The Dow Jones Industrial Average is up more than 100 points this morning suggesting that maybe there has been more bothering the benchmark than simply tariffs. In today's Morning Movers, we...
•...explain what else might be bothering the markets; •...highlight Red Hat's (RHT) 13% post-earnings slump; •...roundup ratings changes on Dollar General (DG), Nike (NKE), Valeant Pharmaceuticals International (VRX), and others.
The Dow Jones Industrial Average is in the throes of an eight-day slump, but the pain could come to an end today...if it can just hold onto its early gains.
Dow Jones Industrial Average futures have gained 123 points, or 0.5%, while S&P 500 futures have risen 0.5%, and Nasdaq Composite futures have advanced 0.4%.
While trade-war fears have been blamed for recent market volatility, DataTrek's Nicholas Colas contends that there's a lot more stuck in the market's craw. He notes that while the VIX is at 14.6, higher than last year's, it's what's happening beneath the surface that tells the real story. The financial, energy and material sectors have seen double-digit increases in implied volatility during the past month, while the Industrial sectors is up just 6%. While industrials and materials can be explained by trade-war concerns, Colas argues that energy the rise in energy volatility has been about global-growth worries and concerns about increased supply, while banks have been responding to the flattening yield curve and slower loan growth. "The upshot here: there's more to the current upswing in volatility than just trade war concerns," Colas explains.
As for the Dow's losing streak, we probably shouldn't make too much of it. It has, after all, dropped just 3.4% during its losing streak, while the S&P 500 has dipped a little more than 1% during the same period. Eight-day losing streaks are fairly common--the last was in March 2017, after all--but a nine-day losing streak is a lot whole lot more rare. The last time the Dow dropped for nine consecutive days was in 1978, and there have been just 10 such streaks since the Dow was created in 1986, according to Bespoke Investment Group's Paul Hickey. He notes that nine-day losing streaks aren't a death knell for the market: The Dow has gone on to rise over the next month six out of the ten occasions, with an average rise of 2%. "Over the next week and month, though, performance starts to improve," Hickey explains. "Nothing goes down forever."
And it's not the length of the decline that matters, after all, but the magnitude.
Earnings & News
BlackBerry (BB) is up 3.9% to $12.16 after reporting first-quarter earnings. The mobile communications firm earned three cents a share on revenue of $217 million. Analysts were looking for the company to break even on revenue of $209.56 million.
CarMax (KMX) is up 5% to $74.63 after reporting first-quarter earnings. The used car retailer earned $1.33 a share on revenue of $4.79 billion, while analysts were looking for earnings of $1.24 a share on revenue of $4.6 billion.
Red Hat (RHT) is down 13.4% to $143.48 after reporting first-quarter earnings. The software firm earned 72 cents a share on revenue of $813.53 million. Analysts were looking for earnings of 68 cents a share on revenue of $807.48 million. For the second quarter, Red Hat expects EPS of 81 cents, on revenue of $822 million to $833 million. Consensus calls for earnings of 89 cents a share on revenue of $854.74 million. The company also announced a $1 billion stock repurchase plan. - Teresa Rivas
Upgrades & Downgrades
Dollar General (DG) is up 2.3% to $100.98 after Raymond James upgraded it to Strong Buy.
Micron Technology (MU) is up 1.3% to $60.19 after the Benchmark Company initiated coverage with a Buy rating.
Molina Healthcare (MOH) is up 1.4% to $100.05 after Jefferies upgraded it to Buy.
Nike (NKE) is down 0.5% to $73.61 after Buckingham Research downgraded it to Hold.
United Rentals (URI) is up 2.1% to $156.40 after UBS upgraded it to Buy.
Valeant Pharmaceuticals International (VRX) is down 0.5% to $24.60 after TD Securities downgraded it to Hold.
Vivint Solar (VSLR) is up 3% to $5.15 after Guggenheim upgraded it to Buy. - T.R.
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