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End of Day Brief - Friday Mar. 26 - Stocks rally in the last hours

Stocks rally to end the day

Market Snapshot

SP 5003974.54+65.02(1.66%)
10-yr Note -3/321.663
NYSEAdv 2492 Dec 727 Vol 1.1 bln
NasdaqAdv 2470 Dec 1445 Vol 5.1 bln

Industry Watch

Strong: Energy, Information Technology, Materials, Real Estate
Weak: Communication Services

Moving the Market

-- Major indices rally into the close in a relatively broad-based advance

-- Relative weakness in some of the mega-caps

-- Fed announced that it will ease current bank dividend/buyback restrictions after completion of stress test

-- Rebound in long-term interest rates

The major averages continued to improve as the session moved on, with the S&P 500 ending the day with a greater than 1.5% gain and the Nasdaq and Dow both adding more than 1%. Trading has remained a bit choppy as the market weighs a variety of factors, including the ongoing rollout of vaccines, the swings in reported infections, the tightening of restrictions in Europe, and uncertainties over China relations. Markets are also keeping a close eye on prospects for yet another multi-trillion stimulus package from Washington.

ECONOMIC EVENTS: In the U.S., personal income dropped 7.1% in February, while spending fell 1.0%. The University of Michigan consumer sentiment index reading improved to 84.9 in the final March print, stronger than expected and replacing the 83.0 figure in the preliminary report. In energy news, Baker Hughes reported that the U.S. rig count is up 6 from last week at 417 with oil rigs up 6 to 324.

TOP NEWS: MSG Entertainment ($MSGE) shares fell 9.9% after the company agreed to acquire MSG Networks ($MSGN) in an all-stock, fixed exchange ratio transaction. The merger is expected to be tax-free for both MSG Entertainment and MSG Networks and their stockholders. Upon the closing of the transaction, MSG Networks stockholders would receive 0.172 shares of MSG Entertainment Class A or Class B common stock for each share of MSG Networks Class A or Class B common stock they own. The exchange ratio is approximately 4% above the ratio of the unaffected closing stock prices of the two companies on March 10, the last trading day before a press report speculated on a potential transaction, the companies said. MSG Networks shares were 7.6% lower after the news as well.

In other M&A news, Reuters reported that EU antitrust regulators are set to approve without conditions Analog Devices' ($ADI) proposed $21B takeover of Maxim ($MXIM). Analog shares gained 4.8% after the news.

Shares of L Brands ($LB) were 3.7% higher after the company increased its first quarter earnings guidance due to "improved sales trends," which the company believes are mostly driven by "unusual shifts in consumer spending patterns, resulting from government stimulus payments, a relaxation of COVID-19 restrictions and other factors."

In earnings news, SAIC ($SAIC) shares fell 16.6% after the company reported lower than expected revenue for the fourth quarter and provided downbeat guidance for fiscal 2022.

Meanwhile, shares of special purpose acquisition company BowX Acquisition ($BOWX) jumped 20.4% after the company announced a merger agreement with WeWork that will result in WeWork becoming a publicly listed company. The transaction values WeWork at an initial enterprise value of approximately $9B.

Additionally, Reuters reported that Robinhood ($HOOD) is creating a platform to "democratize" initial public offerings, including its own, in a plan that would let users acquire shares alongside Wall Street funds.

MAJOR MOVERS: Among the noteworthy gainers was MagnaChip ($MX), which surged 27.4% higher after entering into a $1.4B take private deal with Wise Road Capital. Also higher was Root ($ROOT), which gained 11.4% following positive comments on the stock from Citron Research's Andrew Left.

Among the notable losers were Discovery ($DISCA) and ViacomCBS ($VIAC), which dropped a respective 27.5% and 27.3%, with the weakness in both stocks being attributed to block trade offerings. Also lower was NIO ($NIO), which fell 4.8% after it said it would suspend production for five days due to a semiconductor shortage.

Reviewing Friday's economic data:

  • Personal income fell 7.1% in February ( consensus -7.0%). Personal spending decreased 1.0% ( consensus -0.6%). The PCE Price Index increased 0.2% ( consensus 0.3%) while the Core PCE Price Index, which excludes food and energy, increased 0.1% ( consensus 0.1%).
    • The key takeaway from the report is that spending decreased more than expected, indicating an inclination among consumers to continue saving. That said, the personal savings rate fell to 13.6% in February from 19.8% in January.
  • The final reading of the University of Michigan Consumer Sentiment survey for March increased to 84.9 ( consensus 83.6) from 83.0 in the preliminary reading. The final March reading puts the series at a one-year high.
    • The key takeaway from the report is that sentiment was boosted by another round of direct payments and a faster than expected vaccination distribution.
  • The Advance report for International Trade in Goods for February showed a deficit of $86.7 billion versus $83.7 billion in January. The Advance report for Retail Inventories for February was unchanged, while the Advance report for Wholesale Inventories for February increased 0.5%.

  • Russell 2000 +12.5% YTD
  • Dow Jones Industrial Average +8.1% YTD
  • S&P 500 +5.8% YTD
  • Nasdaq Composite +1.9% YTD

Disclosure: I may trade in the ticker symbols mentioned, both long or short. My articles represent my personal opinion and analysis and should not be taken as investment advice. Readers should do their own research before making decisions to buy or sell securities. Trading and investing include risks, including loss of principal.

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