March 27, 2018.
The market reversed course yesterday, with jaw-dropping gains. With all the ups and downs, news that the U.S. and China were having meetings to avoid a trade war, seemed to do the trick, propping investors’ sentiments. The Dow, yesterday, recorded its third largest daily point gain in history.
Tech stocks were the biggest winners on the day, with gains of 4%. Microsoft Corp. (MSFT) soared 7.6%, Netflix (NFLX) skyrocketing 6.5%. Apple (AAPL) jumped 4.8%. Amazon (AMZN) tacked on 4%. Of the blue chips, only one didn’t close higher. Financials rose 3.2% on the day.
Publicly traded firearm companies fell yesterday in the first session after a massive worldwide rally against gun violence. Sturm Ruger & Co. (RGR) slid 0.4%. American Outdoor Brands (AOBC), Smith & Wesson parent, fell 2.3%.
USG Corp. (USG) rejected a buyout offer from Knauf AG. It stated that it “substantially undervalues” the firm and therefore does not match shareholders’ interests. USG gained 19%.
Intel Corp. (INTC) surged 6.3% on a Raymond James upgrade. Raymond James noted the semiconductor industry’s improved supply/demand balance.
Finish Line Inc. (FINL) soared 31% after JD Sports Fashion PLC JD announced that it would be buying the U.S. retailer for $13.50 per share in cash. The deal is valued at $558 million.
And last but not least, General Electric (GE), which seems to only reach new lows. The stock fell 1.4% to $12.89, now finding itself beneath $13 for the first time since July 2009. GE has tumbled 57% over the past 12 months and was the only Dow component to end down yesterday.
Daily Summary: The major indexes all soared, the Dow up 2.84%, with the S&P 500 tacking on 2.72%; the three saw their largest percentage gains since August ‘15. Tech heavy NASDAQ took the pot with gains of 3.26% on the day.
One of the sectors ripe for growth sees to be the energy sector – and for at least two reasons. Firstly, Trump’s hiring of John Bolton, a hawkish force, as his new national security adviser. Secondly, the fundamentals. Weighing in, Credit Suisse analysts noted, “Extended valuations had resulted in Energy’s underperformance since mid-2016, despite a favorable cyclical backdrop, rising oil prices, and robust earnings growth. A combination of strong fundamentals and weaker stock prices makes the sector’s valuations more attractive than they have been in several years.” The bank also noted that they now find the case against the sector “less compelling.”
One stock that was truly in the limelight yesterday was Microsoft (MSFT), after Morgan Stanley analysts projected that it will hit a $1 trillion market cap. Two of the big names that have been expected to get that big are Apple (AAPL) and Amazon (AMZN), and so yesterday, Gate’s baby basked in the spotlight. The investment bank’s Keith Weiss gave MSFT a target of $130 and at 7.7 billion shares, that would be a cap of just a tad over $1 trillion. The stock is Weiss’s top pick; he expects the company’s public cloud workload adoption to surge 44% in the next 3 years from its 21% share at present.
Facebook (FB) rebounded very marginally by 0.42%. Fears have been growing as the federal government and 37 state attorney generals have chosen to investigate the behemoth’s behavior pattern vis a vis user data and privacy. The social networking site now has 2 billion users. CEOs of other tech companies also came out against Facebook, perhaps most prominent of them being Apple’s Tim Cook: “I think this certain situation is so dire, and has become so large, that probably some well-crafted regulation is necessary.” Salesforce CEO, Benioff, also didn’t mince words. “Smoking, drinking too much, & spending too much time on social media: none of these things are good for you.” If there has been any point at which Facebook will be reined in, it’s now. The question is whether or not it can truly make a dent in the long run. With Facebook having long reached the tipping point – over one in four people in the world use the networking site – what effect can the U.S. government have if it’s not matched by global cooperation?
In today’s Economic Calendar, the S&P Corelogic Case-Shiller HPI will be released at 9:00, followed by Consumer Confidence at 10:00.
It’s hard to know if what we saw yesterday foreshadows further gains; it could have been just a technical bounce. Robert W. Baird & Co. equity sales trader, Mike Antonelli, noted, “Big positive moves in stocks tend to come after biggest down days, and today’s action looks like a technical bounce, just because markets were so weak for days.”
Have a great trading day!
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