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Workday & Apollo Join S&P 500; AppLovin Misses Out

2024-12-09

Workday and Apollo Global Management are set to make significant moves in the stock market. As part of the quarterly rebalance, these companies will join the S&P 500 index before the open on Monday, Dec. 23. This has led to notable changes in the stock prices of various entities.

Uncover the Impact of Index Changes on Key Stocks

Workday's Journey in the Index

Workday stock initially jumped on Monday, showing positive momentum. It cleared a 278.98 handle buy point from a consolidation dating back to late February. Despite some pullback from the highs, it still rose by 6%, indicating its potential in the market. The company's inclusion in the S&P 500 is likely to bring more attention and opportunities. 2: Workday's performance is not only about the index inclusion. It has been steadily growing and evolving, with a focus on providing innovative solutions in the enterprise software space. This has helped it gain a competitive edge and attract investors. The company's ability to adapt to market changes and deliver value is crucial for its long-term success.

Apollo Global's Move and Its Impact

Apollo stock initially jumped to fresh highs but later fell 1%. This shows the volatility and uncertainty in the market. Despite the initial surge, the company's stock price has been affected by various factors. Its inclusion in the S&P 500 is expected to bring more visibility and liquidity to the stock. 2: Apollo Global Management has a diverse portfolio and a strong track record in different sectors. Its entry into the S&P 500 will likely attract more institutional investors and increase its market share. The company's ability to generate consistent returns and manage risks is a key factor in its success.

Other Stocks and Index Shifts

AppLovin, one of the hottest stocks in 2024, sold off after being passed over for the S&P 500. This shows the importance of index inclusion and the impact it can have on stock prices. 2: Comerica and Carpenter Technology will move from the S&P SmallCap 600 to the S&P MidCap 400, while Vishay Intertechnology and Carters will make the opposite move. These shifts in the indices will also affect the stock prices of these companies.

Replacement Stocks and Their Performance

Terreno Realty and Champion Homes will replace Hudson Pacific Properties and Regenxbi0 in the S&P SmallCap 600. Both Terreno Realty and Champion Homes rose solidly, indicating their potential in the smaller cap market. 2: Hudson Pacific and Regenxbio also advanced, showing that the market is constantly in flux. These replacement stocks will play an important role in the future performance of the respective indices.Please follow Ed Carson on Threads at @edcarson1971 and X/Twitter at @IBD_ECarson for stock market updates and more.

UnitedHealth's stock took a significant dive over the weekend as it faced intense backlash following the fatal shooting of its CEO, Brian Thompson. Nearly a week later, with law enforcement having arrested a "strong person of interest" in Pennsylvania but not formally charging them, the situation remains highly charged. Thompson was shot outside the Hilton in Midtown Manhattan on December 4 at around 6:45 a.m., and the suspected shooter fled towards Central Park. Multiple outlets reported shell casings with specific words, sparking various discussions.

Investor Concerns and Backlash Impact

Many Americans showed indifference to the shooting, citing their frustrations with the healthcare system. Critics took to social media to share their stories of UnitedHealthcare allegedly denying coverage claims, highlighting the company's focus on the bottom line rather than providing quality coverage. This led to a drop in the value of UnitedHealth's stocks. Several financial experts, like Laura Veldkamp from Columbia University, pointed out that investors are concerned about the potential negative effects of the backlash on their investments. It raises questions about the balance between shareholder and stakeholder value. In the short term, politics may prevent immediate regulatory changes, but the long-term implications are significant.

Short-Term and Long-Term Perspectives

In the short term, as noted by Laura Veldkamp, the "dysfunctional" state of politics makes it unlikely that the industry will face new regulations due to the backlash. However, consumers have limited options as most get their insurance through employers. In the long term, it is crucial for UnitedHealth to address these issues. David Park from Syracuse University emphasized that events like this can have a lasting impact on a firm's perceived corporate responsibility and ethical standards. Media and public scrutiny can fuel investors' concerns about customer loyalty and financial performance.

Steps to Rebuild Trust

UnitedHealth can take several steps to rebuild trust. As suggested by David Park, transparent communication about the root causes of the crisis and concrete steps to prevent future occurrences is essential. This could include third-party audits of internal policies, public disclosure of enhanced security measures, and the hiring of independent experts to review and recommend improvements. Addressing concerns about claims transparency is also crucial in fixing its reputation. Stephen Ciccone from the University of New Hampshire noted that other insurance companies are facing similar scrutiny and have seen stock price declines. If UnitedHealth doesn't take steps, consumer dissatisfaction will persist, and the industry may face increased government regulation.

Investors seeking that extra boost in corporate bond yields might find Europe to be a more promising destination than the U.S., as suggested by BlackRock. In its 2025 outlook, the BlackRock Investment Institute emphasizes the importance of being selective in fixed income. While Europe has historically lagged behind the U.S. in economic growth, the bond market there appears to be in a favorable state.

Unlock Higher Yields with European Corporate Bonds

Selectivity in Fixed Income

According to Amanda Lynam, head of macro credit research at BlackRock, experts are inclined to be selective in fixed income overall. Despite Europe's economic growth lag, European credit seems to be performing well. High yield within European credit has outperformed investment grade, indicating that the market within Europe is not overly burdened by significant growth risks.This selectivity is also reflected in valuation. Wei Li, BlackRock global chief investment strategist, points out that European high yield is trading roughly 100 basis points cheaper than that of the U.S., which was an average of 15 bps cheaper in the five years prior to the pandemic. Additionally, investment grade debt in Europe is also trading at a discount.

Structural Tailwinds in the European Debt Market

Lynam highlights some "structural tailwinds" in the European debt market. It is smaller compared to its U.S. counterpart, and the European Central Bank still holds a portion of corporate credit from previous bond-buying episodes. Moreover, there are U.S. firms that sell debt overseas, reducing Europe's pure exposure to its own prospects. These factors contribute to the market's resilience despite some growth weaknesses.However, an increase in global tariffs could introduce complexity to the global economic growth story.

Playing the European Debt Market

For U.S. investors, getting exposure to European debt can be a bit challenging as there are no major exchange-traded funds focused explicitly on this sector. But there are some funds on the market with a significant concentration in Europe. For instance, the SPDR Bloomberg International Corporate Bond ETF (IBND) and Invesco International Corporate Bond ETF (PICB) have over 70% of their exposure in Europe, including the U.K. The iShares International High Yield Bond ETF (HYXU) has more than 80% of its exposure in Europe, with around $50 million in assets. This year, HYXU has performed the best, with a total return of about 2% and a 30-day SEC yield of 4.90%.It's important to note that yields from foreign debt can be influenced by currency markets. Investors can also explore active funds where managers share BlackRock's perspective and are increasing exposure to European debt.