April 5, 2018.
Yesterday, it was the Dow’s turn in the spotlight, making its biggest intraday rebound from an intraday low in roughly six weeks. The blue chip index had been down as much as 2.1%, only to end up 1%; trading off as much as 510 points, the index ended up 230 points. If volatility was ever at our doorstep, it’s now. The question is how to play it, in other words, how traders can turn it to their advantage. Like always, it’s keeping your finger on the pulse, not becoming overly vested in any direction, and being ready for hairpin turns at a moment’s notice. Being true to your stop losses, and not letting emotions get the better of you!
Daily Summary: All of the major indexes saw huge intraday swings, the Dow ending up 0.96%, the S&P 500 gaining 1.16%. The NASDAQ climbed 1.45%. All sectors on the S&P 500 ended up for the day. Over the last 5 days, IT has gained the most ground, up 2.31%. Yesterday, the health care sector ended up 1.33%, followed by consumer staples, which tacked on 1.26%. Consumer discretionary and materials stocks were the day’s laggards, up 0.39% and 0.30% respectively.
One of the biggest movers yesterday in after-hours trading was Facebook (FB) which edged up 3%. The company, since its latest user data scandal, has shed $100 billion in market share. What injected investors with renewed optimism yesterday was the company’s announcement that it would engage in new privacy measures, checking third-party access to user’s personal data. Company CEO, Zuckerberg, will be testifying before Congress this coming week. What reassured investors, perhaps, more than anything else was Zuckerberg’s comment that despite the congressional and public uproar and fears that have been stoked, he hasn’t seen “any meaningful impact” on the business.
In terms of the changes implemented one of the most significant is a removal of feature enabling users to enter phone numbers or email addresses into Facebook’s search tool. The company noted that it was being used by actors with bad intentions: “Most people on Facebook could have had their public profile scraped in this way.”
Apologizing, Zuckerberg stated in a conference call to reporters: “We didn’t take a broad enough view of what our responsibility was and that was a huge mistake. It was my mistake.” Zuckerberg added that Facebook will not be able to identify “every single bad use of data, but what we can do is make it a lot harder for folks to do that going forward.” Summing up, he said, “We will be able to uncover a large amount of bad activity that exists.”
Zuckerberg’s congressional testimony could perhaps be said to be reminiscent of Buffett’s testimony on behalf of Goldman, when he stepped up to the plate, took on the helm of CEO, and helped reverse the company’s fortune by reinjecting new confidence into the market. The question is whether Zuckerberg has that political clout and social and political capital, especially after he was slow to apologize and seemed resistant to standing before Congress, even suggesting that lower down experts in his company might be better standing in his place.
With the congressional testimony playing out this coming week, Facebook is certainly a stock to watch and you can expect extreme volatility. Given the centrality of the company and the ecosystem it shares with so many large tech and data players who cull users’ info for advertising purposes, the questions Congress acts and how Zuckerberg responds will be a harbinger of what is yet to come vis a vis regulation for the entire industry. What happens with Facebook could have far-reaching consequences for not only companies like Twitter, Google, and Salesforce.com, but also companies engaged more in the hardware side like Apple and Samsung. With the economy of information and Economy of Things (EoT) taking a more central role in how we do business, it’s clear why this coming week’s testimony will be so important. With tech companies looking to buy car companies for the consumer information they can glean, it could not be more self-evident that the course Congress steers in so far as data collection will shape the entirety of the U.S. and world economy for years to come.
Viacom was also in the spotlight in late trading, after rejecting a lowball bid from CBS. Viacom was up 1.3%.
Hot Stocks: VIAB, FB, OLLI, CONN, HOFT, LW, MON, MTL