Barron’s Weekend Summary: Investors have understandably forsaken Big Blue, but it may be time to start paying attention to it again
Cover Story:
-Investors have understandably forsaken Big Blue, but it may be time to start paying attention to it again. IBM is repairing its reputation with a new CEO who is making serious and lasting changes to its structure and ambitions. Arvind Krishna was named chief executive in January 2020, after years running IBM’s cloud unit. His appointment was reminiscent of Satya Nadella’s promotion to Microsoft‘s top job in 2014.
Interview:
-Barrons interviews New School Professor Teresa Ghilarducci. “In graduate school, she helped her mother’s union in Sacramento, Calif., negotiate a new pension plan.
Today, she is campaigning to get mandatory pensions for all Americans.” Ghilarducci “envisions a plan that would invest in professionally managed funds and bolt on top of workers’ Social Security accounts.”
The Trader:
-A new coronavirus variant discovered in South Africa, dubbed Omicron, caused stocks to fall sharply in a holiday-shortened trading session on Friday. The S&P 500 index dropped 2.2% for the week, while the Dow Jones Industrial Average lost 2%. The Nasdaq Composite fell 3.5%.
“Knee-jerk reactions were abundant. Zoom Video Communications (ticker: ZM), for instance, rose more than 5% on Friday. It had fallen 15% on Tuesday after reporting earnings. Investors were worried about slowing postpandemic growth for the collaboration software company. Now, the stay-at-home trade appears to be back. It isn’t time to panic. ‘The S&P 500 has built up a cushion the last seven weeks, and a 4% to 5% pullback alone won’t alter its longer-term trend,’ says Instinet strategist Frank Cappelleri.”
-“Buying growth stocks when profits are just a rumor can feel like tempting fate. But some companies reward investors’ faith. And highflying stocks can grow into their eye-popping valuations, giving investors another chance to buy into the trend. That looks to be the case with a trio of electric-vehicle makers: China’s NIO, XPeng, and Li Auto.”
Features:
-The UK has confirmed that two Omicron Covid-19 variant cases had been found in the country. “The two cases are linked and there is a connection with travel to southern Africa,” Health Secretary Sajid Javid tweeted on Saturday. The WHO designated the newly identified strain of Covid-19 first found in Southern Africa a “variant of concern” on Friday, prompting stocks to fall on Wall Street as well as new travel restrictions from a number of countries, including the US.
-Not all companies suffered amid the Omicron variant triggered stock market dip. Qiagen closed higher Friday after the diagnostics company reaffirmed the efficacy of its PCR tests against the new Covid variant which scrambled stock markets on Friday.
The stock closed 3.5% higher at $56.47.
-Casino stocks such as Caesars Entertainment closed lower Friday as concerns over a new, heavily mutated variant of Covid-19 triggered new travel restrictions. Caesars fell almost 3% to $91.20, Las Vegas Sands dropped 5.35% to $37.87, Wynn Resorts slipped 6.04% to $85.69, and MGM Resorts fell.
Europe:qiagen
-Uber shares fell after the ride-hailing app was asked to shut most of its services in Belgium starting Friday evening. The stock closed down 3.71% to $40.52. UberPop, a service which allowed private individuals to offer professional taxi services, had been banned back in 2015, but on Wednesday the Brussels Appeal Court extended the ban to professional Uber drivers. Also, in another blow to Uber ride hailing giant Didi Global is being pushed by Chinese regulators to delist from the New York Stock Exchange, according to a Reuters report. Uber owns 12.8% of Didi.
Emerging Markets:
-There’s evidence of yield despite the prevalence of low-returns. The Brazilian central bank, for example, has hiked interest rates from 2% to 7.75% this year, and 10-year local-currency bonds yield north of 11% annually. Similarly, Mexican rates have climbed from 4% to 5% since May. Poland hiked from 0.1% to 1.5% over the past two months. And so on.
“This is the first time in 35 years I have seen EM central banks lead the way on tightening,” says David Robbins, an emerging markets debt portfolio manager at TCW.
Commodities:
-Oil prices remained at the $80-a barrel mark Thursday as a decision by the U.S. administration to release up to 50 million barrels of strategic reserves in a bid to push down gas prices faltered.
Some officials from Organization of the Petroleum Exporting Countries (OPEC) warned that the release of reserves by big oil consumer nations would only add to the glut forecast in the first half of next year.
Streetwise:
-In the Streetwise podcast, Jack Hough warns: “Careful loading up on narrow bets on rising prices. Stocks offer better protection than you might think. Jack talks with Katie Nixon, CIO of Northern Trust Wealth Management.”