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Stock Market News: Aurora Opens Marijuana Earnings Season While Caterpillar Celebrates Trade Talks

By Dan Caplinger – Updated Apr 20, 2019 at 5:37PM

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The stock market roared higher on hopes to avert a government shutdown.

The stock market began Tuesday on an optimistic note, with investors responding favorably to reports out of Washington that lawmakers might have come up with a deal that will avoid a second government shutdown. As of 11:20 a.m. EST, the Dow Jones Industrial Average (^DJI -0.61%) was higher by 310 points to 25,364. Other major stock indexes also did well, as the S&P 500 (^GSPC -1.11%) rose 32 points to 2,741 and the Nasdaq Composite (^IXIC) climbed 100 points to 7,408.

Volatility in recent months has forced investors to take a two-part approach toward the stock market. On one hand, high-growth areas of the market like marijuana still have huge potential to produce long-term gains, and Canadian cannabis company Aurora Cannabis (ACB -1.94%) kicked off a week that will feature several major players in the marijuana space reporting their latest financial results. At the same time, investors hope that the U.S. and global governments will take steps to stoke economic growth worldwide, and that'd be good news for industrial giants like Caterpillar (CAT -0.32%).

Jar of dried cannabis with seeds and rolling papers next to it on a wood table.

Image source: Getty Images.

Aurora sees sales surge

Aurora Cannabis shares were up about 3% following the late-Monday release of its fiscal second-quarter financial results. The company benefited greatly from the opening of the Canadian market to recreational cannabis sales, and revenue was up by more than 80% in just the past three months, reflecting the mid-October rollout of marijuana products in the Great White North. As one of the highest-volume producers of cannabis, Aurora successfully bolstered its production during the quarter, and the company also said that its efforts to continue adding capacity are on track to keep it among the leaders of the budding industry.

Aurora has taken an independent approach toward the cannabis business, relying on making its own acquisitions to bolster its size and gain market share. It's also been among the more internationally focused players in marijuana, and it now counts almost two dozen countries in its geographical footprint. The challenge that some marijuana investors foresee is that as some of Aurora's rivals make use of large investments from major consumer-goods players, the pressure will rise for Aurora to make its own partnerships in order to keep pace.

With an addressable market that some see approaching the $200 billion mark worldwide, there's plenty of room for multiple cannabis companies to succeed. Yet during this critical opening phase, it's important for Aurora to work as hard as it can to build up an early-mover advantage and keep would-be competitors at bay.

Constructing a winning path forward

Caterpillar was among the top Dow stocks on Tuesday, with shares climbing almost 3%. The move came as a nice surprise for investors, who've been concerned about the global economic tensions that have weighed on the construction equipment specialist's prospects. Falling demand in China played a prominent role in the stock's big decline following its fourth-quarter financial report in late January, and the continuing failure of the U.S. and China to make substantial progress toward reaching agreement on tariffs and other trade issues has affected not just Caterpillar's direct prospects but also the willingness of its customers to make significant capital investments.

However, there's reason for optimism despite those pressures. Much of Caterpillar's strength during the fourth quarter came not from its construction business but rather from higher demand in the natural resources, energy, and transportation industries. Volatility in the prices of key commodities like crude oil will continue to cause uncertainty, but with copper prices having rebounded nicely so far in 2019, customers in the mining sector look like they're ready to start buying Caterpillar's equipment again.

Investors should continue looking at broad market moves, but it's also important to watch what key companies say about their own business conditions. With many investors watching marijuana closely while others keep their eyes on the global economy, both Aurora and Caterpillar are good indicators for how market participants are feeling right now.

Check out the latest Caterpillar earnings call transcript.

Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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