What Happened in the Stock Market Today

By Demitrios Kalogeropoulos Markets Fool.com

Image source: Getty Images.

Continue Reading Below

Stocks jumped out of the gate to start 2017, with the Dow Jones Industrial Average(DJINDICES: ^DJI) and the S&P 500 (SNPINDEX: ^GSPC) indexes each finishing higher by more than 0.5%.

Today's stock market

Index

Percentage Change

Point Change

Dow

0.60%

119.16

S&P 500

0.84%

19.00

Data source: Yahoo! Finance.

Gold volatility benefited bullish investors on Tuesday, particularly those that used leveraged funds like the Direxion Daily Junior Gold Miners Bull 3X ETF (NYSEMKT: JNUG)and the Direxion Daily Gold Miners Bull 3X ETF (NYSEMKT: NUGT). The two ETFs, which amplify moves in a collection of gold miner stocks, jumped 19% and 12%, respectively.

Continue Reading Below

As for individual stocks, Xerox (NYSE: XRX) and Depomed (NASDAQ: DEPO) stood out with large jumps even as the market ticked higher.

Xerox splits up

Xerox shares jumped 15% on the company's first trading day following a spinoff that executives hope will put it on a path to stronger growth. Xerox is now focused completely on its document technology and document outsourcing segments, with the business process services divisions operating as a separate public company called Conduent.

Image source: Xerox.

Management has been working on this split for over a year, and this week they highlighted some of the key benefits they see behind the move. "The successful completion of the separation sharpens our market focus and commitment to our customers," CEO Jeff Jacobson said in a press release. As for the business, the spinoff should help by boosting free cash flow generation and profitability, executives said.

But the most immediate benefit is the $1.8 billion of cash that the deal delivers to Xerox in the form of a transfer from Conduent, which will allow it to quickly pay down $2 billion of debt. Looking further out, investors will be watching the next few quarterly releases for evidence that profitability is indeed improving, and that any increased cash flow is being put to good use investing into growth areas like document outsourcing.

Depomed sale rumors swirl

Opioid manufacturer Depomed jumped 13% following news that it could be nearing a deal to sell itself. A New York Post story over the weekend cited insider sources saying that the sale process is in advanced stages, with final bids likely to arrive in the next few days. The Post named investment firm KKR as a potential suitor that could pay as much as $25 per share for the drug company, equating to a market capitalization of around $1.5 billion.

Image source: Getty Images.

While that would represent a solid premium even from Tuesday's closing price, investors should be cautious about buying into Depomed now. The company last posted surprisingly weak quarterly results as a 5% uptick in revenue wasn't enough to keep it in the black.

Due to poor demand trends around its core Nucynta opioid medication, CEO Jim Schoeneck and his executive team slashed their full-year sales guidance to $460 million from $493 million. Depomed also forecast its second straight year of losses, with net outflow improving only slightly to $46 million from $76 million in 2015. Non-GAAP earnings are predicted to nearly double to $82 million.

Looking ahead, management plans to continue supporting the relaunch of its Nucynta franchise while building prescription demand for other brands including Gralise and Cambia. Investors should focus their attention on that strategy over rumors about potential acquisitions, since it's anyone's guess whether Depomed and another party will agree on a buyout, or what the final price tag might be.

10 stocks we like better than Xerox
When investing geniuses David and Tom Gardner have 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.*

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

Click here to learn about these picks!

*Stock Advisor returns as of Nov. 7, 2016

Demitrios Kalogeropoulos has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.