All the equity indexes were lower, and all the sectors were in the red around midday, almost as if they were dipping their caps to honor perhaps the greatest investor of all time after Warren Buffett took another step back from Berkshire Hathaway.
But it was more to do with higher oil prices and bond yields, again the main factors for markets in the aftermath of the Federal Reserve’s first rate hike since 2023, as stocks ended the week on a downbeat note.
By the closing bell, tech stocks and industrial stocks had turned green, as had consumer discretionary and financials. The tech-heavy Nasdaq Composite turned positive late in the session and was up 0.4% at 26,522.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more – straight to your e-mail.
Profit and prosper with the best of expert advice – straight to your e-mail.
The broad-based S&P 500 added 0.2% on Friday to 7,650, but the blue-chip Dow Jones Industrial Average was down 0.2% at 51,682. Papa Dow has now closed lower for three consecutive weeks.
All three benchmarks were up on Thursday after digesting a 25-basis-point increase to the federal funds rate following the September Fed meeting.
“Nothing has changed on the fundamental side to lead investors to think that oil prices will decline in a significant way or that yields will tumble over the intermediate term,” observed Miller Tabak Chief Market Strategist Matt Maley.
Indeed, the front-month West Texas Intermediate crude oil futures contract opened at $101.96 and traded as high as $98.01 before ending the session down 1.6% at $95.68 per barrel.
Looking for more timely stock market news to help gauge the health of your portfolio? Sign up for Closing Bell, our free newsletter that’s delivered straight to your inbox at the close of each trading day.
But the 10-year Treasury yield climbed 5.9 basis points, crossing above 5% again and settling at 5.006%. The 2-year Treasury yield (+7.0 bps, 4.760%) and the 30-year Treasury yield (+3.7 bps, 5.333%) were higher, too.
With the impact of inflation and rising interest rates on the minds of investors, traders, speculators and consumers heading into another weekend, CME FedWatch shows a 55.4% probability of another 25 bps increase to the fed funds rate following the October 28-29 Federal Open Market Committee (FOMC) meeting.
NFLX has more downside
Netflix (NFLX, -4.7%) was among the worst-performing S&P 500 stocks on Friday after Wells Fargo analyst Steven Cahall cut his rating on the streaming giant to Underweight (Sell) from Equal Weight (Hold).
Cahall also cut his 12-month target price for NFLX, which split on a 10-for-1 basis last November, from $80 to $57. The analyst’s new target suggests the stock could fall 25% from its closing price on Wednesday.
“Engagement trends look worrying to us,” Cahall wrote. “Netflix has lacked big original series, and it’s showing.” The analyst says “breakout hits [are] a must for the stock to work again,” citing recent success for “more hit-driven” Walt Disney (DIS, -2.6%) on the content creation front.
Cahall suggests Netflix management faces a “messy” set of choices, including boosting capex to create its own content or using its balance sheet for more mergers-and-acquisitions activity after losing a bidding war for Warner Bros. Discovery (WBD, -1.6%) to Paramount Skydance (PSKY, -3.9%).
The Oracle of Omaha is now the Chairman Emeritus
Buffett is stepping down from his role as chairman of Berkshire Hathaway (BRK.B, +0.1%). The biggest financial stock in the sector and one of the most important broad market bellwethers rallied off its intraday lows to close with a solid gain on Friday.
In a letter to Berkshire Hathaway shareholders (PDF) on Friday morning, Buffett said “the timing is right” to complete a leadership transition that began when Greg Abel became CEO in January.
Buffett, still the largest Berkshire shareholder with holdings worth about $145 billion, will stay with the company he bought in 1965 as chairman emeritus and remain a member of the board of directors.
Abel was designated CEO successor in 2021 and first joined Buffett and Charlie Munger on the stage at a Berkshire annual meeting in 2022.
The chairman emeritus said Abel “has been making the decisions that matter for some time now, and I have not had to think twice about any of them.”
Howard Buffett, who’s been a director for 33 years, will succeed his father as chairman. “Greg runs the company; Howard will guard its culture and values – both worth more than anything on our balance sheet,” Buffett wrote.