Send me real-time posts from this site at my email

Here's What's Helping Stocks Take Flight on Tuesday

The stock market moved higher on Tuesday morning, with broad-based gains that spanned Wall Street. As of 7:30 a.m., futures on the Nasdaq Composite (NASDAQINDEX: ^IXIC) were up half a percent, in line with other major market benchmarks and taking the near-month futures contract to 12,107.

One macroeconomic factor that has played a key role in driving uncertainty among investors is the fact that China's zero-COVID policy has weighed on economic activity in the world's second-largest economy. However, a recent policy change could finally bring some relief on that front, and it's particularly good news for a Chinese online travel portal that gave its latest earnings report late Monday.

Trip.com is cleared for takeoff

Shares of Trip.com Group (NASDAQ: TCOM) were up more than 15% in premarket trading on Tuesday. The move came after the travel specialist reported its financial results for the first quarter of 2022.

As expected, Trip.com had a lot of trouble during the period. With the latest resurgence of COVID-19 cases in China, net revenue was down 12% from where it was three months ago, and it came in roughly flat from where it was this time last year. Local hotel bookings saw a big increase, rising 20% year over year as many Chinese citizens resorted to staycations to scratch their vacation itch while protecting their health and complying with local regulations.

However, good signs are still ahead. Air-ticket bookings on Trip.com's global platforms were up 270% from where they were last year, as most markets in Europe and the Asia-Pacific region have eased their international travel restrictions substantially in the past 12 months. That's beneficial for Trip.com, whose revenue from transportation-related ticketing actually exceeds what it gets for accommodation reservations.

To be clear, Trip.com isn't out of the woods yet. Net losses were down by nearly half year over year, but they still amounted to roughly $155 million. Even on an adjusted basis, Trip.com still posted a modest loss.

Is China opening up?

Also driving Trip.com higher was the latest from Chinese officials on how they're handling the COVID-19 outbreak. Going forward, China will impose somewhat less stringent quarantine requirements on certain international arrivals, and that has investors around the world feeling more comfortable about the longer-term prospects for the global economy.

Those visiting China from abroad will now be allowed to enter the country after meeting a 10-day quarantine requirement. That will consist of a week of staying in an official quarantine hotel, followed by three additional days of isolation at home. That's down from the previous requirement of two weeks of hotel quarantine and an additional week of home quarantine.

Other travel stocks outside China showed much more muted reactions to the news. Trip.com competitors Booking Holdings and Expedia Group were up around 2%, while major U.S. airlines like Delta Air Lines showed similar gains in the 1% to 2% range.

The reawakening of the Chinese economy won't be all good news. As much as energy prices have risen, the gains in crude oil and other commodities haven't been as large as they might have been were it not for reduced levels of business activity within China. If Chinese industry starts to get back toward full capacity, the resulting need for energy products could exacerbate the inflationary challenges that many are facing around the world.

Nevertheless, in the long run, the global economy needs to find a new equilibrium in the wake of the pandemic and the current geopolitical situation. That won't be easy, but it will help bring some greater stability to markets and more certainty about their prospects.

10 stocks we like better than Trip.com
When our award-winning analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

They just revealed what they believe are the ten best stocks for investors to buy right now... and Trip.com wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks

*Stock Advisor returns as of June 2, 2022

Dan Caplinger has positions in Booking Holdings. The Motley Fool has positions in and recommends Booking Holdings. The Motley Fool recommends Delta Air Lines. The Motley Fool has a disclosure policy.


Source

Popular posts

Welcome! Is it your First time here?

What are you looking for? Select your points of interest to improve your first-time experience:

Apply & Continue