fell 3.8% last week and ARK Genomics ETF lost 4%.
Time The Market With IBD's ETF Market Strategy
Nvidia Stock
Nvidia stock soared 8.5% to 788.17. That was all due to Thursday's 16.4% spike on yet another quarter of skyrocketing earnings and guidance, roaring from the 21-day line to a fresh record high.
Nvidia is easily the top performing stock in the S&P 500 this year, after leading the way in 2023. It closed the week with a $1.946 trillion valuation, briefly topping $2 trillion on Friday. It's now the third most-valuable U.S. company. It's increasingly plausible to see Nvidia stock topping the market cap of Apple ($2.818 trillion) and even Microsoft ($3.049 trillion).
However, NVDA stock is now 33% above its 50-day moving average. It could be some time before the AI leader offers a buying opportunity.
Stocks To Watch
AMD stock rose 1.5% to 176.52, but it was a wild week. Shares fell back to the 10-week line, undercutting several weeks of trading, then surged nearly 11% Thursday on Nvidia earnings before pulling back somewhat Friday. AMD stock actually climbed 1.52% for the week, fractionally too much for a three-weeks-tight with a 183.83 buy point. Investors might want to wait another week for a flat base to form. That would also give a little more time for the 10-week line to catch up.
One question for investors: Why buy AMD — or any other AI stock — instead of waiting for an opportunity to buy or add to Nvidia, the clear AI leader?
Microsoft stock rose 1.55% to 410.34 last week, rebounding from the 10-week line and reclaiming the 21-day, offering a new entry for the AI and cloud giant.
MongoDB stock tumbled below the 422.84 buy point on Wednesday, but found support at the 10-week line, rebounding on Thursday and Friday to reclaim the buy zone. Still, shares fell 2.9% to 451.32.
Lennar stock rebounded from the 50-day line, rising 3.2% to 155.08, just below a 156.01 flat-base buy point.
Manhattan Associates stock has been consolidating this month after gapping out of a flat base on Jan. 31 following earnings. The supply-chain management software maker tested its 21-day line Wednesday and then bounced, closing up 2.1% to 248.90 for the week. Shares cleared a short, downward-sloping trendline, offering an aggressive entry. Investors also could wait for a move above the 251-252 areas, clearing its February trading range.
What To Do Now
The market rally doesn't want to stop, which is impressive. But that's limiting new buying opportunities. With the Nasdaq and S&P 500 already somewhat extended, that may be for the best.
Investors likely want to be cautious about new buys, especially in high-beta AI plays. There are some non-tech names setting up like Lennar, as well as some consumer, energy and biotech names. Those could help diversify AI and tech-heavy portfolios, making them less vulnerable to a major sell-off.
Cast a wide net to find that broader leadership, looking for actionable names and setups. If you do choose to add exposure, you want to have the best names on your watchlists, ready to pounce as they flash buy signals.
But don't feel compelled to make a lot of moves. Riding the current trend with significant exposure is a sound play.
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