Why Google, Facebook, and Yandex Stock Rebounded Today | The Motley Fool

1

What happened

After a miserable Thursday, Friday promises to be a bit better for stock investors.

Pundits are predicting that the Trump Administration and Congress — whether working separately or together — may be putting together significant relief measures to stabilize the economy and prepare America to weather (((( the COVID-19 coronavirus storm. This is sparking a big rally on Wall Street, with the Dow up in excess of 700 points in the first hour, and tech stocks such as Alphabet NASDAQ:GOOG) NASDAQ:GOOGL), Facebook NASDAQ:FB), and Yandex NASDAQ:YNDX) — “Russia’s Google” — all up strongly.

As of 10:15 a.m. EDT, Google Class A and Class C shares were both up 3.4% after notching better than 5% gains earlier in the morning. Facebook, too, was still hanging on to 4.6% gains. And Yandex, which at one point seemed to be closing in on a 10% day, was leading this tech stock pack with a 6.3% gain.

So what

Notably, just as on Thursday all of these stocks suffered losses despite reporting no particularly bad news, today’s rally in tech shares seems to have few underpinnings aside from a general hope that the government will do something to fix whatever went wrong yesterday.

Now what

And I have to admit: This worries me. The phrase “easy come, easy go,” springs to mind, as does “dead cat bounce.” A skeptical value investor may wonder what will happen to this stock rally if later today no grand bargain emerges from Washington, D.C. What if the White House and Congress turn out to be at loggerheads about what exactly is to be done — or perhaps worse, announce policies at cross purposes?

As much as stocks have fallen already (we’re officially in a bear market now), the S&P 500 is still selling at a decidedly not-cheap valuation of 19.5 times trailing earnings, and probably a much worse ratio when valued on forward earnings, given the damage coronavirus has already wreaked upon the economy.

As good as things look in the stock market today, they could still get worse.