Government Shutdown News Lifts Stocks: Dow Rebounds


Stocks started sharply higher Tuesday, as efforts to beat deadlines for China tariffs and a government shutdown stirred optimism, and as the Dow Jones index rebounded off the 25,000 mark.


Chegg (CHGG), Mimecast (MIME) and RingCentral (RNG) all swept higher on earnings news.  Under Armour (UAA) also gained following its fourth-quarter report. Shopify (SHOP), Veeco Instruments (VECO) and marijuana stock Aurora Cannabis (ACB) notched earnings-related losses.

Video gaming stocks were active. Electronic Arts (EA) spiked after releasing details for its new Apex Legends game. Take-Two Interactive (TTWO) slipped on an analyst downgrade. Peer Activision Blizzard (ATVI) reports fourth-quarter results after today’s close. Among chipmakers, STMicroelectronics (STM) jumped in early trade and Xilinx (XLNX) added to its recent advance.

Fragrance icon Coty (COTY) soared 14%, on a bid from a German private investment firm to take a 60% stake in the company.

The Dow Jones index and the Nasdaq Composite each scrambled 1% higher at the starting bell, while the S&P 500 climbed 0.9%.

Electronic Arts led the Nasdaq 100. JPMorgan (JPM) and Goldman Sachs (GS) paced the early gains on the Dow Jones index, where nearly half of the Dow’s 30 issues rose more than 1%.

Coty jetted to the top of the S&P 500. Molson Coors Brewing (TAP) fell furthest among S&P 500 stocks, down almost 7% on mixed fourth-quarter results.

Dow Jones Index Rebounds From 25,000

The Dow Jones industrials backed off Monday, ending still above 25,000 and just even with its 200-day moving average. The Nasdaq and S&P 500 are pulled back after meeting resistance at their 200-day lines last week. A move above that resistance by either index could signal added momentum for the uptrend.

The stock market’s uptrend has been behaving well, with indexes carrying very few distribution days — which would indicate institutional selling. The Dow and the Nasdaq are both fighting for an eighth-straight weekly gain.

For more detailed analysis of the confirmed uptrend and stock market today, read the Big Picture.

Under Armour Sacks Expectations

Under Armour muscled up almost 2% in early action. The Baltimore, Md.-based athletic-wear maker reported fourth-quarter earnings per share of nine cents, vs. expectations for a four-cent gain. Revenue climbed almost 2% as international sales swelled 24%, and sales in North American fell 6%.

Under Armour is technically in a cup-with-handle base showing a 21.62 buy point.

Deadline Update: Shutdown, China Tariffs, Brexit

A tentative pact between Democrat and GOP lawmakers — hashed out in appropriations committees in the Senate and House and approved by House Speaker Nancy Pelosi — raises some hope of a budget deal that would avert a second federal government shutdown.

The deal met with resistance on both the Republican and Democrat sides, and it was uncertain whether it had the backing of President Trump. House Appropriations Committee Chairwoman Nita Lowey, D-N.Y., said she hoped to have a formal proposal on the table by Wednesday. Federal offices and operations will shut down if a deal is not reached by midnight Friday.

U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin are in Beijing, set to meet with a team led by Chinese Vice Premier Liu He. Tariffs are scheduled to increase from 10% to 25% on imported China-made goods valued at $200 billion per year if an agreement is not hashed out by March 1.

U.K. Prime Minister Theresa May, expected to brief Parliament today on progress toward a Brexit plan, planned to ask for an extension before a scheduled vote Thursday. May wants two more weeks in order to work through details. There is a possibility that the Labour party opposition could commandeer oversight of the Brexit plan design in Thursday’s vote.  Britain faces a March 29 deadline for its exit from the European Union.

Stocks: RingCentral, Mimecast, Chegg

RingCentral stock perked up 6.5% in opening trade. The software developer reported fourth-quarter earnings and revenue above analysts’ estimates, and raised its first-quarter and full-year revenue guidance to above the consensus target. RingCentral stock is extended after a breakout from a cup-with-handle base in early January. RingCentral stock has a best-possible 99 IBD Composite Rating.

Mimecast bolted 15% higher after reporting a solid fiscal third-quarter win. A 200% earnings gain and a 30% rise in revenue topped expectations. Management put its fourth-quarter revenue guidance well above analyst targets. The gap up gain sent shares past a 46.92 buy point in an eight-month cup base. Shares remain in a buy range through 49.31.

Textbook publisher Chegg punched up 6%, as its fourth-quarter earnings surged a better-than-expected 67% and revenue swung 30% higher. The stock is extended, beyond buy range, after clearing a 32.92 cup-base buy point in January. Chegg’s Composite Rating is a 96.

Oil Prices Jump On Saudi Comments

Exxon Mobil (XOM) and Chevron (CVX) each rumbled more than 1% higher on a rebound in oil prices. Oil prices leapt, with West Texas Intermediate up almost 3% to just below $54 a barrel. News reports quoted Saudi Energy Minister Khalid al-Falih saying that Saudi Arabian oil production would come in below 10 million barrels per day in March, about 500,000 bpd below levels agreed to in OPEC’s most recent quota arrangement.

The price of WTI had fallen about 6% since Feb. 1 through Monday, due in part to concerns over China trade and U.S. government shutdown threats, and also on pressure regarding the possible success of U.S. “NOPEC” anti-trust legislation, working its way through Congress. Europe’s Brent crude benchmark rose 2.7%, to above $63 a barrel.

Coty Gets Takeover Offer

Coty spritzed 14% higher after Germany-based private investment firm JAB said it would buy, through an affiliate, 150 million shares of the company at 11.65. That’s a 21% premium to Coty’s closing price on Monday. The deal would reportedly give JAB a controlling 60% stake in Coty. JAB already owns a reported 300.9 million shares — about a 40% stake. JAB said the arrangement depended upon approval from Coty’s board of directors.

Coty shares are up more than 70% from a late December low. They remain about 60% below the stock’s July 2015 record high.

Tokyo, Frankfurt, Paris Markets Rally

In Japan, Tokyo’s Nikkei 225 roared back to life after a holiday weekend, surging 2.6% as a falling yen stirred a rush of corporate share buybacks. The gain revived the index’s uptrend that paused last week, leaving the benchmark up 10.1% from a late December low.

Markets in China gained, with the Shanghai Composite posting a 0.7% advance. In the U.K. and Europe, stocks rallied on optimism over progress on U.S. negotiations regarding a federal government shutdown and China tariffs. Frankfurt’s DAX and the CAC-40 in Paris each gained about 1%. London’s FTSE 100 gave up its early gains, slipping to narrow losses in afternoon trade.


The Big Picture: Stocks Pause, But This Index Provides A Hopeful Sign

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Current Stock Market Rally: A New, Bullish Phase For Investors

2019-02-12 14:26:15

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