Promise of More Chinese Babies Pushes Stocks to Record Highs
The Dow Jones Industrial Average rose to a record high on Monday, breaking above 16,000, after the Chinese government unveiled major reforms. The index was up nearly 50 points as of 11:133 a.m. EST. But Dow component Microsoft underperformed, falling more than 1% on the first day in what is shaping up to be a crucial week for the tech giant.
Other tech names were mixed. Salesforce.com was down slightly ahead of its earnings report, while telecom Sprint rose more than 3% following the debut of an ambitious new plan.
The end of China's strict one-child policy
The Chinese government announced a number of major reforms at the end of last week, including a major alteration of the country's long-standing one-child policy. Chinese couples can now have two children, providing that one of the parents was themselves an only child.
Chinese stocks rallied strongly on the news, and the bullish sentiment may be spilling over to markets in the United States. Although China's economy is growing at a rapid pace, the one-child policy was setting the nation up for a major demographic trap, one that could've undermined China's economy in the long run.
Other reforms announced by the Chinese government included ending force labor camps and, most notably, limiting economic support for the government's state-owned companies.
A crucial week for Microsoft
Microsoft shareholders missed out on the market rally early on Monday. Investors may have been cautious ahead of a week that promises to be key for the tech giant. The company's board is meeting today to further narrow down its list of CEO candidates. Microsoft will have its shareholder meeting on Tuesday, and Friday will mark the debut of the company's next Xbox console and the first Windows phablet.
Microsoft's next CEO could be instrumental in transforming the company. If it's former Nokia CEO Stephen Elop, Microsoft could look to shut down Bing and sell its Xbox division. The Xbox One will go on sale Friday, and will compete with the PlayStation 4 this holiday season. Meanwhile, Nokia will release a Windows Phone with a 6-inch display, the Lumia 1520, on the same day.
Salesforce.com earnings coming after the bell
Shares of salesforce.com were trading in a fairly tight range early on Monday, but will likely move substantially after the bell. Salesforce.com is set to announce earnings after the close; given its sky-high valuation, investors should brace themselves for a major move in either direction.
Analysts expect salesforce.com to continue its rapid growth, with earnings per share of $0.09 on revenue of $1.05 billion. Salesforce.com has been a great stock to own in recent quarters, rallying more than 21% in the last six months alone.
Sprint turns to students to stop the bleeding
While salesforce.com has grown, Sprint has shrunk, though its shareholders have seen upside because of Softbank's acquistion deal in the telecom. Sprint has been bleeding subscribers, losing 313,000 subscribers last quarter and more than 1 million in the prior quarter.
But Sprint has a plan to reverse that trend. Now students can get one year of free Sprint service, including unlimited calling and 1GB of data, when they buy a smartphone through Best Buy. Although Sprint isn't likely to benefit immediately from these subscribers, many could be tempted to stick with the provider after their free year runs out.
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The article Promise of More Chinese Babies Pushes Stocks to Record Highs originally appeared on Fool.com.Sam Mattera owns shares of Best Buy. The Motley Fool recommends Salesforce.com. The Motley Fool owns shares of Microsoft. Try any of our Foolish newsletter services free for 30 days. 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.
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