Stocks Rally as Volatility Index Falls
Stocks made a strong rally on Wednesday and broke a recent pattern where the equity market has been a captive of rising bond yields. After the Labor Department reported consumer prices to be 2.1%, treasury yields surged in a broad sell-off and shot up to a new four-year high of 2.92%. However, the market took it in stride and rose for the fourth straight day.
The Cboe Volatility index (VIX) also fell under 20 Wednesday, a level considered as a kind of safety zone for the stock market. Investors have been looking at the VIX as the leading indicator. The VIX was above 50 last week when stocks traded in wild swings.
The chief investment strategist at Bleakley Financial Group, Peter Boockvar, said that the VIX under 20 is a better scenario for the stock market. It contributed to the market’s rise.
Traders will await the producer price index on Thursday morning to see if there are any signs of inflation lurking. The day will be filled with economic reports such as the jobless claims, empire manufacturing, industrial production, and home builders’ sentiment. The final report will be Treasury’s data on capital flows.
Warren Buffett Takes Stake in TEVA, Sells IBM Shares
Shares of Teva Pharmaceutical (TEVA) spiked nearly 7.0% in after-market trading as news that Warren Buffet’s Berkshire Hathaway (BRKA) had taken a $358 million stake in the Israeli company that makes generic drugs. TEVA fills about one in six generic prescriptions in the United States.
In the last three months, Berkshire Hathaway also sold 35 million IBM shares and is left with just 2 million shares. Investors were not surprised about the disclosure and didn’t affect the IBM stock. They knew beforehand because last May, Buffett started unloading his IBM shares.
Google’s App Network is their New Growth Engine
No other tech company can make ads show up in more smartphone apps than Google. Their app network is now the core of parent Alphabet Inc.’s resurgent business. For three straight quarters, Google’s ad network unit has posted double-digit sales increases year-over-year.
The business is nearing $20 billion in annual revenue. Thus, the unit is as important to Google’s top-line groups combined – hardware, cloud computing and app store.
Google’s AdSense used to be the lead star that delivers ads to websites in exchange for a cut of ad revenue. But when consumers began migrating from desktop computing to mobile, momentum has shifted to AdMob, Google’s mass-market tool for third-party apps alongside DoubleClick for Publishers, its higher-end mobile software.
Amazon to Create 2,000 Job Openings in France
The U.S. online retail giant announced on Thursday that it will create 2,000 permanent contract positions this year in France. The country is their third its largest market in Europe after Britain and Germany. With the plan, Amazon.com Inc. will raise the total number of permanent French staff to 7,500. It’s an indication of Amazon’s confidence in the country’s economy. The Seattle-based retailer invested over 2 billion euros since 2010.
Cisco Makes Surprise Turnaround
Cisco Systems Inc. is no longer primarily about hardware. The company reported its first rise in quarterly revenue in more than two years on Wednesday. It took years of untiring efforts to transform into a software-focused company. Finally, it paid off.
The shares of the gear maker benefited from growth in its switching business, jumping 7.1% to $45.09 in after-market trading. Cisco also raised its buyback program by $25 billion, taking the total to about $31 billion. The company plans to repatriate $67 billion held overseas in the third quarter of fiscal 2018 and take advantage of tax cuts in the newly enacted U.S. tax laws.
With slower demand for its traditional switches and routers business from telecom carriers, Cisco its business model and became more software and subscription focused. Chief Executive Chuck Robbins said the new strategy is bringing in results. Revenue from its infrastructure platforms category, which includes switching, routing and data center businesses, rose 2% to $6.7 billion.