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Feb 6, 2019

Markets: Tech Rally Puts Nasdaq on Verge of Exiting Bear Market.

The Wall Street Journal.
Markets Bear logo.
Markets
Will the Nasdaq exit a bear market today? We'll get you up to speed. I'm Jessica Menton, breaking down the latest premarket moves. 
  • Snap shares are surging ahead of the bell. The social-media company is inching closer to profitability. Meanwhile, investors are sorting through earnings from Humana and Eli Lilly, with GM results on tap later this morning. After the closing bell, Chipotle will open its books.
     
  • U.S. trade and productivity data are on the docket. Wall Street is also looking for reassurance on the health of the economy after service-sector growth cooled last month.
     
  • Plus, we're monitoring the Nasdaq. Our Akane Otani explains what's helped push shares of large technology firms higher recently. Meanwhile, stock futures are inching down, putting the S&P 500 at risk of ending its five-session winning streak.
 

Markets in a Minute

Markets Data
 

Overnight Developments

 

Nasdaq on the Brink of Leaving Bear Market

By Akane Otani, stocks reporter
The Nasdaq Composite is on the cusp of exiting a bear market, rebounding nearly 20% from its Christmas Eve low and highlighting the resilience of the technology shares that have long powered the market higher.
The index heavily weights shares of technology firms like Apple, Amazon, Google parent Alphabet and Facebook, which cumulatively lost hundreds of billions of dollars in market value in the final months of 2018. The rout, many said, was fueled by dimming confidence in the domestic and global economies, then likely exacerbated by machine-run trading that accelerated the declines.
But in recent weeks, rising optimism about U.S.-China trade negotiations and U.S. monetary policy has helped propel stocks across the board higher. And earnings reports from technology behemoths, while mixed, have proved to be better than many investors had feared.
Apple’s revenue and profit slipped as its China sales disappointed, although shares jumped after Chief Executive Tim Cook reassured investors that the company wasn’t taking its “foot off the gas.” Facebook delivered record profit for the latest quarter, proving its business continued to grow even as it faced  backlash from users and regulators. Alphabet posted a jump in quarterly revenue, along with rising costs outside its core online-advertising business.
Those developments have pushed the Nasdaq up 19.5% from its December low—and within less than half of a percentage point of exiting bear-market territory and kicking off a new bull run. If the index achieves the feat in the next five days, it would mark its second-fastest such rebound since its inception in the 1970s, according to Dow Jones Market Data. Despite the recent surge, the index is still down 8.7% from its Aug. 29 high.
Meanwhile, both the S&P 500 and the Dow Jones Industrial Average, which narrowly avoided entering a bear market, have also surged since Christmas. The indexes are both up 16% from their lows.
Yet some of the companies exerting the biggest pull on the stock market have enjoyed a more subdued recovery, suggesting the recent uptick in technology shares is far from the indiscriminate rally that many investors worried about last year.
Apple and Amazon have performed roughly in line with the S&P 500 this year, while Microsoft has trailed the broad index. The three companies have jostled for the title of the world’s largest publicly traded company in the past few months, with Apple’s recent post-earnings climb putting it close to reclaiming the title.

Market Facts

  • Analysts in January lowered their first-quarter earnings-per-share estimates for S&P 500 companies by 4.1%, the largest such drop in the first month of a quarter in three years, according to FactSet.
     
  • Shares of Church & Dwight slid 7.5% Tuesday, their biggest percentage loss since October 2008, after the household-product manufacturer's fourth-quarter profit missed Wall Street estimates.
     
  • On this day in 1808, the Milan Stock Exchange Borsa Valori di Milano (now called Borsa Italiana) was established. Borsa Italiana merged with the London Stock Exchange Group in 2007.

Key Events

The U.S. trade deficit for November, released at 8:30 a.m. ET, is expected to narrow to $54.3 billion from $55.49 billion the prior month.
U.S. labor productivity in the fourth quarter, also due at 8:30 a.m., is expected to rise at a 1.6% pace, a slowdown from the prior quarter's 2.3%. Unit labor costs are expected to increase 1.7%.
Crude-oil stockpiles are out at 10:30 a.m. and expected to have advanced by 1.4 million barrels during the week ended Feb. 1, according to the average forecast of 11 analysts and traders surveyed by the Journal. 
Fed Vice Chairman Randal Quarles speaks at a stress-testing conference at 6:05 p.m., and Chairman Jerome Powell participates in a town hall at 7 p.m.
 

Must Reads

Blackstone CEO Stephen Schwarzman, left, and Dangote Group CEO Aliko Dangote at the 2014 U.S.-Africa Business Forum in Washington. PHOTO: DREW ANGERER/BLOOMBERG NEWS
Blackstone is retreating from its Africa investment plan. Blackstone Group, the world’s largest private-equity firm, has pulled back on a plan to invest billions of dollars across Africa, the latest U.S. investor to temper its ambitions on the continent.
Goldman is planning cuts in its commodities trading as its new CEO digs in. Commodities trading at Goldman Sachs, once a huge moneymaker and a central part of the bank’s DNA, is on the chopping block.
The Federal Reserve will include high unemployment in its 2019 stress test scenario. The U.S. central bank said that its stress test for big banks will imagine a rapid increase in unemployment, as it announced the details of the hypothetical scenario banks must survive to pass the latest round of the exams.
Don’t obsess over earnings season. As we reach the halfway point in the S&P 500’s fourth-quarter earnings season, investors are obsessing over financial reports and downgraded profit forecasts. Here’s a heresy: This doesn’t matter nearly as much as people think.
Activist Edward Bramson is stepping up his push for a Barclays board seat. Mr. Bramson wants Barclays to shrink its investment bank, among other measures, which puts him in direct conflict with Chief Executive Jes Staley.
Venezuelan bonds are caught in fresh U.S. sanctions moves. Before the trading bans, Venezuelan bonds had been among the best-performing assets globally this year.
 

What We've Heard on the Street

“At Snapchat, even the brightest pictures are designed to fade away. Investors in parent company Snap should keep that in mind.”
—Heard on the Street columnist Laura Forman
 

Stocks to Watch

Disney: The media conglomerate's profit and revenue topped Wall Street estimates in the holiday quarter while costs rose.
Electronic Arts: The videogame publisher's quarterly financial results missed analysts' sales and profit expectations.
Container Store: The retailer turned in weaker-than-expected earnings for the latest quarter and projected that its annual revenue outlook would be at the lower end of its range.
Shutterfly: The digital-photo company announced that its chief executive officer Christopher North will step down at the end of August.
 

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