What happened
Shares of Fastly (FSLY +6.44%) rose Wednesday morning after President Trump signaled that he wants Congress to work on economic stimulus moves that could be passed quickly. That contradicted the statement he made on Tuesday that he wouldn't negotiate with Congress on a new emergency stimulus measures until after the election.
Shares of the cloud-computing services company were up by 14.4% as of 12:20 p.m. EDT.
So what
Fastly's stock price surge appeared to be a bit of a positive overreaction by investors, considering the S&P 500 was up by just 1.3%. If a new economic stimulus package including checks for U.S. citizens gets passed sooner rather than later, it would be a good thing for the overall economy, but major share price jumps like the one Fastly just took are usually the result of company-specific news.
Tech companies have been particularly attractive to investors during this recession and pandemic, as many of them have been integral in helping businesses transition to remote work, supporting e-commerce, or keeping people connected to friends and family. Still, a huge one-day jump for Fastly stock based on the now-somewhat-brighter prospect of an economic stimulus deal appears excessive.
Investors have been hoping for another stimulus package as the U.S. economy continues to suffer due to the pandemic. Jobs are slowly coming back in some sectors, but recent economic data released this week showed lower-wage jobs aren't coming back as quickly, and the unemployment rate remains stubbornly high at just under 8%. Moreover, that figure doesn't reflect the decline in labor force participation -- millions of people who are out of work have stopped looking for jobs, which means they are no longer counted in the official unemployment figure.
Image source: Getty Images.
President Trump added uncertainty to the economic outlook when he abruptly ended stimulus negotiations between his administration and House Speaker Nancy Pelosi Tuesday, saying that the talks would only resume after the presidential election. Trump appeared to reverse course later in the evening, though, when he tweeted that Congress should immediately reroute unused funds from the previously passed CARES Act to help the ailing airline industry and to assist small businesses.
The House & Senate should IMMEDIATELY Approve 25 Billion Dollars for Airline Payroll Support, & 135 Billion Dollars for Paycheck Protection Program for Small Business. Both of these will be fully paid for with unused funds from the Cares Act. Have this money. I will sign now!
— Donald J. Trump (@realDonaldTrump) Oct. 7, 2020
Now what
The political climate is volatile, the president is still infected with COVID-19, and the U.S. is still fighting the pandemic and a major recession. This means that investors in Fastly -- and shareholders of nearly any company -- should try to keep a long-term perspective on their investments right now. Given that there's no company-specific news behind Fastly's stock price jump, it's clear that some traders are willing to bid the tech company up based on the daily news.
