Updates on Today’s Market

I wanted to add a few comments on today’s market activity. The S&P 500 had its best day since March 1. The stock market had fallen nine days in a row, but those declines were quite modest. Today’s big gain won back more than 70% of what had been lost in nine days.

Gold had its worst day in a few weeks, and the Dow retook 18,000. The Dow also crossed back above its 50-day moving average.

Today was the best pre-election day for the market in 84 years. All 20 Buy List stocks closed higher. We had especially big gains from Biogen (BIIB) and Cognizant Technology (CTSH), the latter due to its impressive earnings report, and the former due to a positive drug study.

A few weeks ago, shares of CTSH fell sharply after the company said it may have been involved in some illegal activities. Until now, we haven’t had any more news. Now we have some details from Reuters:

IT services provider Cognizant Technology Solutions Corp said on Monday some senior managers may have participated in or failed to take action to prevent making about $5 million in “potentially improper payments” primarily related to real estate and procurement in India.

Cognizant, whose shares were up 4 percent at $54.18 in early trading, said the material weakness existed as of Dec. 31, 2015, and continues to exist in subsequent interim periods.

The company also said its ongoing internal investigation had identified a material weakness in its internal control over financial reporting.

If the payments are limited to $5 million, this would probably be well below investors’ worst case, Cowen and Co analysts said in a research note.

Cognizant said in September it was conducting an internal investigation into possible violations of U.S. anti-corrupt practices laws related to payments in India.

The company also said that the people possibly involved with the payments are no longer with the company or in a senior management position.

The company said in September that President Gordon Coburn had resigned, giving no reason for his departure, and that he would be replaced by Rajeev Mehta, the head of IT services.

Cognizant said in a regulatory filing on Monday that it had not maintained an “effective tone at the top”.

“We will continue the investigation until we are confident that we have tracked it all down,” Chief Financial Officer Karen McLoughlin said on a conference call, adding that it was “early days” in the investigation.

I think this is very good news. It shows that CTSH is on top of it, and it doesn’t appear to be a very large deal in financial terms. Bear in mind that CTSH plunged more than 13% when the news first came out on September 30.

Posted by Eddy Elfenbein on November 7th, 2016 at 10:40 pm

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