Dow Jones Up As McCarthy Gives Debt Ceiling Warning; Activist Targets This Growth Stock
The Dow Jones Industrial Average rose as House Speaker Kevin McCarthy issued a debt ceiling warning to President Joe Biden. Shake Shack (SHAK) soared on an activist investor move while Meta Platforms (META) popped on an analyst upgrade. Microsoft (MSFT) inched up after a regulator boosted its takeover bid for Activision Blizzard (ATVI).
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Meanwhile, a trio of stocks managed to pass buy points despite the mixed action. Heico (HEI), HSBC (HSBC) and CPKC (CP) all tested entries.
Treasury yields were mixed. The 10-year yield rose four basis point to 3.50% while the two-year yield dipped slightly to 4%. The yield curve remains inverted.
McCarthy Throws Down Debt Ceiling Gauntlet
McCarthy slapped Biden with the proverbial gauntlet before giving a debt ceiling warning. He is set to meet with the president on Tuesday and gave every indication he wants a speedy resolution to the potential crisis.
McCarthy said the two sides are still "far apart." He accused Biden and his aides of "not talking anything serious" and claimed they are more interested in making it look like they are engaging in talks.
"I think we've got to have a deal done by this weekend," McCarthy said, adding a sense of urgency to the proceedings.
The House Speaker has previously indicated he wants to get a full agreement put in place rather than strike a short-term deal to add more negotiating time to the clock.
It comes after Biden said Sunday that he is "optimistic" a deal will be struck to avert a potential default.
Nasdaq Shines As Small Caps Jump
The Nasdaq fared better than the other major indexes as it closed with a gain of 0.7%. China e-commerce play JD.com (JD) was among the good performers here as it popped 6.7%.
The benchmark S&P 500 made a less impressive gain of 0.3%. Western Digital (WDC) caught the eye here as it surged 11.2%.
The S&P 500 sectors closed mixed. Materials, financials and technology were the strongest performers. The defensive utilities area lagged most while health care also struggled.
Small caps fared best, though, with the Russell 2000 rising 1.2%. Growth stocks reversed higher, with the Innovator IBD 50 ETF (FFTY) closing up 0.6%.
Dow Jones Today: Microsoft Stock Up After Deal Boost
The Dow Jones index lagged the other major indexes but rallied into the close. It finished the day up 48 points, or 0.1%.
Intel (INTC) fared best as it rose 2.9%. The chip giant remains below its 50-day moving average, according to MarketSmith analysis, but getting closer to the line.
American Express (AXP) and Walgreens Boots Alliance (CRM) also performed well on Dow Jones today with gains of 1.4% apiece.
Microsoft squeezed out a gain of 0.2% after its takeover bid for Activision Blizzard got a boost.
The EU has approved the mooted $69 billion deal. However, U.K. regulators have blocked the deal over competition concerns.
The U.S. Federal Trade Commission has also launched a lawsuit against Microsoft to stop the deal. MSFT is extended past a flat base entry of 276.86.
Activision Blizzard finished the session with a 1.2% gain.
Growth Stock SHAK Soars On Activist Interest
Burger stock Shake Shack soared after it emerged activist investor Engaged Capital has the company in its sights. The activist is planning a proxy fight for three board seats, according to The Wall Street Journal.
Engaged, which has a stake of nearly 7% in the company, believes it has found ways to double the profitability of Shake Shack within two years. It also wants it to get rid of its staggered board.
However, it seems the activist firm and management are at loggerheads, sparking a potential battle.
"Our stock is up more than 50% year-to-date and we are well positioned to continue enhancing value for shareholders," Shake Shack said in a statement.
The stock is extended past a 61.49 buy point. SHAK closed the day up 7.8% and is now up nearly 70% for the year.
META Stock Pops After Upgrade
Leaderboard stock Meta Platforms (META) ended the day comfortably higher after it scored an upgrade.
It was upgraded from hold to buy by Loop Capital, which also raised its price target to 320 from 220.
The company sees a brighter revenue picture ahead for the social media giant. It also said the stock has been "rerated meaningfully this year mostly on expense reductions."
Meta stock ended the day with a 2.2% gain. It is extended past a 197.26 buy point.
The firm previously guided for revenue of between $29.5 billion and $32 billion in Q2. The midpoint was well clear of analyst views for $29.5 billion.
Earlier this year, CEO Mark Zuckerberg said in a statement that 2023 is going to be the "Year of Efficiency" for the company.
Outside Dow Jones: Biotech Play Tests Entry
A trio of stocks attempted breakouts.
Heico jumped on news of that it acquired privately held aircraft parts maker Wencor Group for about $2 billion. Heico stock broke out above the 177.65 buy point of a flat base in heavy volume.
Banking play HSBC managed to clear a cup-with-handle entry of 38.54. While overall performance is strong, with its IBD Composite Rating 94 out of 99, buying a bank stock would be a brave move at the moment. HSBC is based in the U.K., however.
Railroad stock CPCK is trading around the entry of a flat base buy point of 83.06 on its weekly chart. Earnings are a key strength here. CP stock holds an EPS Rating of 93 out of 99.
Chip stock Onto Innovation (ONTO) also broke out, this time from a cup base. The entry point here is 89.85. Strong all-around performance has netted it a Composite Rating of 87 out of 99.
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Source: Investor's Business Daily
