Historic Trade Deal Lifts U.S. Stock Markets - Markets This Morning

  • A historic trade deal that's been six years in the making was signed.
  • Expectations of a Fed rate hike appear to be fading.
  • Twitter stock rose 7% on news of Jack Dorsey becoming the permanent CEO.
  • Micron stock jumped by over 10% following an earnings beat.
  • Markets seem to be buoyant, following the latest news and developments, at least for now.

Historic TPP Trade Deal Bouys Stock Markets

A historic trade deal was signed and announced on Monday, between the U.S.A and 11 Pacific Rim nations including Japan, Singapore, Canada and Australia among others. The deal, dubbed the Trans-Pacific Partnership, has taken six years to reach completion, and is expected to boost trade between the countries involved. The deal is targeted at eliminating tariffs that are considered barriers to trade, including over 18,000 tariffs that are currently imposed on U.S. exports. U.S. President Obama was quoted as saying:

“This partnership levels the playing field for our farmers, ranchers and manufacturers,” Obama said. “It’s an agreement that puts American workers first and will help middle-class families get ahead.”

U.S. markets seemed to echo the sentiment, as key indices rose between 1.5% to 1.85%. The NASDAQ composite was up 73.5 points to end the day 1.56% higher, while the broad based S&P 500 rose 35.7 points, to move 1.83% higher, and Dow Jones Industrial Average rose 304 points or 1.85%. Markets were also aided by receding expectations of a rate hike this year. Though the Fed had indicated its intent to raise rates later this year, recently released weak U.S. jobs data and fears around the lack of adequate inflation, have led some to expect no hikes this year. Though several stocks showed significant gains on Monday, two tech stocks in particular, Twitter (NYSE:TWTR) and Micron (NASDAQ:MU) had big news driving their share prices over 7% and 10% higher respectively.

Twitter Stock Celebrated Permanent CEO, Jack Dorsey's Appointment

Twitter announced the appointment of co-founder Jack Dorsey as permanent CEO, sending Twitter stock 7% higher, to close the day at $28.16 a share. Dorsey who has been serving as interim CEO after the exit of Dick Costolo also heads payments company Square. Twitter shares have come under extreme pressure this year, falling from nearly $53 a share to as low as $21, as the company has encountered one problem after another.

Twitter missed its own guidance earlier this year, which led the stock into a phase of massive correction. As user growth remained subdued, some investors and analysts called for ex-CEO Dick Costolo's exit. Since then, Twitter shares have fallen further, following the managements commentary indicating that no serious user growth can be expected till the platform undergoes an overhaul that is aimed at making it more scalable.

More recently, worries have lingered about the absence of a stable, full time leadership at Twitter. This is possibly also because of the fact that Jack Dorsey also manages payments company Square, which could potentially be headed for an IPO. The latest announcement of Jack Dorsey's appointment as permanent CEO seems to have calmed those fears, and the Twitter stock has found some support, at least for now.

MU Stock Jumps Post Earnings Beat

Micron stock has become hot property since the company reported earnings for Q4 2015. Micron reported a 15% decline in quarterly revenue, compared to the year ago quarter, with revenue of $3.6 billion. The company's non-GAAP earnings per share stood at $0.37 per share, as against $0.82 in the same quarter a year ago.

In spite of the declines in revenue and profits, Micron shares surged since the earnings release, as the company beat analyst estimates across the board. While slowing PC sales continued to drag results, sales of mobile DRAM, which were much stronger, drove up the shares. Micron shares are now up nearly 19% since the company's earnings announcement on 1 October 2015.

After an initial jump on Friday last week, Micron stock jumped another 10.43% on Monday, to touch $17.57 a share.

What Happens In The Markets This Morning?

Apart from the biggest trade deal so far, there were other things that brought cheer to markets. Like we said earlier, one of those things was the receding expectation of rate hikes by the Fed. Another factor was buoyancy in oil prices. Oil prices edged higher, and a big part of the fear for the last month or so has been deflation, fueled in part by the meltdown in oil prices. Oil's slide has dented market sentiment several times over the last month or so.

To sum up, the sentiment looks pleasant at the very least, with no major bad news for now. Then again, the markets have a mind of their own, and they never fail to surprise you. As we head in to the earnings season, notable earnings for today are expected from Pepsico (NYSE:PEP) and Yum Brands (NYSE:YUM). Also, a key trigger might be the U.S. crude oil inventory change report, due on 7 Oct 2015.

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Neither Amigobulls, nor any members of its staff hold positions in any of the stocks discussed in this post. The author may not be a certified/registered investment advisor, and the opinions expressed should not be treated as investment advice. Buying and selling of securities carries the risk of monetary losses. Readers/Viewers are advised to carry out their own due diligence and consult their investment advisors before making any investment decisions. Neither Amigobulls, nor the author have any business relationship with any of the companies covered in this post.

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