3 big things you missed in the markets Monday: Dollar Tree, Apple, Roku
What bear market?
Stocks continued to recover Monday from what has become known as the Christmas Eve Massacre. The Dow Jones Industrial Average popped 98 points, the S&P 500 tacked on 17 points and the Nasdaq Composite rose 84 points.
Investors took their cue from fresh signs the U.S. trade war with China is easing. Federal Reserve Chairman Jerome Powell’s dovish tone at a conference on Friday also supplied more gas to the rally off the recent lows.
The S&P 500 is now up 8.5% since the drubbing seen on Christmas Eve.
In a way, it’s remarkable that investors are suddenly feeling so jolly as Wall Street pros continue to try and talk the U.S. economy into a recession.
JPMorgan economist Jesse Edgerton now forecasts a 39% chance of a U.S. recession within the next 12-months. Stellar December jobs report be damned. On Yahoo Finance’s ‘The First Trade’, Moody’s Analytics chief economist Mark Zandi put the chance of a U.S. recession at 25%.
Recession call creep persists.
Meanwhile, stock strategists remain skeptical of the latest move higher.
“We are definitely more constructive than we have been in over a year based on valuation, sentiment, and positioning, but we don't think it is time to blow the all clear signal yet,” wrote Morgan Stanley strategist Michael Wilson (aka the patent holder for the “rolling bear market” investment thesis unveiled over the summer that proved correct).
Here are three things you may have missed on Monday.
Dollar Tree gets attacked by a noted activist investor.
Dollar Tree executives started their week likely watching live coverage on Yahoo Finance all-day of a new attack by activist investor Jeff Smith at Starboard. Smith, who rose to fame by ousting the entire Darden board several years with an impressive research dive, believes Dollar Tree is worth 61% more than its present value.
Smith thinks Family Dollar needs to be sold to private equity and Dollar Tree should raise prices to more than a $1.00. Family Dollar has been a terrible acquisition for Dollar Tree, with sales under pressure since the company bought it in 2015 for $9 billion. Smith believes Family Dollar is now only worth $1 billion to $3 billion.
Ouch. Smith may have some resistance to a Family Dollar sale from current Dollar Tree Executive Chairman Bob Sasser (former CEO who signed off on the deal) and current CEO Gary Philbin (former Family Dollar executive).
Check out more coverage of this brewing battle on Yahoo Finance’s ‘On the Move.’
Interesting times for Apple.
Mixed messages on the medium-term direction for stocks continues. On the one hand, the Russell 2000 has rallied 4.5% over the past five days, outperforming the Dow and S&P 500. The U.S. dollar is hovering near its lowest levels since October thanks to Powell’s dovish comments. That should help multinational companies’ sales and profits in the first quarter if the weakness persists.
But, market heavyweight Apple fell on Monday’s session as investors assess the tech giant’s massive $7 billion revenue warning last week. The action in Apple and the broader market today suggest Wall Street believes Apple has to deal with very specific challenges in the quarters ahead (such as smartphone pricing power, or lack thereof).
Investors will likely approach Apple with caution for the time being, said Jeff Mills, co-chief investment strategist at PNC Financial Services Group, during ‘On the Move.’
Sorry, Roku haters.
Score yet another win for Roku founder Anthony Wood. It was about two months ago when Wood told Yahoo Finance a $1 billion, one-day valuation haircut in reaction to a strong third quarter didn’t phase him much. “We had a great quarter — the fundamentals are great,” Wood said, echoing comments to me just weeks earlier.
Roku shares skyrocketed 25% on Monday as the streaming player said fourth quarter active accounts exploded 40% from the prior year. Streaming hours ballooned 68% to more than 7.3 billion hours.
Stay tuned as Yahoo Finance’s @DanielHowley will talk live with Wood on Tuesday from CES 2019.
Brian Sozzi is an editor-at-large at Yahoo Finance. Follow him on Twitter @BrianSozzi
Read Yahoo Finance’s Apple coverage:
Here’s what Apple’s China nightmare scenario looks like
Apple just confirmed the market's biggest fear
What Tim Cook left out about China in Apple's revenue guidance
