A roaring day of M&A and other tie-ups helped inject some life into the stock market Monday, as did renewed hopes for a successful vaccine before the end of 2020.
Chipmaker Nvidia (NVDA, 5.8%) announced late Sunday that it would buy mobile chip maker Arm Holdings from Japanese conglomerate SoftBank (SFTBY, +7.9%) for $40 billion in cash and stock.
“We like the deal for NVDA given Arm’s licensing model, which provides high visibility, as well as ecosystem across the mobile space,” writes CFRA analyst Angelo Zino, who maintained his Buy rating on Nvidia shares. “NVDA expects the deal to be immediately accretive to EPS and support margin expansion.”
While Microsoft (MSFT, +0.7%) revealed Sunday that its bid for the U.S. operations of controversial Chinese social media platform TikTok was rejected by parent firm ByteDance, but Oracle (ORCL, +4.3%) confirmed Monday that it would become a “trusted technology partner” for the app. The deal, which is not an outright sale, still must pass muster with the White House.
And biotech Gilead Sciences (GILD, +2.2%) announced Sunday that it would bolster its cancer-treatment portfolio with a $21 billion buyout of Immunomedics (IMMU, +98.0%).
“Following a disappointing August with the CRL for filgotinib, we are highly encouraged with the continued expansion into oncology,” write Credit Suisse analysts, who rate the stock at Neutral (equivalent of Hold). “We see this as closer to a ‘transformative’ deal, given the size and current peak potential for Trodelvy (~$3.5B in peak sales per Visible Alpha consensus).”
Also over the weekend, Pfizer CEO Albert Bouris said he thinks key late-stage trial data for its COVID-19 vaccine should be available by late October, which, if positive, could mean possible U.S. distribution before the end of the year.
The major indices all were sent solidly higher, with the Dow Jones Industrial Average closing up 1.2% to 27,993.
Other action in the stock market today:
- The Nasdaq Composite finished with a 1.9% gain to 11,056.
- The S&P 500 improved by 1.3% to 3,383.
- The small-cap Russell 2000 rocketed ahead 2.7% to 1,536.
Can Stocks Climb the “Stairs”?
The market’s volatility favored investors Monday, and it could be part of a pattern of lurching market moves that ultimately sees stocks set new highs.
“The 7% correction in the S&P 500 over the past six trading sessions is likely the first of a few 3%-7% drawdowns followed by new highs as the market stairsteps higher like the fall of 2009, driven by election-year angst and the extended nature of the market-cap-weighted indices,” Canaccord Genuity equity strategist Tony Dwyer says. He also reminds investors that the markets have an ally in the Federal Reserve.
“Unlike the political backdrop, which is totally unpredictable, we know the Fed intends to keep rates at zero and to keep intervening when there are any signs of stress,” Dwyer says. “The uncertainty around the Fed is not whether it will continue to support the economy and risk assets, but what tools it may use to be even more accommodative.”
For those eager to take a more active approach to their portfolio, these drawbacks could be the perfect opportunity to snare some of the new bull market’s highest-potential plays, or a chance to buy already-value-priced equities for an even bigger discount.
For others, it could be heartburn waiting to happen. The easiest way to keep from sweating Wall Street’s ebbs and flows is to put someone else at the helm — and when you do so via target-date funds, you get the whole enchilada: equities, fixed income, and in some cases, even real estate and commodities. But which target-date funds are for you? We’ve explored 10 of the biggest and best target-date fund families and highlighted some of their most important characteristics to help you decide.