One of the signs of a healthy stock market is the high demand and successful completion of IPOs. Thanks to the bear market of 2018 and the shock that Wall Street triggered, we have not seen many major IPOs lately. That ended today.
Stocks of up and coming Lyft, Inc. (LYFT) debated this morning on the Nasdaq. Anxious traders pushed the opening price to $ 87.24 – a 21% higher price than the IPO price of $ 72 per dollar share the company had earmarked for the stock. This inflated opening price confirmed that traders were both excited about the company's prospects and hungry for new stocks to invest. Anyone who was wondering if Wall Street still has some catching up to do was answered today with their question.
Unfortunately for those who The Lyft stock could not keep their profits, as it was between the open price of $ 87.24 and the high price of $ 88.60. The shares fell to a midday high of $ 80 before recovering slightly. The newly traded stock fell lower again, dropping to an intra-day low of $ 77.29 before closing slightly to $ 77.75.
When analyzing the performance of an IPO, it is important to remember this volatility weeks and sometimes even months is normal and expected. The company behind the stock has been in business for a while and has a proven financial track record. This is the first time traders have been able to express their opinion about the stock in the only way that really counts: with their paperbacks.  The fact that the Lyft stock has been unable to hold its support level at $ 80 at midday (see the one-minute chart below) shows me that traders are facing potential gains over the IPO price of $ 72 is nervous. Falling close is rarely a positive sign for a stock.
If traders believe that the company will leverage the $ 2.3 billion it has raised today today and the stock market remains bullish next week, the stock could rise to new highs at $ 77.29 but will be an important support level next week. If this is not the case, traders may be inclined to push the Lyft stock down to its $ 72 flotation.
S & P 500
The S & P 500 turned up higher in the morning opening, which was a positive sign for the market, but after that it did not move much. Even as the British Parliament fired its third Prime Minister Teresa May's Brexit deal, Wall Street traders expressed their optimism that a trade agreement between the United States and China could be reached and that the global economy was strong enough to generate strong revenue and profits for corporate America.
The technology sector has been responsible for much of today's positive move – with Micron Technology, Inc. (MU) up 5.06%, Western Digital Corporation (WDC) up 5.05%, and Seagate Technologies Holding PLC (STX) up 4.13% – but the big winners of the day were CarMax, Inc. (KMX) and Celgene Corporation (CELG), which gained 9.61% and 7.88%, respectively.
Now the S & P 500 has established a firm place with a new higher low at 2,785, we will see if it can reach a higher high next week.
Risk Indicators – Federal Funds Futures
Today we received confirmation that traders expect the Federal Open Market Committee (FOMC) to justify lowering the federal rate by the end of 2019. The Bureau of Economic Analysis (BEA) released its latest price for personal consumption expenditure (PCE) and shows that inflationary pressures are weakening and the need for higher interest rates is falling.
The PCE Price Index – FOMC's favorite inflation gauge – rose only 1.37% over the previous month last month. This is the lowest monthly increase since September 2016, well below the Fed's 2% inflation target.
When inflation falls, the FOMC does not have to worry about raising interest rates to prevent uncontrolled inflation. However, if inflation slows down too much, the FOMC must be concerned about the impact deflationary pressures might have on the US economy and whether it should cut interest rates again to combat those risks.
Based on the PCE trend It looks like the FOMC needs to worry about deflation before it has to worry about inflation again.
Bottom line – Signs of Hope
Lyft's strong opening above its IPO price – even when it expires The remainder of the trading session slipped further down – and the bullish impulse in the S & P 500 is two signs of hope that the traders are still bullish and still want to be bullish given the opportunity.
This bullishness on Wall Street is fueled by today's recovery in the Consumer Confidence Report from the University of Michigan. The confidence index rallied from 93.8 to 98.4, its highest level since last October last month.
New home sales also rose to 667,000 in March, the highest level since June 2018. This recovery is largely due to the decline in mortgage rates we've talked about.
All in all, it was a great first quarter on Wall Street, and the foundation for a further rise in Q2 is provided.
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