Please ensure Javascript is enabled for purposes of website accessibility

Microsoft's Office Expansion Leads the Dow Higher as Investors Say "TGIF!"

By Alex Planes – Mar 28, 2014 at 12:15PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Markets are up broadly as good news finally outweighs bad.

Happy days are here again for the markets! All three of the major U.S. indices are either pushing toward 1% gains at as of 12:10 p.m. EDT as investors flock back to stocks after a few lousy days at the tail end of 2014's first quarter. American consumer spending and income both rose 0.3% in February, but markets are also keyed into the possibility of increased stimulus measures in Europe and China, which should offset some fears that the Middle Kingdom's economy is slowing.

The Dow Jones Industrial Average (^DJI 0.70%) and the S&P 500 are both up about 0.8% as a result of this positive news. Only three Dow components are in the red, and all but 55 stocks  on the S&P 500 are up heading into the afternoon. The Dow was led by a 3% gain from Microsoft (MSFT 1.45%), while the S&P's clear leaders are Cognizant Technology Solutions (CTSH 0.86%) and tax preparer H&R Block, with respective gains of 6% and 5.2%. Microsoft has also respective been the S&P's strongest megacap this morning. No Dow stock is suffering from notable losses, but the S&P's losers are led by software maker Red Hat (RHT), which lost 4.5% of its value.

Microsoft is enjoying a surge of positive attention for the release of its Office 365 software on Apple's (AAPL 1.48%) App Store for use on the iPad. Bloomberg wrote a glowing analysis of the move this morning, praising new CEO Satya Nadella for breaking away from the "increasingly obsolete business paradigm" of focusing on its operating system as the core of its operations. Office 365's major products -- Word, PowerPoint, and Excel -- are all top downloads in the App Store productivity category, with Word currently ranked as the most-downloaded app in the entire App Store. However, this move may not necessarily be as valuable for Microsoft as investors are hoping, as Apple will still take its typical 30% cut of all subscriptions sold for Office 365. Since the product needs a subscription to do anything useful, one would think that Apple itself would be a better performer today, but the world's largest tech company was trading flat just after noon.

Microsoft CEO Satya Nadella.
Source: Heisenberg Media via Flickr.

Cognizant is up following a Morgan Stanley upgrade. The investment bank now ranks the IT services company as a buy instead of a hold, citing further growth in the "cyclical recovery in discretionary spending"  for the industry. The stock now has a $60 price target, implying further upside of roughly 20%.

H&R Block doesn't have any real news of note today, but the company did unveil the finalists for the "Greatest Hipster in History" contest yesterday, which it sponsors through the Irony Games, a tongue-in-cheek bunch of ridiculous nonsense that purports to raise money for the Covenant House International charity for homeless youth. Let's hope that it doesn't take donations exclusively in beard clippings and thick-rimmed glasses.

Red Hat slipped today after reporting good earnings that it followed with weak guidance. The company posted revenue of $400.4 million and earnings of $0.39 per share for the fourth quarter, slightly ahead of both the $398.9 million in revenue and $0.37 in EPS Wall Street was looking for. However, the company's guidance for the fiscal year ending in February 2015 now pegs revenue in the range of $1.73 billion to $1.755 billion -- a hair below Wall Street's $1.756 consensus -- and EPS in the range of $1.54 to $1.56 -- well below Wall Street's $1.63 estimate.

Alex Planes holds no financial position in any company mentioned here. Add him on Google+ or follow him on Twitter @TMFBiggles for more insight into markets, history, and technology.

The Motley Fool recommends Apple. The Motley Fool owns shares of Apple, Cognizant Technology Solutions, and 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.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.