What a day for the stock market, as the major indexes rose thanks to big gains in beaten -down momentum stocks like Salesforce.com (CRM), Alexion Pharmaceuticals (ALXN) and Netflix (NFLX), and jumps in International Business Machines (IBM) and Goldman Sachs (GS).
REUTERS The S&P 500 rose 1% to 1,896.65 today, a record high, while the Dow Jones Industrial Average gained 0.7% to 16,695.47, also an all-time high. The Nasdaq Composite jumped 1.8% to 4,143.86, its largest one-day gain since Jan.30, while the Russell 2000 climbed 2.4% to 1,133.65 but is still 6.2% off its record high hit on March 4.
Stocks got a big boost when China’s State Council offered a blueprint for liberalizing its financial markets. HSBC’s Qu Hongbin and Julia Wang explain what happened:
The State Council has issued a document outlining nine broad-ranging capital market reform principles for the next five years. The overall goal is to develop a multi-layer, fully-functioning capital market system to support growth. There are some big challenges. However the endorsement from the top level of government is highly significant. The role of the capital market to transfer savings into long-term investments has become a national economic strategy. This should also lead to a better coordination between different regulators to overcome some of the structural obstacles to the development of the capital market.
And with that, momentum was restored to beaten down momentum stocks. Salesforce.com, which had plunged 16% during the past two months, jumped 6.3% to $53.43, Alexion Pharmaceuticals, which had slid 15%, bounced 5.4% to $161.10, and Netflix, which had plummeted 25%, climbed 5.1% to $345.45.
International Business Machines and Goldman Sachs were the biggest contributors to the Dow’s new high, a sign that even big, stodgy stocks weren’t left out of today’s rally. International Business Machines, which has lost 5.8% during the past 12 months, gained 1.3% to $192.57, and Goldman Sachs, which had risen just 7%, advanced 1.5% to $159.55.
Bespoke Investment Group offers some perspective on today’s momentum rally:
We can't be sure if this is the bottom for some of the hardest hit names out there; the downtrend is too powerful to read in to any one day with anything approaching a strong feeling. But there was definitely a more upbeat tone to trading, and investors with exposure to equities will certainly take it. We would continue to wait for more sustainable strength and an eventual break of the downtrend channels before getting comfortable with new longs in the "high flyer" group. This could just as easily be an oversold bounce that quickly gets faded as it could be the start of something more bullish.
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Westpac’s Graeme Jarvis marvels at the strength of global markets today:
The S&P500 last night closed a new record high, the NASDAQ closed +1.77% and even the much maligned and written about Russell 2000 (which was -10% from its March high) managed to rally +2.41%. This however was not just a US event. Across the globe equity markets had or were having breakout moves from the SENSEX in India to the DAX in Germany. The indecision and indifference we have all experienced recently which was hinted at coming to end last week looks to have been replaced with a modicum of certainty.
Let’s hope that certainty lasts until tomorrow.
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