Stock Market Today: Fed Fuels Second Day of Stout Stock Surge
Markets rallied for a second straight session Thursday amid optimism over Fed messaging and China's most recent involvement in the Evergrande situation.
Thursday's Wall Street action started right where Wednesday's left off, with investors driving the major stock indexes to another day of broad and sizable advances.
At least some of the day's gains were chalked up to the Federal Reserve, which several strategists said yet again threaded the messaging needle with yesterday's announcement.
"The Fed has done a very good job telegraphing its intentions and the numbers that it is watching to make decisions," says Andy Kapyrin, co-head of investments at wealth management firm RegentAtlantic, adding that yesterday's statement "leaves little room for big surprises down the line."
Also encouraging was a new development for Chinese developer Evergrande (EGRNY, -13.1%), whose liquidity issues have sent shock waves well beyond China.
Anu Gaggar, global investment strategist for Commonwealth Financial Network, explains: "Evergrande has been instructed by the Chinese government to not default on the interest payments on the USD-denominated bond that are due today even as local officials have been ordered to step in should Evergrande's unwinding become disorderly."
To some investors, even those modest measures suggest the Chinese government wants to prevent a sudden collapse of the deeply indebted real estate firm, which left unchecked could rattle both China's economy and global stock markets.
The Dow Jones Industrial Average improved by 1.5% to 34,764, led by a 7.2% jump in Salesforce.com (CRM) after the cloud software firm raised its current-year revenue forecasts and provided better-than-expected sales guidance for its next fiscal year. The S&P 500 (+1.2% to 4,448) and Nasdaq (+1.0% to 15,052) also finished significantly higher.
Indeed, stocks even managed to overlook a surprise increase in initial unemployment claims. Jobless-benefits filings for the week ended Sept. 18 grew by 16,000 to a seasonally adjusted 351,000.
Other news in the stock market today:
- The small-cap Russell 2000 was propelled 1.8% higher to 2,259.
- Darden Restaurants (DRI) was a big post-earnings winner, jumping 6.1% in the wake of its fiscal first-quarter report. For the three-month period, the Olive Garden parent brought in earnings of $1.75 per share on $2.3 billion in revenues, while same-restaurant sales surged 47.5%. All three metrics were higher than analysts were expecting ($1.63; $2.2 billion; 44.0%, respectively), as was DRI's full-year forecast .
- BlackBerry (BB, +10.9%) also got a boost from its quarterly results. The former smartphone maker turned cybersecurity and software firm reported an adjusted second-quarter loss of 6 cents per share on $175 million in revenues – better than the 8-cent-per-share loss on $161.9 million in sales that Wall Street expected. Nevertheless, CFRA analyst Angelo Zino kept his Hold rating on the stock. "BB's lackluster performance in its cybersecurity segment amid a healthy industry backdrop is of concern to us," he says, but adds that "efforts to expand its sales force and new product launches could support growth ahead and we like its ability to generate positive free cash flow."
- U.S. crude oil futures jumped 1.5% to $73.30 per barrel.
- Gold futures retreated 1.6% to settle at $1,749.80 an ounce.
- The CBOE Volatility Index (VIX) dropped another 10.5% to 18.68.
- Bitcoin improved by 3.2% to $44,805.20. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m. each trading day.)
Another Shot at Buying Value?
A few rays of sunshine are starting to peek through the COVID clouds, too.
Nationally, coronavirus cases and hospitalizations are starting to inch lower – hardly enough to declare us out of the woods, especially with winter on the way, but enough to see reasons for optimism.
"As expected, vaccination against Covid has been effective in curbing hospitalization and mortality," says global asset manager Research Affiliates. "We expect renewed economic growth as the emerging markets and other regions slow to vaccinate their populations make significant progress on that front. The cyclical sectors of the economy, and consequently value investors, should benefit."
And as for so-called recovery plays? Some are bargain priced, some aren't, but most of them could get a second wind if and when the world turns the next corner on COVID.
Among the most sensitive to such an event are airline stocks, which are dependent on both travelers feeling comfortable enough to pack themselves into a jet – and governments feeling confident enough in their COVID progress to lift travel bans. Even then, the whole industry doesn't necessarily become a buy. Read on as we explore nine airline stocks to determine which ones are the best bets from here.
Kyle Woodley was long CRM as of this writing.