- Stocks markets bounced back yesterday, and some stocks rose even higher after-hours, on earnings.
- Oil and gold were up on the day, but remain depressed.
- Google morphs into Alphabet, which will hold the new, leaner, more focused Google, and its other ventures as separated entities.
- Twitter shares rose 9% primarily driven by two news items.
- Buffett's latest acquisition will be his last big deal for the year.
Bounce Back Monday - Stock Markets Find Some Reprieve
So, all better, then?
Maybe. The U.S. stock markets were all up over 1% yesterday, helped by gains in Asia and Europe, buoyed by increased energy and commodity prices.
The good news started in China, with the Shanghai Composite up nearly 5%. It continued in Germany, the DAX up 1%. By the time U.S. trading opened the momentum was irresistible, and the S&P 500 index – the broadest-based measure of market strength – rose about 1.25%.
The rise left major averages unchanged from a week ago. The NASDAQ finished up 1.15% for the day at about 5,100. The Dow Jones was up 1.35% to 17,600 and the S&P 500 finished near 2,100.
Technology is BAA-ACK - Tech Stocks Join The Party
What a lot of tech traders wanted to know was whether the big names that fell last week might come back this week. So far the answer is yes. But before that, let's kick off with what is probably the biggest stock market related news item this morning.
Google And Alphabet – That’s Why Google Shares Are Up 6.4%
Google is undertaking a major restructuring exercise. Under the new scheme of things, Sundar Pichai will be CEO of Google (NASDAQ:GOOG), which will retain control over Google search, ads, Android, the Google Play Store, Maps and YouTube.
As for co-founders Sergey Brin and Larry Page, the duo will be CEO and President of a larger holding company named Alphabet, which will oversee the new, reshaped Google, as well as the rest of Google’s businesses which will be hived off, and come under the Alphabet umbrella.
Alphabet will oversee affiliated companies such as the life-extension project Calico, and Wing, a drone delivery venture which came under the large umbrella of what was Google. Alphabet will also be managing the operations of other allied entities like Google X, and Google Capital & Google Ventures, which were early stage funding initiatives by Google.
The new set up will see Alphabet allocating a CEO and leadership to each of its sub-divisions, while Brin and Page will probably look to guide the broader direction of the company as a whole.
Don’t worry about your shares though, unlike with its rather complicated stock split, this time, Google’s kept it simple. As per an SEC filing all Google shares will not trade as shares of the new holding company, Alphabet. Here’s a more detailed coverage of the news. For now, Google shares are up $40 a share, nearly 6.5% in after-hours trade.
Technology is BAA-ACK - Back To The Broader Talk On Tech Stocks
Apple (NASDAQ:AAPL) finished up 2.5% at near $119.65, and even IBM (NYSE:IBM) was up 1.15% to finish at almost $157. Apple is still down for the month and IBM is still just $5 over its January lows, against a high last month of over $173.
Twitter (NASDAQ:TWTR) was another star, up 9% after news interim CEO Jack Dorsey and other executives have been buying the stock, and that the National Football League will show replays of big plays on Twitter for the next two years. Brands will be able to display league content created specifically for the platform.
Warren Buffett of Berkshire Hathaway (NYSE:BRK.A) remains bullish on IBM, and has even bought/boosted his stake in recent months, having gotten in during 2011. Other big tech stocks had more modest moves – less than 1% up-or-down for Amazon (NASDAQ:AMZN), Google and Facebook (NASDAQ:FB), with Alibaba (NYSE:BABA) up over 2% to $80.17 on hopes for good earnings news Wednesday.
Buffett Boosts Manufacturing
Buffett was the day’s big newsmaker. His decision to have Berkshire Hathaway spend $37.2 billion on acquiring Precision Castparts (NYSE:PCP), put together over a few weeks, was the day’s big deal. Buffett said PCP, whose castings are used in jet planes and oil equipment, is his last big deal for the year, and it took Berkshire’s shares, which never split, down .26% to $214,880. (You can still get a “baby Berkshire,” a Class B share worth a fraction of what an A is worth, for $143.)
Was the price fair? PCP cost an above-market multiple of over 21, high for an old-line industrial company. But that was less than the $240/share the stock sold at before the oil bust last year.
Energy was “up” in yesterday’s market, but up is still down. West Texas Intermediate (WTI), the main U.S. grade, was up 2.1%, but still finished below $45/barrel, while Brent North Sea oil, the global standard, finished barely above $50. Oil analysts now think U.S. producers can survive on $50 oil.
So What Happens Now?
The Volatility Index or VIX, a measure of fear in the market, fell 7% yesterday, and analysts remain skeptical the rally can last. I rate that skepticism as good news.
After the bell Shake Shack (NYSE:SHAK) beat estimates, with earnings of 9 cents/share on revenue of $49 billion, with same-store sales up 12.9%. The hamburger chain’s shares rose almost 9% on that, and the new price was more than 50 times annual revenue. Heinz Kraft (HNZ), put together by Buffett and Brazil’s 3G Capital early this year, fell as it was unable to deliver a combined earnings number, saying there was $4.52 billion in revenue for Kraft, down 5%, with $2.62 billion from Heinz, down 4%. HNZ fell 1.6% on that.
Rackspace (NYSE:RAX), the cloud services provider, also rose despite missing on revenues by $2 million, at $489 million, earning the expected 20 cents per share. Shares rose almost 6.25% because Rackspace announced it would buy back shares worth $1 billion -- on a $4.5 billion market cap that’s huge.
For today Rackspace illustrates the big story. There are now fewer public companies than there had been, and fewer shares outstanding. Companies like Uber can grow to giant size without going public, and hedge funds like 3G can take companies private that were once immune to that.
There’s certainly enough pessimism out there to keep the rally going today. Will it? Stay tuned.
You can also see our previous edition of Markets This Morning.