Brexit, China, and Netflix Weigh in on Wall St.
While some may have thought that the Brexit vote had real potential to move markets, it is the currency market and not the stock market that gets moved by these things.
The much-anticipated Brexit vote in the U.K. House of Commons is now history, although this story is far from concluded as the U.K. parliament is now faced with the decision on how to proceed. In spite of a vote against Prime Minister Elizabeth May and her government’s bill on exiting the European Union, it is not as if the matter has been put to rest by any means.
The bill went down to defeat convincingly, coming in at 432 against and only 202 for it. Defeating the bill required that many of Prime Minister May’s Conservative MPs vote against the party essentially, but that indeed was what happened.
This led to the opposition Labour Party tabling a no-confidence motion, but this looks more like a political ploy than anything with much chance of success. Britain is certainly still mired in a conundrum over this issue, where both exiting the EU and indecisiveness about the exit bring negative consequences.
This issue is of more interest to currency traders than the stock market though, although seeing the British Pound strengthen against the dollar as a result of the vote does have stock market implications as well, although nothing too dramatic. While U.S. markets did flinch a little and moved downward for a time after the result was announced, things quickly recovered and we ended up with an up day overall.
The Dow finished up 0.65%, the S&P closed up 1.07%, and the NASDAQ Composite put in a 1.71% gain. This positive result was not because of the Brexit vote but in spite of it, as the no vote had a mildly negative impact upon share prices, since this served to weaken the U.S. dollar overall, and the gains were realized in spite of this outcome.
Netflix Ups Their Subscriber Fees
Some are pointing to Netflix’s raising their prices as playing a real role in today’s surge forward, and Netflix’s advance of 6.5% as a result did have a bit of an impact. If this result was based upon business performance though and not just putting prices up, then it at least could be argued that this portends to the sector’s health.
Netflix simply does not represent much of a percentage of stock market indexes to have this sort of advance have any sort of noticeable impact upon the indexes. If Netflix can get by with putting their prices up, this may in an indirect way indicate sector health, although it might be a bit of a stretch that this is really that meaningful to the market as a whole.
Netflix, of course, does not arrive at such decisions without a lot of analysis, and while companies do make mistakes with their pricing, the very fact that they see the market as being able to absorb these costs does perhaps suggest that the demand for the streaming service is growing.
There are people who see a stock in a certain sector rise though, and then start buying not only the stock but related stocks as well, and this aspect may indeed have led to other boats being raised at least somewhat. Amazon, Google, and Apple all saw jumps in their share prices right after this announcement, so in this case the effect at least seems to have been present.
China Contemplating Stimulus, and the Current Rally Still in Force
When we have a player as big as China weighing in on the markets though, that’s a different story, and China’s fortunes are indeed far reaching in both scope and impact. Chinese officials hinted at being open to stimulating the somewhat lagging Chinese economy more, and it often doesn’t take more than a mere hint to excite markets.
On the other side of the ledger, disappointing earnings reports from both J.P. Morgan Chase and Co, the largest bank in the United States by assets, as well as fellow big bank Wells Fargo & Co, served to dampen the bullish enthusiasm in early trading. JPMorgan managed to overcome the dip to finish up 0.7%, while Wells Fargo ended down 1.5%.
On the technical side, we are still moving forward overall since the intraday lows of December 26, and while the move may be slowing somewhat, the overall gains now sit at over 10% now with no clear sign that the move is about to come to an end.
Today’s positive finish reinforces this, even as several indicators are showing signs they may be topping out. This has to do more with the length of the run than anything though. We are still only about halfway to getting back to the levels of early October 2018, and should we get back there in the near term, it probably won’t be without one or more pullbacks.
The bears will no doubt jump at the chance to proclaim that the end is nigh on any significant pullback though, but at this juncture, in the midst of a positive trend, the time to get out of positions isn’t now. Whether that point comes fairly soon is yet to be determined, but things still look pretty healthy on the long side at the present time at least.
Editor, MarketReview.com
Monica uses a balanced approach to investment analysis, ensuring that we looking at the right things and not confined to a single and limiting theory which can lead us astray.
Contact Monica: monica@marketreview.com
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