Dow 30,000 | Salesforce & Slack

AstraZeneca was the third Big Pharma to announce positive vaccine news and pushed the Dow Jones over the 30,000 mark for the first time. The short week (markets closed Thursday and half Friday) came in up +1.45%. At this point, any more Big Pharma's to announce a vaccine is already baked in.


The Dow is on-track to have the best monthly gain since Jan 1987. The S&P and Russell 2000 both posted fresh record highs as well. Economic data releases were light, putting the emphasis on balancing positive vaccine news and ascending COVID-19 cases and hospitalizations. Longer-term outlook remains positive for stocks, but investors should expect volatility through January as politicians turn over and lumpy COVID news dominates.


"Dow 30,000" sounds good, but the more important question is: What does this number mean?


Though the specific number is purely emotional, the market is robust and strong. Year-to-date return in the Dow is +5%. More impressive is the +61% gain in just the past eight months, rising nearly +12,000 since early COVID. This is a milestone, but as the market gains, the incremental milestones, on a percentage basis, become less and less meaningful.

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It’s been awhile since we've heard of a tech acquisition this big. Rumors of Salesforce's (NYSE: SFDC) potential acquisition of Slack (NYSE: WORK) drove Slack higher this week by about +40%. Salesforce's shares fell by -5%, but this is many times the case of the acquirers stock in such situations.


The potential deal is also pandemic positive. Slack allows employees to more easily communicate remotely. Slack is getting a large premium here on its stock if this deal happens. That is, COVID makes Slack more appealing, and of course investors and management know that. Slack management may be taking advantage of a market catalyst / timing.


At the tech segment level, the acquisition makes sense. Slack is basically text messaging (and lot more) for employees within companies. Salesforce is basically a sales enablement product that helps salespeople manage their deals through a sales pipeline. Salesforce tried to rollout their own corporate messaging app. It didn't work. They've also had internal product Chatter that hasn't reached much user penetration. Salesforce has aggressively entered adjacent markets to sales in recent years, acquiring B2B marketing companies and products that use artificial intelligence to help their customers manage sales processes. Salesforce also made a very aggressive move to acquired LinkedIn a few years ago, but lost that war to Microsoft. We are long Salesforce as a company and the management team, and we believe that this combination propels the company forward.


But what's the bigger impact on the tech industry and stock market generally? Generally speaking, these large acquisitions do not have a wider impact. They do shake things up for potential competitors that sell B2B software to large enterprises (in this case like Workday or Microsoft), but that doesn't move markets overall or drive stock price. It's market neutral.






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