Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
In an extremely odd twist, the broad-based S&P 500 (^GSPC 0.02%) reversed its early morning weakness and finished the day higher even while Washington inched only a fraction closer to a debt-ceiling and government shutdown resolution.
With no economic data on the docket today, all eyes remained on the ongoing shutdown and the possibility of an upcoming debt default that, according to economists, would occur if a deal is not reached by Thursday. The possibility of a prolonged government shutdown, and the ratings downgrades that could ensue from a debt default, would have been expected to drive the markets lower on the day. However, a delayed meeting between President Barack Obama and congressional leaders could signal that a bipartisan deal is in the works. That appears to be the impetus behind today's strong reversal to the upside for the S&P 500.
For the day, the S&P 500 ended higher by 6.94 points (0.41%) to close at 1,710.14, the index's third-straight day of gains.
Handily leading the S&P 500 to the upside was content streaming service Netflix (NFLX -3.92%) which jumped 7.8% on word from The Wall Street Journal that the company is in talks with Comcast (CMCSA -0.37%) and Time Warner Cable to make its streaming app available on these cable providers' set-top boxes. Netflix has swiftly moved away from its DVD business and is going full throttle into families' living rooms. A deal would definitely place Netflix as a direct competitor to the cable companies' pay-per-view offerings, but it could also drive up viewership and help reduce turnover for providers like Comcast and Time Warner Cable. In turn, Netflix would be the clear winner with the added convenience of being in millions of new homes. While I'd call this a great deal for Netflix shareholders, I remain concerned that with minimal cash flow generation all optimism has been more than baked into its share price.
Also having a very good day despite no company-specific news is Vertex Pharmaceuticals (VRTX -1.02%) which advanced 3.9%. The biopharmaceutical company's shareholders have been on a bumpy ride over the past two years as Incivek, the company's leading hepatitis C drug, vaulted to $1 billion in cumulative sales in a matter of months -- a history-making milestone -- only to see this same product lose about half its sales over the past year to the anticipation of non-interferon-based oral treatments from the likes of Gilead Sciences and AbbVie that are likely on their way. For Vertex, Kalydeco and its cystic fibrosis drug hopefuls such as VX-809 and VX-661 have the best shot of sending the company higher. I would certainly suggest adding Vertex to your watchlist if you haven't done so already.
The story was much the same for storage maker Western Digital (WDC -0.53%) which added 3.3% in spite of no company-specific news. There has been an ongoing tug-of-war for years between optimists and pessimists in Western Digital and soon we should find out which side will be right over the long run. The pessimists would point to industry-wide commoditization of storage components products as the reason why Western Digital's margins should fall over the long term. On the flipside, optimists would note that Western Digital's opportunities in cloud computing, hitting the PC-side and big data center-side of the storage business, give it ample opportunities to counteract any margin weakness and overcapacity. I happen to fall into the optimist camp but am certainly curious to get an update from Western Digital when it reports earnings in less than two weeks.
