In advance of the February jobs report, due out Friday before the open of U.S. markets, stocks endured another day of sideways action Thursday as the S&P 500 gained 0.35% while the Dow Jones Industrial Average rose 0.26%. The Nasdaq Composite finished higher by just 0.09%.
Energy producers were the big winners on the day and the sector’s 2016 losses are now close to being erased. That after the group was the worst-performing sector in each of the previous two years. Energy stocks surged Thursday while oil closed slightly higher.
Unemployment claims data out today could be a sign that tomorrow’s jobs report will be bullish, but services industry data was slack for a fourth straight month.
What was not slack were the performances turned in by Chesapeake Energy Corporation (NYSE:CHK), SolarCity Corp (NASDAQ:SCTY) and Sprint Corp (NYSE:S).
Those were three of today’s best stocks. Here’s why.
Chesapeake Energy Corporation (CHK)
On more than triple the average daily volume, shares of Chesapeake Energy surged 25.6% amid a broader rally in the energy sector. The rally in Oklahoma-based CHK’s shares comes a day after former CEO Aubrey McClendon died in a car accident. Just days before his death, McClendon was indicted on charges of bid-rigging.
Other catalysts are at play with Chesapeake’s stock beyond the death of McClendon, who departed the company in 2013. For example, options activity in the name has recently been strongly in favor of the bulls. Short covering is also a factor because CHK, along with several other natural gas producers, have heavy percentages of their shares outstanding out on loan to short sellers.
When the stock soars, as it has been recently, shorts are forced to cover, and that only powers the stock higher.
SolarCity Corp (SCTY)
Shares of Elon Musk’s SolarCity jumped 15.6% on volume that was more than double the daily average as rumors circulated that Musk could take the company private. Like CHK, SCTY is a heavily shorted stock, so it is possible some of today’s move is attributable to short covering as the Musk buyout rumor remains unsubstantiated.
Earlier this week, Morgan Stanley lowered its price target on SCTY to $52 from $78, but the bank also sounded a bullish tone on the stock.
Something else to consider: Alternative energy stocks, including solar names such as SCTY, often move in unison with traditional energy names.
Shares of SCTY are down 37.5% over the past three months.
Sprint Corp (S)
Telecom giant Sprint saw its stock climb nearly 6.7% today on news that Japan’s Softbank, which owns a controlling stake in S, will create a new entity to loan heavily indebted S cash. Wireless equipment and rights to some highly sought after wireless spectrum controlled by S will back the loans by Softbank.
The news also sparked a rally in S bonds. The company has $34 billion in debt and is widely expected to not be profitable again this year, marking an eighth consecutive year the company will lose money.
At the time of this writing, Todd Shriber did not own any of the aforementioned securities.
