New Highs Have Arrived
A handful of earnings winners have helped propel the S&P 500 and Nasdaq Composite to new all-time highs.
The Nasdaq’s 1.3% gain on Tuesday officially ended a nearly seven-month drought of new closing highs posted by the tech-heavy index. The S&P’s gain of nearly 0.9% also pushes the large-cap index to fresh highs. Meanwhile, the Dow only needs to gain another 1% to join the Nasdaq and S&P in record-high territory.
While many shell-shocked investors continue to feel the emotional sting of the fourth-quarter correction, it’s safe to say that a new melt-up rally has taken the market by storm
Let’s give credit where it’s due: Our own Mike Burnick was one of the first to predict a melt-up scenario for stocks this year.
A smart analyst never rests, which is why Mike’s back today with more bullish data supporting an extended rally.
“The four-year presidential election cycle is one of the most consistent and reliable drivers of stock market returns and has been for decades,” Mike explains. “Right now, we’re squarely in the most bullish part of the cycle.”
We’ve already tracked the beginnings of the “sweet spot” of the four-year cycle from midterm election-year low, which occurred during the fourth quarter of 2018. From here, Mike notes, stocks typically enjoy a big upside move over the following 18–24 months.
“During this sweet spot of this cycle, the S&P 500 has gained a whopping 40% on average,” he continues. “By contrast, any random two-year period would see stocks gain only about 15% in value.”
And it’s not too late to take advantage of this trend.
“You can clearly see by the bull’s-eye drawn in the chart above that right now we’re ONLY about 75 days into the cycle, which means the stock market most likely has another 12–18 months to rally even higher,” Mike explains. “Based on the historical record, the S&P could easily reach 3,200–3,400 during this upward cycle.”
Moving on to a hot earnings winner, it looks as if Twitter isn’t dying after all.
Twitter shares are rising from stock market purgatory following an optimistic earnings report.
The stock jumped as much as 17% Tuesday after the company grew its revenues 18% during the first quarter, The Wall Street Journal reports.
Twitter announces its improved haul as management works to curb harassment and “unwanted interactions” on the social media platform.
For all his faults, CEO Jack Dorsey is making an honest effort to corral abusive tweets and users through newly implemented automated algorithms. Previous moderation efforts involved Twitter users flagging offensive or bullying tweets for review, creating a backlog of complaints that required employee review.
While the tweaks may make it harder to tweet inane questions to celebrities, Dorsey hopes to make the platform a happier place and more “conversational.” Of course, a friendlier platform may draw in more advertisers, The Wall Street Journal also notes.
Still, Twitter will need to work on hanging onto its user baser over the next few quarters. Despite the jump in revenue, monthly active users continue to dwindle.
Luckily, social media names are back in favor on Wall Street. Snap Inc. (NYSE:SNAP) gained almost 4% yesterday after beating top and bottom-line estimates. Facebook Inc. (NASDAQ:FB) also clocked new highs yesterday ahead of its afternoon earnings announcement. Heck, even market newcomer Pinterest Inc. (NYSE:PINS) is outperforming. It’s up three days in a row following its debut on the New York Stock exchange last week.
We have plenty of exposure to this sector right now with position in both Facebook and Snap. There’s no need to chase Twitter after yesterday’s huge gap higher. But I will continue to keep a close eye on Pinterest as it settles into its first full trading week.