Medicare Agent News: A Little To Like

Thursday, May 26, 2022

A Little To Like

By Nicholas Jasinski | Thursday, May 26

Trending. Some M&A news, greater confidence in the U.S. consumer, and basic mean reversion lifted the market to anther day of gains. The Dow Jones Industrial Average rose for a fifth-straight session, adding 1.6%.

The S&P 500 climbed 2% and the Nasdaq Composite jumped 2.7%, giving those indexes two day winning streaks.

The S&P 500's recent bounce has come as several measures of investor positioning and sentiment had reached levels that many describe as "oversold"—and that have historically been followed by near-term rallies. Simply put, when the market goes down a lot in a short period, the next move tends to be in the opposite direction. That's certainly some of what we've seen in recent days.

There were also a few more tangible catalysts for today's move higher. One was the return of big M&A, with Broadcom announcing that it would pay $61 billion in a mix of cash and stock to acquire VMWare. The deal was rumored since early this week and made official this morning.

The acquisition is one of the biggest announced this year so far, behind only Microsoft’s nearly $70 billion deal for Activision Blizzard and ahead of Elon Musk’s $44 billion bid for Twitter.

Broadcom has a market value of almost $220 billion and a long history of growing through acquisitions. It’s predominantly a semiconductor company, designing chips for data centers, telecommunications, and various networking applications.

VMWare makes software for many of those applications, with a focus on cloud computing. It will plug into Broadcom’s existing enterprise software business, all of which will be rebranded under the VMWare name.

Big companies looking to do big deals tends to be bullish for the stock market. It means industry insiders see value at current prices.

Also helping to boost investor sentiment today was the latest batch of retailer earnings (more on that below). The main takeaway is that the outlook isn't as gloomy as last week's earnings might have initially suggested.

The U.S. economy and consumer isn't out of the woods, but it's not all bad.

"To be sure, the data releases this week suggest the economy is slowing, and the Federal Reserve appears poised to raise rates at a 50 basic point clip over the next two months, but the notion that the consumer, 70 percent of the U.S. economy, is on a spending strike, is overblown as earnings reports coupled with positive guidance indicate otherwise," wrote Quincy Krosby, chief equity strategist for LPL Financial, today.