Companies like Netflix (NFLX), Incyte (INCY), Broadcom (AVGO), Facebook (FB) and Alphabet (GOOGL) are leading the S&P 500 higher today as investors return to the most important part of the market.
Several things seem to be happening all at once.
First, NFLX lit a fire of enthusiasm by announcing 13-18 percent price increases for U.S. subscribers. That followed bullish analyst calls by Goldman Sachs and UBS earlier in the year. It also comes just two days before the streaming-video giant releases fourth-quarter results.
NFLX was the first major growth name to stumble last year, with tepid user growth triggering a bearish slide in early July. Investors mostly shrugged off good numbers in October that relied on overseas growth. Today’s price-increase announcement eases fears about the U.S. business. Sure, the domestic market may be near saturation in sheer headcount. But now that management is squeezing more revenue from each user, the growth story is back.
Second, money continues to pour into biotechnology stocks as investors look for more takeovers in the space. That’s lifting INCY and Nektar Therapeutics (NKTR) today. Stay tuned for our special report on biotechs tomorrow.
Third, a ton of cash is on the sidelines after investors dumped stocks in December. CNBC reported yesterday that money-market fund assets spiked to $3.066 trillion - the highest in almost eight years.
That raises two questions: Is there anyone left to sell? And, does it make sense to be underweight equities in the middle of an economic expansion, a few weeks before earnings?
Speaking of earnings, here are some big announcements to watch:
・January 17: NFLX
・January 23: Xilinx (XLNX)
・January 24: Intel (INTC)
・January 29: Apple (AAPL)
・January 30: FB, Alibaba (BABA), Visa (V), Qualcomm (QCOM), PayPal (PYPL).
・February 4: GOOGL
Finally, remember that new growth stocks continue to surface. Aside from names identified on Market Insights, the S&P 500 gained new members last year including Fortinet (FTNT), Arista Networks (ANET) and heart-device maker Abiomed (ABMD).
In conclusion, investors are looking past risks potentially resulting from the government shutdown and focusing on the positive. Right now, that means a return to one-time market leaders at discounted prices.
This article was written by David Russell, TradeStation Securities, Inc., part of the Monex Group Inc, published on 15/01/2019.
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