The Market's New Mood

By Alex Eule |  Thursday, June 2 A Different Market. It may still be a temporary bounce, or a bear-market rally, but investor sentiment has made a significant shift in the last two weeks. Since the Nasdaq Composite bottomed on May 24, it's now up 9%. Seemingly bad news is no longer tanking stocks. In fact, in some cases, stocks are going up despite it.  Let's take Microsoft. The software giant said this morning that it was cutting its forecast for the current quarter. They were small cuts -- roughly $500 million on about $52 billion in sales -- but it's the kind of news that would have killed the stock last month. But after falling this morning, Microsoft managed to finish the day in positive territory, up 0.8%. To be sure, Microsoft had a relatively simple explanation for the reduced forecast, citing an "unfavorable foreign exchange rate movement." For investors reading between the lines, Barron's Tae Kim wrote that the news could actually be seen as a positive:  In an environment where many other technology companies are citing more difficult macroeconomic conditions, the small reduction in Microsoft's updated guidance could suggest the company’s business is more resilient than its peers. In other words, better an unfavorable foreign exchange environment than slowing demand. Salesforce saw a similar reaction to its own guidance cut this week, which the cloud pioneer also pegged to headwinds related to foreign exchange volatility. For U.S. companies operating abroad, a stronger dollar has made international sales slightly less valuable. Investors are just happy it's not worse. (Salesforce rose 10% on the news.) The tech-heavy Nasdaq finished today up 2.7%, for its highest close since May 5. The S&P 500 gained 1.8%, while the Dow Jones Industrial Average was up 1.3%, or 435 points, with Salesforce leading the way for a second straight day.  The market also shrugged off a relatively hawkish statement from Federal Reserve Vice Chair Lael Brainard. Referring to slowing or stopping rate increases, she told CNBC that "it's very hard to see the case for a pause." As of now, investors are all but certain there will be consecutive half-point rate increases at the Fed's June and July meetings. The following meeting in September seems less certain, but the odds are rising for a third half-point hike, and Brainard's comments today won't dispel that thinking.  Despite the more hawkish sentiment, stocks have still done relatively well over the past week. It's another sign that the market's mood may be changing. The next test comes tomorrow morning, when the Labor Department releases its jobs report for May. More on that below.

 

DJIA: +1.33% to 33,248.28 S&P 500: +1.84% to 4,176.82 Nasdaq: +2.69% to 12,316.90 The Hot Stock: Generac Holdings +10.3% The Biggest Loser: Hormel Foods -5.2% Best Sector: Consumer Discretionary +3.0% Worst Sector: Energy -0.3%