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Two Things Investors Might Have Missed in the Markets This Week

By Daniel Miller – Nov 19, 2016 at 5:20PM

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This week brought a little bit of everything: acquisitions, large stock price moves, and positive economic data. Here are some highlights.

Image source: Getty Images.

If you were hoping for some economic optimism, this week offered a good dose of data. For instance, the number of people who applied for unemployment last week plunged to a 43-week low, according to MarketWatch, which reflects a stronger labor market as we head into 2017.

Another bright spot was found in construction; more specifically, housing starts jumped to an annual rate of 1.32 million, much better than estimates of 1.17 million. To be fair, the government housing report is volatile and this strong result came after a sharp drop in September -- but overall, the housing market has been consistently expanding.

With those bright spots out of the way, let's take a look at some stocks making big moves or big headlines this week.

The tale of two tales

Let me start this next part off by showing you a three-month graph of Ellie Mae's (ELLI) stock price:

ELLI Chart

ELLI data by YCharts.

On Monday shares of Ellie Mae lost nearly 11% before recovering slightly by the closing bell. The company provides mortgage software that helps banks navigate through new regulations set in place after the 2008 housing and financial crises. Because its business is clearly linked with interest rates, which moved up from 3.62% on Election Day to 4% recently, investors are less optimistic about the number of mortgages, negatively impacting Ellie Mae's overall business.

However, despite the short-term knee-jerk reaction, recall that housing starts surged last month and that in the grand scheme of things the housing market continues to improve. The fact that the economy looks strong enough to potentially raise interest rates, sooner rather than later, is good in the grand scheme of things, despite creating a little headwind for mortgage rates.

Take the long-term view, like the graph below, which shows that the recent dip is just a speed bump in the company's public history:

ELLI Chart

ELLI data by YCharts.

Not solely an automaker

With the soon-to-be-launched Model 3, Tesla has a lot more on its plate. Image source: Tesla Motors.

Don't tell Elon Musk, CEO of Tesla Motors (TSLA -0.94%), what he should and shouldn't do while turning his electric vehicle company into an energy empire -- and making rockets on the side. While many analysts and investors were critical of Musk's push to acquire SolarCity (SCTY.DL), it was announced on Thursday that shareholders of both companies approved the acquisition.

Perhaps more surprising, to me at least, was that the percentage in favor of the acquisition reached 85%, much higher than I expected. SolarCity shareholders will receive 0.11 Tesla share for each SolarCity share they own, in the all-stock transaction.

While the realist in me wonders if this young electric-vehicle maker is taking on too much, too soon, I'll note that the price of roughly $2 billion in Tesla stock appears cheap compared to what SolarCity traded for three years ago.

Make no mistake, this is a dramatic pivot point in Tesla's story -- though it could drag out in court. It will be either the beginning of the end for Tesla, or a huge source of regret for investors who watched from the sidelines. There seems to be little gray area for Tesla's "go big or go home" strategy.

Daniel Miller has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Ellie Mae and Tesla Motors. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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