Viacom, Disney move up, MGM falls again
NEW YORK — Most showbiz stocks joined in as Wall Street experienced a “dead cat bounce” rally Tuesday, lifting the Dow Jones Industrial Average up 288.36 points to 7,827.43, or more than half the ground lost in Monday’s big selloff.
The entertainment rally was led by Viacom, which rocketed $9, or 17%, to $58.62, while Walt Disney Co. jumped $2.93 to $30.37. But the rally wasn’t uniform, highlighted by the 10% drop in Metro-Goldwyn-Mayer’s price to $15.50.
Many Wall Streeters said the rally was a normal bounce-back after a sharp slump like the one seen Monday and several days last week. But the Dow is still 16% down on its high from July and money managers remain nervous and expect further selloffs in coming days.
Tuesday’s rally was “tentative and very selective,” said Sal Muoio, principal of money manager SM Investors.
“There is a flight to quality within sectors that have gone down … Anything where cash flow is developmental didn’t bounce back,” Muoio noted.
Other than MGM, which is yet to get back in the black, other showbiz stocks to lose ground included such exhibs as AMC Entertainment and Carmike Cinemas, whose medium-term prospects are affected by the rebuilding of circuits. AMC fell 75¢ to $12.12 while Carmike fell 75¢ to $18.75.
Most stocks in media and entertainment rallied, however. Time Warner, for instance, closed up $2.62 to $83 while News Corp. rose $1.18 to $25.25 and Tele-Communications Inc. rose 6¢ to $33.06.
Reinforcing the rally in some media stocks were buyback programs. Viacom’s rally likely was partly due to Monday’s $1.75 billion buyback, while Comcast suddenly announced a $500 million buyback as its stock plunged even during the rally Tuesday morning.
“We are saying that at this level we are an interested buyer,” said Comcast vice chairman Julian Brodsky, adding “nothing has changed about the fundamentals of our business.” Comcast stock finished the day up 50¢ to $37.81.
Similarly, Sinclair Broadcast Group said it would “reactivate its previously announced share buyback program” which authorizes repurchase of up to $50 million of stock. Only $5.3 million has been bought back since it was first authorized in 1995. Sinclair stock jumped $2.43 to $18.50 by the end of trading.
By day’s end, the rally produced relief but little jubilation among Wall Streeters. “All I can say is ‘Thank God.’ I take one day at a time,” said Ellen Gibbs, a principal at money managers CRI Media Partners.
“I don’t think we are done with this yet. A bounce-back is normal and natural after we have come so far so fast on the downside,” said Cowen & Co. analyst Harold Vogel, who noted “there is still less confidence than there was a few weeks ago.”