01 September 2020

Apple & Tesla Power Ahead on Day 1 of Stock Split

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News shaping
the markets today

     

What’s happening: Shares of Apple and Tesla recorded sharp gains on Monday after both companies implemented their stock splits.

What happened: Companies use the stock-split approach after a rally to make their share price more reasonable for their investors.

However, with some brokers now allowing investors to buy parts of individual shares and CFD instruments gaining popularity, the approach of splitting stocks has become less attractive, and only three S&P 500 firms have announced splits this year.

Why it matters: Stock splits do not result in any change in the intrinsic value of a company’s stock; but give small investors an opportunity to gain exposure to massive companies.

Apple announced a four-for-one stock split on July 30 and its stock has climbed more than 30% since then. The stock was trading close to $502 before the split took place, making it tougher for small investors to invest in the iPhone maker.

Prior to the latest split, Apple had split its stock in 1987, 2000 and 2014 and its shares have gained more than 400% since its 2014 split. With a market valuation exceeding $2 trillion, Apple has overtaken Saudi Aramco as the most valuable public-listed company in the world.

Same goes for Tesla, whose shares were trading at $2,280 before the split. The recent five-for-one split will make the electric vehicle maker’s stock more reasonable for retail investors, as the stock has added more than 400% this year. Tesla’s shares have gained 70% since the announcement of the split on August 11.

Tesla also emerged as the seventh-largest company by market capitalisation, as per the closing price on Monday.

How shares responded: Shares of Apple climbed 3.4% to close at $129.04 on Monday, adding 62% over the past three months. Tesla’s stock surged 12.6% to settle at $498.32, adding a whopping 198% over the last three months.

What to watch: Investors will lower budgets can now gain exposure to shares of Tesla and Apple, given their lower share price. Markets look forward to Tesla’s Battery Day event scheduled for September 22 and the release of its Q2 delivery numbers.

The Markets Today

     

US stocks will be in focus today, ahead of a basket of economic data from the country.

Context: Wall Street closed mostly lower on Monday but ended the month in positive territory. Some stocks recorded their strongest monthly gains in decades. The tech-laden Nasdaq 100 closed higher in the previous session, notching another record finish.

Details: For August, the Dow Jones index recorded its strongest returns since 1984, while S&P 500 clinched its best returns since 1986. The tech-heavy Nasdaq notched its best August returns since 2000.

The rally in these major indices have been driven by hopes of vaccines and treatments for the deadly covid-19 virus that has derailed the global economy. Fed’s decision to shift its monetary policy added to the positive sentiment.

A major restructuring of the Dow Jones index, which saw the addition of Salesforce.com, Amgen and Honeywell International, also added to the gains. Shares of Amazon gained 1.5% on Monday after the ecommerce giant announced it had received FAA (Federal Aviation Administration) approval for drone delivery. GameStop’s shares jumped 24% after RC Ventures LLC announced the acquisition of a 9% stake in the retailer.

The Dow Jones index lost 223.82 points to close at 28,430.05 on Monday, while the S&P 500 slipped 0.2% to 3,500.31, after climbing as high as 3,514.77 earlier in the session.

The Nasdaq 100 gained 79.82 points to close at 11,775.46 on Monday, also reaching a new intraday high of 11,829.84.

What to watch: Investors await data on manufacturing PMI, ISM manufacturing PMI and construction spending from the US. The IHS Markit manufacturing PMI is expected to rise to 53.6 in August, from 50.9 in July, while the ISM manufacturing PMI is likely to increase to 54.5 in August, from the previous month’s 54.2 reading. Analysts expect construction spending to rise 1% in July, versus a 0.7% decline in June.

Markets will continue to keep an eye on the covid-19 numbers, with total cases in the US climbing past 6 million.

Other Markets: European indices were trading higher at 8:30am GMT, with the STOXX Europe 600, French 40 and Dax 30 index up by 0.1%, 0.1% and 0.5%, respectively.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

Mexico’s business confidence and manufacturing PMI, Brazil’s GDP, balance of trade and manufacturing PMI, Canada’s manufacturing PMI as well as the US Redbook index and API crude oil stockpiles.

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