2 signs investors are regaining their confidence in the stock market


This article was originally published on All figures quoted in US dollars unless otherwise stated.

The stock market continued its recovery on Tuesday, with solid gains that suggested investors have gotten past all the uncertainty that has hit Wall Street recently. There hasn’t been much resolution to all the headwinds buffeting the business world, but market participants nevertheless seem to believe that the bear market in the Nasdaq Composite (NASDAQINDEX: ^IXIC) and corrections in other indexes have been overblown.

As of 1:30 p.m. ET today, the Dow Jones Industrial Average (DJINDICES: ^DJI) had risen 260 points to 34,831. The S&P 500 (SNPINDEX: ^GSPC) rose 44 points to 4,333, while the Nasdaq had gained 220 points to 14,058.

A couple of stocks stood out as showing new signs of investor enthusiasm from a couple of different angles. Alibaba Group Holding (NYSE: BABA) moved sharply higher, showing renewed interest in Chinese stocks. Meanwhile, GameStop (NYSE: GME) posted a massive advance in a victory for meme stocks. Below, we’ll look more closely at the latest from both of these companies.

Alibaba boosts its buyback

Shares of Alibaba Group were up more than 12% in early afternoon trading on Tuesday. The Chinese internet giant made its own big bet on its stock, and investors were eager to ride its coattails. 

Alibaba announced that it would increase the size of its stock repurchase program. Previously, the tech company had authorized $15 billion to buy back stock, but the new authorization expanded that plan to $25 billion. Indeed, today’s move marked the second time Alibaba had raised the size of its buyback plans, having started with just $10 billion in December 2020.

Alibaba’s past buyback activity hadn’t prevented a swoon in its share price up to this point, however. The company’s most recent financial results showed that it spent $1.4 billion repurchasing 10.1 million shares in the fourth quarter of 2021, yet shares went on to lose nearly half their value after that report before bouncing back. Even now, share prices are 10% to 20% below the average price Alibaba paid on its repurchases during the last quarter.

U.S. investors remain concerned about whether the Chinese government will continue a harsh regulatory crackdown on Alibaba and its big-tech peers. Nevertheless, with shares at bargain prices, it’s been harder to pass up Alibaba than it has been for a long time. 

Winning the game

Meanwhile, shares of GameStop were up nearly 30%. There wasn’t any particularly noteworthy news from the meme stock standout today, but after having fallen to its worst levels since its late 2020 breakout, GameStop seemed to have investors focusing on what it hopes will be a promising future.

GameStop’s earnings last week didn’t generate an immediate turnaround, but investors seem to be looking back and finding reasons for hope from the numbers. Sales were up 6% from the previous year’s quarter and rose 18% year over year for the full 12-month period. Even though adjusted losses widened from year-earlier levels, shareholders now seem to be focusing more on the potential for top-line growth.

One thing that could generate some excitement is GameStop’s plan to establish a marketplace for non-fungible tokens (NFTs), which have gotten a lot of attention lately. Even as the traditional crypto market has shown signs of slowing down, innovation in the NFT arena has continued at a healthy pace.

Retail investors helped drive GameStop’s stock higher in its initial phase upward, and they seem to be behind today’s move as well. Those investors can be fickle, but some truly see real potential for GameStop’s turnaround story to get a Hollywood ending. 

This article was originally published on All figures quoted in US dollars unless otherwise stated.

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