U.S. equities climbed higher on Monday thanks to M&A activity, a big investment in Apple Inc. (NASDAQ:AAPL) by Warren Buffett and a rise in crude oil. The gains reversed Friday’s breakdown in the Dow Jones Industrial Average below its 50-day moving average — something that hadn’t happened since February. Which is a pretty big deal.
There are some niggling concerns that remain. Breadth is underwhelming. Federal Reserve officials continue to sing a hawkish tune heading into the release of the April meeting minutes on Wednesday. And economic news both at home and overseas continues to weaken.
For now, large-cap stocks continue a three-month sideways skid, which caps a long three-year pattern near a Dow level of 18,000. For an idea of where we go next, keep an eye on these three stocks.
Apple Inc. (NASDAQ:AAPL)
We learned on Monday that Warren Buffett’s Berkshire Hathaway Inc. (NYSE:BRK-B) has established a stake in AAPL — a rare dose of good news for a company that’s been bogged down by disappointing earnings, a first-ever decline in iPhone sales, and rapidly dimming expectations for the upcoming iPhone 7 launch. Specifically, the company disclosed it acquired 9.8 million shares of Apple in its latest 13F filing.
This comes with the stock down nearly 9% for the year to date. Last week, Edge Pro subscribers closed their position in the May $107 AAPL puts for a 283% gain.
Bank of America Corp (NYSE:BAC)
Financial stocks like Bank of America Corp (NYSE:BAC) look vulnerable to a breakdown here as they decline to test support from the post-February uptrend. Moreover, the stock is testing its 50-day moving average as it did successfully back in April.
Investors continue to worry about the drags from energy-sector loan defaults and bankruptcies, lower long-term interest rates pinching net interest margins and market volatility weighing on investment banking revenue. Edge Pro subscribers are holding a position in the June $14 BAC puts.
Home Depot Inc (NYSE:HD)
For the last two weeks, it has been all about retail stocks as a series of disappointments and share price declines have focused attention on the pullback by American consumers.
Home Depot Inc (NYSE:HD) will report before the bell today and will be closely watched not only for retail strength but also for indications on the health of the housing market.
Analysts are looking for earnings of $1.35 per share on revenues of $22.35 billion.
Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters. A two-week and four-week free trial offer has been extended to InvestorPlace readers.
