What Happened?
Shares of mobile app technology company AppLovin (NASDAQ: APP) jumped 11.3% in the morning session after S&P Dow Jones Indices announced on Friday that the company will be added to the benchmark S&P 500 index.
The inclusion, which will take effect before the market opens on September 22, is a significant milestone for the company. Stocks typically rise on news of their inclusion in a major index because investment funds and ETFs that track the S&P 500 are required to purchase the company's shares to reflect the index's updated composition. This creates substantial, built-in demand for the stock from passive investors. AppLovin, along with Robinhood Markets and Emcor Group, will replace MarketAxess Holdings, Caesars Entertainment, and Enphase Energy in the widely followed index.
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What Is The Market Telling Us
AppLovin’s shares are extremely volatile and have had 60 moves greater than 5% over the last year. But moves this big are rare even for AppLovin and indicate this news significantly impacted the market’s perception of the business.
The previous big move we wrote about was 3 days ago when the stock dropped 2.7% after the release of a much weaker-than-expected U.S. jobs report, which overshadowed hopes for a Federal Reserve interest rate cut by fueling concerns about the health of the economy.
The U.S. Bureau of Labor Statistics reported that employers added only 22,000 jobs in August, significantly below the 75,000 economists had forecasted. Additionally, the unemployment rate rose to 4.3%, its highest level since 2021. While poor economic data often increases the likelihood of the Federal Reserve cutting its benchmark interest rate to stimulate growth, the sharp slowdown in the labor market appears to have spooked investors. The concern is that the weak hiring is a sign of a more pronounced economic downturn, which could negatively impact corporate profits. This fear has led to a "flight to safety," with investors selling stocks and buying government bonds, pushing Treasury yields to their lowest levels in months.
AppLovin is up 59.5% since the beginning of the year, and at $545.24 per share, has set a new 52-week high. Investors who bought $1,000 worth of AppLovin’s shares at the IPO in April 2021 would now be looking at an investment worth $8,361.
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