Shares of DocuSign (DOCU) should have dropped on Friday. After all, almost everything technology was down on the day and the company reported that growth in demand for its electronic document-signing products, which had soared during the Pandemic, had slowed as more workers went back to the office. Earning for the third quarter were 58 cents a share on an adjusted basis. That was above the 46 cents a share expected by Wall Street analysts. However, revenue, including revenue from acquisitions, rose “just” 42% to $545.5 million Analysts were expected revenue of $594 million for the quarter. But a plunge of 42.2%? I’d argue that something else is going on, something that’s related to the market as a whole and not to DocuSign in particular.
Congress votes to keep government open–through February 18–now it’s just the debt ceiling to worry about
Yesterday, December 2, the House and Senate both voted to approve a bill to fund the federal government to February 18. So no government shutdown this weekend. (Funding for the federal government was set to expire at midnight tonight.) Republicans in the Senate backed off on plans to delay at vote until after the weekend passed. The new agreement leaves a few items hanging.
After yesterday’s selling, we’re getting a bounce today. But, significantly, the bounce in stocks is much less “bouncy” than the Monday bounce from Friday’s plunge.
Apple, Amazon, Alphabet,Adobe, Applied Materials and other big techs rally hard–rest of stocks not so much
Today, Monday November 29, it’s a tale of two bounces from Friday’s big sell off. Technology stocks and especially big technology stocks are up big. At the close in New York Applied Materials was up 5.53%. Adobe (ADBE) was ahead 3.83%. Nvidia (NVDA) was higher by 5.95%. Amazon (AMZN) had gained 1.63%. Apple (AAPL) and Meta Platforms (AKA FB) were 2.19% and 1.47%, respectively. Qualcomm (QCOM) had gained 4.55%. Alphabet (GOOG) was higher by 2.32%. Microsoft (MSFT) had picked up 2.11%. NXP Semiconductors (NXPI) had climbed 5.41%. In most of these stocks today’s gains made up for Friday’s losses–or more. For example, on Friday Applied Materials had dropped 3.84% and NXP Semiconductors was down 3.88%. On the other hand, the “re-opening stocks” that got crushed Friday on fears that the Omicron Covid-19 variant would throw sand in the gears of the global economy showed only minor gains.
I think that in the coming week the market is likely to reconsider its panic selling of Friday. No guarantees, of course, but that is the most likely path for stocks in the coming week.
The foreign exchange markets have opened stronger in early trading in Sydney. The U.S. dollar rose modestly against the yen, euro and pound in early trading in Sydney. The currency of South Africa, where the variant was identified, rose as much as 0.9% against the dollar. Leveraged accounts bought the Australian dollar against the U.S. currency and yen on risk-positioning and short-covering. The likelihood at this point on late Sunday afternoon is that we’ll get at least a modest bounce on Monday.
I’m look for a test of the Friday’s rotation into technology stocks and away from anything that depends on economies remaining relatively free of Pandemic restrictions. On Friday, the winners were technology shares–Apple, Amazon, Tesla, Nvidia, for example–that have in the past been able to show revenue and earnings growth despite any economic slowdown resulting from Covid shutdowns. And the losers were the stocks of companies–such as Six Flags, United Airlines, Macy’s, for example, that depend on the continued recovery in economic activity. The immediate impetus for this sentiment came from news that Austria would impose Pandemic economic lockdowns–again–in an effort to slow soaring rates of infection. The believe is that Germany, the Netherlands, France, and the United Kingdom aren’t far behind. And the fear is that the United States will follow some time this winter. Add that to worries of elevated and rising inflation–where technology companies are seen as one of the few sectors able to outgrow inflation–and you’ve got significant sentiment to push technology shares higher. Logically.
U.S. retail sales rose in October for a third month. The value of overall retail purchases increased 1.7% last month, the most in seven months, the Commerce Department said today, November 16. Excluding gas and motor vehicles, sales gained 1.4% in October. The figures aren’t adjusted for inflation. The median estimate in a Bloomberg survey of economists called for a 1.4% advance in overall retail sales.
With stocks trading at record highs, I’d argue that nothing is as important as what “news” is priced in–or not. If stocks have priced in all the likely good news, then there’s much less to drive prices higher–and much more expansive possibilities for drops on disappointments. If there’s likely good news that’s not yet priced in, then stocks have potential fuel to move high. And, on the other hand, if bad news is priced in and fails to materialize, then, hey, we’re going higher from here. And if bad news isn’t priced in, then current record prices aren’t sustainable.
China’s factory-gate prices, the Chinese equivalent of the U.S. Producer Price Index, grew at the fastest pace in 26 years in October. Factory inflation climbed 13.5% year over year, the National Bureau of Statistics reported Wednesday.(Economimsts had projected a 12.3% year over year increase.) Raw material costs continued to soar, with signs that producers are passing on higher costs to consumers. China’s consumer inflation rose by 1.5% in October, the fastest pace since September 20202.
The dominoes keep tumbling and I think we’re now set up for one of those extremely volatile market melt ups through early January. Why do I believe that? And what’s a melt up look like? Glad you asked.
I’m starting up my videos on JubakAM.com again–this time using YouTube as a platform. My sixty-fourth YouTube video “It’s a market melt up! went up today.