It was a message meant to warn investors that stocks were in jeopardy. But, as has been the case for months now, investors ignored the warning.
The message in question came from Morgan Stanley’s chief United States equity strategist Mike Wilson, who noted on Monday that “The puts have expired.” In other words, “With the Fed’s first rate cut in a decade not having the desired effect on markets and a trade deal looking less likely every week, these two puts (the Fed and Trade Deal) may have expired, leaving investors facing the potential reality there is no second half rebound coming.”
The market may have shrugged off the warning and sent the S&P 500 up to the tune of 1.3%, on the heels of comments from Commerce Secretary Wilbur Ross. The country’s chief business development leader explained in a Fox Business news interview that the government had extended a temporary license allowing an otherwise-banned Huawei to do business with U.S. partners.
The added 90 days not only gives its American customers time to make alternative arrangements, but tacitly suggests the current administration is becoming more flexible on trade matters. The Nasdaq Composite outpaced the S&P 500, rallying 1.4% in response to the easing trade tensions with China.
The unwinding of last week’s inversion of the bond yield curve may have played a role in re-inflating confidence as well.
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PG&E Corporation (NYSE:PCG) isn’t out of the woods yet, it seems. Shares of the utility company implicated in last year’s California wildfires had been on the mend. PCG hit bottom in January, when it appeared regulators and lawyers weren’t looking to destroy it. Last Friday, however, a U.S. bankruptcy judge determined that an $18 billion suit against the company for damages and death could proceed after all, even during bankruptcy proceedings. The news sent PCG stock down by 25% today.
Sina (NASDAQ:SINA) rallied 15% on Monday, after reporting earnings of 73 cents per share on revenue of $533.1 million. Analysts were only calling for a top line of $510.2 million and earnings of 47 cents per share.
The move would inspire other Chinese stocks higher, boosted by hope for repaired trade relations. Weibo (NASDAQ:WB) was one of them. Compared to Twitter (NYSE:TWTR), WB stock jumped 14% on Monday in step with other Chinese names after posting a solid second-quarter earnings beat of its own.
Bio-pharma name Jaguar Health (NASDAQ:JAGX) reported on Monday that its Crofelemer had proven effective as a means of controlling diarrhea in dogs that had been dosed with tyrosine kinase inhibitor. Tyrosine kinase inhibitors are a means of fighting cancer in human patients, but they can cause dire side effects. Jaguar Health hopes to use Crofelemer in human clinical investigations in the future.
A relatively obscure Zscaler (NASDAQ:ZS) took center stage on Monday, falling 11% after OTR Global downgraded the cybersecurity name. Over the course of the past 12 months ZS shares had doubled in value. This made the stock an easy profit-taking target.
Bouyed by Sina, Chinese stocks also bounced on possibly improving trade ties with the United States as well. However, it was stocks of companies that digitally serve Chinese consumers that led the way. Iqiyi (NASDAQ:IQ), sometimes referred to as the Netflix (NASDAQ:NFLX) of China, gained more than 6% headed into its post-close earnings report that had some investors hopeful.
Baidu (NASDAQ:BIDU) was up more than 8% in front of its earnings report slated for release after the closing bell rang as well.
As of the time of this writing, James Brumley did not hold a position in any of the aforementioned securities. To learn more about James, visit his site at jamesbrumley.com, or follow him on twitter at @jbrumley.
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