I’ve been starting off several articles recently flagging the volatility we’re seeing on the FTSE 100 index at the moment. Yesterday was a perfect example of this. The index gained around 4.3% in a single day. This was put down to some positive results coming out from the US about a successful vaccine trial. Markets were further helped by the Federal Reserve Chairman, who offered some upbeat projections for the US economy.
Even though this news is coming from across the pond from our American cousins, stock markets around the world are correlated. So the FTSE 100 index reacted well to the news from the US. Markets throughout Europe and beyond also posted gains. Amidst all this, there were some standout performers.
Come fly with us One firm that was an obvious winner yesterday was easyJet (LON:EZJ) (LSE: EZY). As I write, the share price is up over 10% so far this week, largely driven by market sentiment. Rival Ryanair also saw its shares rally by a similar amount. This despite reporting expectations of a £175m loss for the first quarter!
Obviously, any effective vaccine would enable governments to not only ease, but completely remove, lockdown measures and travel bans. So for easyJet, it would mean more people could fly, which would boost revenues quicker than currently projected.
Remember, a lot of pessimism has been priced-in to the share. It has a P/E ratio of just over 6, and a price-to-book ratio of 0.76. The latter ratio highlights that the market currently values the firm at less than the intrinsic value (assets etc) of the business. So from here, there’s plenty of room for the share price to move higher without it flashing red as being overbought.
Keeping connected Vodafone (LSE: LON:VOD) is another firm that gained from the general positive momentum yesterday. I think some of this is being carried over from last week, with the news that Vodafone is still going to pay a dividend to investors. Given the many FTSE 100 giants that have cut dividends, this news is very welcome.
Naturally, if you’re an income-seeking investor, Vodafone might suddenly have become top of your buy list. It currently has a dividend yield of 6.39%, so higher than the FTSE 100 average.
Aside from the good news on the dividend, recent trading updates said that Vodafone shouldn’t see a material downturn in earnings this year. Profit is expected to be flat or slightly down, but not falling off a cliff. Add to this a solid 2019/20 financial year to March, when the business grew revenues by 3%, and I can see why investors are feeling positive on the stock.
Further gains ahead for the FTSE 100 index? Given the positive sentiment, there’s nothing stopping the FTSE 100 index moving higher throughout this week. If we see this continuing, I’d once again expect to see the sectors most sensitive to the virus outperforming.
The post The FTSE 100 index rallied 249 points yesterday! I like these 2 stocks that caught the surge appeared first on The Motley Fool UK.
Jonathan Smith and The Motley Fool UK have no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2020
First published on The Motley Fool
