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Zynga and AOL Surge as Dow Jones Rebounds

By Sam Mattera – Feb 4, 2014 at 11:20AM

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Zynga and AOL lead the markets higher on the day Dow Jones component Microsoft names its next CEO.

The Dow Jones Industrial Average (^DJI 0.10%) rebounded on Tuesday, adding nearly 70 points as of 11:30 a.m. EST. Zynga (ZNGA) and AOL (NYSE: AOL) were two notable outperformers, while Microsoft (MSFT 0.13%) was up slightly on the session.

Factory orders fall
According to the Census Bureau, factory orders were down 1.5% last month. Still, that number should be seen as a positive, as it exceeded expectations. Prior to the release, economists anticipated a drop of 1.7%.

Factory orders aren't the most important economic indicator, but they are a broad measure of economic activity. More factory orders suggests consumers and businesses are purchasing more durable goods -- indicating a strengthening economy.

Microsoft names new CEO
Microsoft was up 0.3% in late-morning trading after the tech giant announced that longtime executive Satya Nadella would be its next CEO, succeeding Steve Ballmer, who will remain on Microsoft's board.

Meanwhile, co-founder Bill Gates has stepped down as board chairman in order to work as a technology adviser for the company. Gates will work at Microsoft part time on new consumer products.

Nadella was widely expected to take the job, after several media outlets reported last week that Microsoft was in the final stages of its CEO search. Nadella is an insider, having worked at Microsoft for 22 years, and he brings a focus on the cloud -- an area of intense interest for Microsoft going forward.

Zynga gets upgraded
Zynga shares rose more than 6% in late-morning trading. Zynga has been an extremely volatile stock since its late-2011 IPO, but the move on Tuesday was likely prompted by an upgrade at UBS. The firm bumped its rating on the social media game provider up to buy from neutral, with a $6 price target. UBS said it likes Zynga's new management team and the company's commitment to cost-cutting.

Asset manager buys into AOL
AOL was up 5% early in the session. The Internet media company's rally follows Iridian Asset Management's disclosure  that is now owns 9.3% of AOL. It is a passive stake, so investors shouldn't expect the firm to push for major changes, but Iridian clearly believes AOL is undervalued.

Iridian describes itself as an asset manager that looks to take advantage of companies in transition. In that respect, AOL fits the mold. AOL has been undergoing a bit of a restructuring in recent months, most notably selling off its local news network, Patch. This has attracted analyst interest, and now investors seem to be getting on board.

Sam Mattera has no position in any stocks mentioned. The Motley Fool owns shares of Microsoft. 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.

Stocks Mentioned

Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
$34,429.88 (0.10%) $34.87
Microsoft Stock Quote
$255.02 (0.13%) $0.33
Zynga Stock Quote

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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