foxex: Getting Stronger

The Market Sum | Insight after the bell

By Caleb Silver, Editor in Chief

Thursday's Headlines

1. U.S. Markets Jump on Earnings, Economy and IPOs

Markets Close

Dow
26,559.54 +0.42%

S&P
2,905.03 +0.16%

Nasdaq
7,998.06 +0.02%

VIX
12.09 -4.05%

INV Anxiety Index
102.86 Neutral

US 10-Yr Yield
2.56 -1.23%

U.S. Markets Jump on Earnings, IPOs and the Economy

If you were able to ignore the political noise in Washington D.C. today, there was a lot going on in the markets - most of it positive.

The DJIA tacked on 110 points as a swell of solid earnings results buoyed investors into the buying mood. Some notable examples:

Travelers Insurance popped 2.7% after beating analysts estimates and boosting its dividend
Honeywell (not a Dow component) climbed 3% on better than expected results and guidance that it sees strong demand for its aerospace products
United Rentals (not a Dow component) rose more than 7% after the heavy equipment rental company posted a stronger than expected quarterly report and cited strong demand for 2019

While there were also plenty of earnings misses today, these three companies are good representatives of industries that need a strong economy to flourish. The good news is that the U.S. economy is stronger than we might have thought.

U.S. Retail Sales for March climbed 1.6% and posted the best monthly gains in 18 months. Sales of cars and trucks, which have been relatively muted for the past several quarters, climbed 3.1% - the best reading all year. Auto sales make up about one fifth of all retail sales, so if cars and trucks are moving off the lots, it's a strong sign for the overall economy. Department store sales were flat, but sales of building materials and gardening equipment and supplies jumped 3.7%. Spring is in the air and mortgage rates are low.

It's charts like this that make economists ratchet up their GDP forecasts.

That's exactly what they did...

The Atlanta Federal Reserve Bank's GDPNow forecast was revised today to show that first quarter GDP growth will be 2.8% when the final estimates are calculated. That's up from the 2.4% growth estimates of just a couple weeks ago. The Atlanta Fed is one of the Federal Reserve's regional banks, but its GDPNow forecast gathers economic data from all regions and the Commerce Dept.

This is what its chart looks like as of this morning.

More News:

Netflix Trading Higher After Lowering Guidance

Why Investors Should Just Say No to Pot Stocks

Health Care Tanks on Medicare-for-All Worries

Zoom and Pinterest Rock their Debuts

Today was a great day to go public, apparently. The much anticipated debuts for video conferencing company Zoom and social photo sharing app Pinterest did not disappoint.

Shares of Zoom priced at the higher end of their range and came out of the gate like like a cannonball, rising 72% on the day. That gave the company a market value of $15.9 billion. Zoom is actually profitable, earning $7.58 million in net income last year on revenue of $330 million.

Pinterest, which is not profitable, but extremely popular, popped 28% on the day, giving the company a market value of $12.9 billion at the close.

While both companies were celebrated on their first day in the public markets, don't expect them to hold or grow these gains. They might, but the IPO dance is all about supply and demand. Supply is restricted to the companies' executives, investors, underwriters and a select group of individual investors before the IPO. Once its publicly traded, there is an open market for those shares, and those backers like to cash out while they are ahead. It's not a certainty, but it's not uncommon to see the sizzle of an IPO fade in the days and weeks after it opens. Nice debuts, though.

Read More: IPOs Explained

Top Movers

Charts courtesy of www.Koyfin.com

Global Markets

What's the Word?

Lock up Period

Given the massive gains made for inside investors in today's IPOs of Zoom and Pinterest, we thought this would be timely.

A lock-up period is a window of time when investors in a hedge fund or another closely held investment vehicle are not allowed to redeem or sell shares. The lock-up period helps portfolio managers avoid liquidity problems while capital is put to work in sometimes illiquid investments.

The initial public offering (IPO) lock-up is a typical lock-up period in the equities market used for newly issued public shares. It typically lasts anywhere from 90 to 180 days after the first day of trading so that fund managers can keep a lower amount of cash on hand.

Mark July 18th and October 18th on your calendars if you bought shares of Zoom and Pinterest today. That's when those lock ups expire.

President Franklin Delano Roosevelt takes the U.S. off the Gold Standard

On April 18th, 1933, Pres. Franklin D. Roosevelt announces that he will issue an executive order embargoing exports of gold and free the exchange rate of the U.S. dollar to float against foreign currencies. In effect, Roosevelt has taken the U.S. off the gold standard and devalued the dollar. Terrified by the uncertainties of the Depression, Americans have been hoarding gold, but Roosevelt's move flushes out the gold that has been squirreled away. That floods banks with liquidity and helps set the stage for economic recovery.

Sources: JasonZweig.com and Barrie A. Wigmore, The Crash and Its Aftermath: A History of Securities Markets in the United States, 1929-1933

James is on vacation but we'll be back with our daily chart next week.