What Happened:

Shares of data-mining and analytics company Palantir (NYSE:PLTR) jumped 5.2% in the morning session after equities( Dow +0.8%, S&P 500 +1.2%, Nasdaq +1.6%) surged for the second straight day with the start of earnings season showing that the health of companies that reported Q1 earnings was solid and that the economy seems to be holding up. Only about a fifth of S&P 500 companies have reported, but roughly three-quarters of them have beat expectations. This may be spurring dip buying following elevated volatility in the previous two weeks of trading. 

Treasury yields pulled back suggesting markets are tempering the growing concerns about the possibility of higher for longer interest rates following recent economic data highlighting sticky inflation, ahead of the Fed's expectations. 

While earnings thus far have been encouraging, most companies have yet to report. Microsoft, Alphabet and Meta will report this week, and many other bellwethers will announce their results in the coming weeks. 

As a reminder, the driver of a stock's value is the sum of its future cash flows discounted back to today. With lower interest rates, investors can apply higher valuations to their stocks. No wonder so many in the investment community are optimistic about 2024. We at StockStory remain cautious, as following the crowd can lead to adverse outcomes. During times like this, it's best to own high-quality, cash-flowing companies that can weather the ups and downs of the market. After the initial pop the shares cooled down to $21.68, up 3.4% from previous close.

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What is the market telling us:

Palantir's shares are very volatile and over the last year have had 39 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business. 

The previous big move we wrote about was 26 days ago, when the company dropped 5.8% on the news that Monness analyst downgraded the stock's rating from Neutral to Sell and assigned a $20 price target, highlighting the company's "rich valuation." The price target implied a potential 13% downside from where shares traded when the downgrade was announced.

Palantir is up 30.7% since the beginning of the year, but at $21.68 per share it is still trading 18.1% below its 52-week high of $26.46 from March 2024. Investors who bought $1,000 worth of Palantir's shares at the IPO in September 2020 would now be looking at an investment worth $2,282.

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