Can't Stop The Streak

By Connor Smith |  Friday, May 13 Still Committed. Solid gains for U.S. equities on Friday were not enough to cut short the S&P 500's sixth-straight weekly drop. Nor were they enough to pull the spotlight away from Elon Musk. The S&P 500 index rose 2.4% to pare the week's drop to 2.4%. At six weeks, the benchmark index's losing streak is the longest since 2011. The Dow Jones Industrial Average rose 1.5% on Friday, but the index still fell for its seventh-straight week for the first time since July 6, 2001. Friday was a strong day for risky assets and high-growth tech stocks. The Nasdaq Composite had its best day since Nov. 4, 2020, with a 3.8% jump. It still fell 2.8% on the week, extending its own losing streak to six. Peloton Interactive and Zoom Video Communications rose 16% and 11%, respectively. After days of tumbling, Bitcoin and other crytpocurrencies jumped too.  Tesla also gained 5.7%, but some of that enthusiasm may have more to do with its high-profile chief executive. Elon Musk sent Twitter shares tumbling on Friday with one tweet: Twitter deal temporarily on hold pending details supporting calculation that spam/fake accounts do indeed represent less than 5% of users Though Musk added that he's still committed to the acquisition, investors are clearly worried the billionaire will find a way to back out. The suggestion that spam and fake accounts were holding things up could be a case of Musk haggling for a lower price than the $54.20 he agreed to. But that might be tricky. Brian Quinn, a professor at Boston College Law School, told me that Musk would need to prove a discrepancy in how Twitter stated fake account totals amounted to a "material adverse effect." He added: “These kinds of claims tend not to be strong,” Quinn says. “So there’s a lot of bravado, a lot of back and forth, but they tend not to be strong. You do find people renegotiating prices downward, but not by a whole lot.” If Musk can't prove a material adverse effect, Twitter could seek a court order for specific performance, essentially forcing Musk to go through with his end of the deal, assuming he still has the financing to do so. “A Delaware court that looks at this merger agreement will give an order for specific performance if this deal is capable of being closed,” Quinn says. “And if Musk just says ‘I’m not going to do it,’ they will get the order and they’ll force him to close.” With the stock trading at $40.72, Wall Street traders still think he might have a shot at getting a better price. My colleague Al Root notes that the spread implies a roughly 60% probability the deal falls apart. Read more from Al here.

 

DJIA: +1.47% to 32,196.66 S&P 500: +2.39% to 4,023.89 Nasdaq: +3.82% to 11,805.00 The Hot Stock: Las Vegas Sands +15.1% The Biggest Loser: Twitter -9.7% Best Sector: Consumer Discretionary +3.9% Worst Sector: Health Care +1.1%