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The Market Sum | INVESTOPEDIA

Insight after the bell

By Caleb Silver, Editor in Chief

Tuesday's Headlines

1. Markets rally for third day in a row

Markets Close

Dow
23,787.45 +1.09%

S&P
2,574.41 +0.97%

Nasdaq
6,897.00 +1.08%

VIX
20.39 -4.72%

INV Anxiety Index
103.53 High Anxiety

US 10-Yr Yield
2.716 +1.27%

Source: Win McNamee / Getty Images

Stocks rally ahead of President's prime-time address

Another consistent rally across all major indexes today boosted stocks around one percent for the DJIA, S&P 500 and the Nasdaq. It's the first 3 day rally we've had since November, and what is notable is that these rallies have started strong and held through the close. We haven't had the 3pm fade in the final hour of trading as investors sell into strength at the end of the day as they did throughout December. That shows conviction, although we don't know how long it will last.

Trade talks between the U.S. and China are underway and the early reports are positive, as expected. Amazon and Apple both rallied today, and we know how much they influence the broader market. James charts out the recent performance of both stocks, below, and this article shows just how influential Apple is to the entire market.

For Apples' part, CEO Tim Cook, in an interview with CNBC, said he is optimistic about the trade talks and is very confident about Apple's 'ecosystem'. By that, he is referring to Apple's suite of products and all the suppliers that make components for the iPhone. The iPhone is a truly global product with components coming from companies all over the world. Our friends at visualcapitalist.com have a great infographic on where the components come from if you are interested.

The U.S. Government remains in partial shutdown over an impasse on border security. President Trump will address the nation at 9pm in a televised speech this evening and is expected to talk about the issue. Mainstream news is having a field day with this, as you can imagine.

Why it Matters

Government shutdowns typically don't impact the stock market, as we have reported.

That said, no two shutdowns are alike and there is no telling when this one will end. This is now the second-longest on record and Friday should be payday for 800,000 federal employees - the first one of the year. Nothing gets people's attention like a missed paycheck.

Beyond messing with people's livelihood, the shutdown is exhibit A of a dysfunctional government, which could impact the stock market, eventually. Trump is facing two more years with Democrats holding a Congressional majority. The shutdown is the first real test of that political dynamic and so far it is not going well.

What's Next

We are not expecting any breakthroughs or political reconciliation following the President's speech this evening. Why should we? The question for us as investors will be whether or not people will keep buying stocks regardless of what happens. So far, they have - at least over the past three days. The U.S. economy seems strong and the Fed has backed off its hawkish stance for the time being. Valuations across the stock market have dropped significantly given the selloff, which has made some stocks too cheap to ignore.

According to BeSpoke Investments, none of the major sectors of the S&P 500 are in 'oversold' territory anymore. That's a far cry from where we were at the end of the year.

Zoom in to see the ETF sector performance, and you'll see plenty of green.

What could go wrong?

Here's some notable headlines from a busy day:

Sears is still alive....barely

If Eddie Lampert can get a $121million deposit together by tomorrow morning for a $4.4billion valuation of the nearly shuttered company, he can bid on Sears in auction. If he wins, he will have the opportunity to try and turn around one of the most consistently non-profitable outfits in the retail sector - again. Its chief competitor? Amazon. Lucky him?

Samsung issues a revenue warning of its own

Looks like Apple might have been the canary in the silicon mine. Ha.

Which banks had the most student loan complaints?

The short version? Navient Solutions doesn't look like it comes highly recommended.

IBM leads the world in patent filing

26 years in a row leading the United States! It's stock doesn't seem to know that.

Intel and Facebook teaming up on a new chip

A new AI chip. I'm not entirely sure what it would be for, or how you would use it. Sounds cool though.

Chart of the Day: Two FAANGs Take Different Paths

Amazon.com (AMZN) and Apple (AAPL), two of the top FAANG stocks, have taken markedly different paths since the overall market low on December 24. The chart above shows a performance comparison of the two stocks since that low, and the contrast is clear.

Apple stumbled severely in the beginning of the new year after CEO Tim Cook sent a letter to investors lowering the company's revenue forecast on weakened demand from China. Despite that big hiccup, AAPL stock has clawed its way back, at least partially, and is now up nearly 3% since the market's late December low.

That sounds reasonably good, until you look at the S&P 500, which has risen more than 9% since December 24. And AAPL's rise pales even more in comparison with Amazon's performance during the same time period. AMZN has risen a whopping 23% in only slightly more than two weeks. Though Apple looks poised to gain back some of its recent losses, Amazon was clearly better positioned at the beginning of this rally. The diverging charts speak for themselves.