Month: October 2017

Consumer spending increased faster than expected in September as Americans in hurricane-hit regions replaced damaged vehicles. Personal incomes grew by 0.4 percent, in line with estimates and double August’s growth rate. Core inflation held steady at 0.1 percent growth.

Later this week, several reports for October will be out, including the Conference Board’s consumer confidence index, Chicago PMI, ADP employment report, Markit and ISM manufacturing indexes, motor vehicle sales and the Bureau of Labor Statistic’s employment report. Economists expect several data points to moderate from September’s surge.

The Federal Reserve will meet on Wednesday. No rate increase is expected, but December rate hike odds are at 98 percent.

This will also be an important week overseas. The European Union will report third-quarter GDP October inflation on Tuesday. Last week, European Central Bank President Mario Draghi’s comments on open-ended quantitative easing sent the euro down versus the dollar. A lower-than-expected inflation number could spark a further decline in the euro. Canada will report August GDP and multiple nations will report manufacturing PMIs.

Brent crude crossed $60 a barrel last week. On Monday, West Texas Intermediate crude climbed above $54 a barrel. WTI hasn’t traded above $55 since July 2015. A move above $55 could lift inflation and interest rate expectations.

The 10-year Treasury yield traded above 2.4 percent last week, but slipped to 2.3 percent on Monday following inflation data. The U.S. Dollar Index also retreated after rising on four of five days last week.

Telecom funds were hit hard on Monday after Softbank (SFTBY) announced it would drop plans for a Sprint (S) and T-Mobile (TMUS) merger. Softbank owns Sprint. Shares of all three companies fell on the news. Sprint fell more than 10 percent before recovering, T-Mobile more than 5 percent and iShares U.S. Telecommunications (IYZ) slid more than 2 percent. IYZ fell near its 52-week low of $29.31.

Biotech stocks look to rally this week after disappointing earnings. Celgene (CELG) tumbled after missing earnings last week. Gilead Sciences (GILD) beat estimates, but sales of its hepatitis C drug slowed.

Technology funds will reach for another all-time high this week with Facebook (FB) and Apple (AAPL) earnings on tap. Pharma, consumer staples and utilities will also be in focus this week.

Pfizer (PFE), Mastercard (MA), BP (BP), Aetna (AET) will deliver results on Tuesday. CVS Health (CVS) made an offer for Aetna (AET) last week.

Wednesday brings Facebook (FB), Kraft Heinz (KHC), Qualcomm (QCOM), Allergan (AGN), MetLife (MET), Honda (HMC), Tesla (TSLA), Occidental Petroleum (OXY) and Southern Company (SO).

Apple (AAPL), Alibaba (BABA), Royal Dutch Shell (RDS.A), DowDuPont (DD) and Starbux (SBUX) headline Thursday’s reports.

Duke Energy (DUK) and Moody’s (MCO) deliver results on Friday.

Equities jumped into record territory on Friday following positive technology earnings. Google (GOOGL), Microsoft (MSFT) and Intel (INTC) all rose on Friday, while Amazon (AMZN) rallied 13.2 percent. The Nasdaq’s 2.20 percent gain on Friday left it up 1.09 percent for the week. The Dow Jones Industrial Average rose 0.45 percent.

Amazon climbed past $1100 per share after its cloud services division delivered strong profit growth. Revenue for the entire firm was $43.7 billion, $1.6 billion higher than forecasts. Microsoft (MSFT) beat earnings estimates by 17 percent. Intel beat forecasts by a wide margin, pulling in $1.01 per shares versus the 80-cent consensus estimate. Intel also raised its full-year earnings guidance. iShares Semiconductors (SOXX) gained 2.09 percent on Friday.

The U.S. economy grew 3.0 percent in third quarter, well ahead of estimates.  Personal consumption added 1.6 percentage points to growth. Rising inventories contributed 0.7 percentage points.

New home sales hit an annualized pace of 667,000 in September. This was 100,000 higher than estimates and August’s sales pace. Initial unemployment claims were 233,000, up from last week but still near 44-year lows. The University of Michigan’s Consumer Sentiment survey hit 100.7.

Strong economic growth pushed the odds of a December rate hike past 98 percent. Investors have largely priced a hike into the market.

The pharmacy subsector slumped this week as Amazon entered the wholesale pharmaceuticals market. Walgreens (WBA), CVS Health (CVS) and Rite Aid (RAD) fell 7 to 12 percent. CVS also announced what was widely seen as a defensive buyout of Aetna (AET) as it deals with the competitive threat from Amazon.

Saudi Arabia called for an extension of the current production cuts set to expire in March. Russia will back an extension through the end of 2018. West Texas Intermediate crude topped $53 a barrel. Energy shares finished down for the week.

Caterpillar (CAT), McDonald’s (MCD), 3M (MMM) surprised with positive earnings. Celgene (CELG) shares fell 16 percent following disappointing results.

Over the past 10 days, SPDR DJIA (DIA) has climbed 2.18 percent, followed by SPDR S&P 500 (SPY) with an increase of 0.07 percent.

Since the Dow is a price-weighted index, the higher-priced stocks have a larger impact on index returns, as reflected in the following charts:

Homebuilder stocks have risen sharply. New home sales jumped in September to an annualized pace of 667,000, crushing estimates of 555,000 and August’s pace of 561,000. It was the largest one-month increase since 1992. Sales of pre-construction homes in the South contributed to the growth as hurricane recovery began. Even without this bump, sales were strong across the nation.

General Electric (GE) has weighed on the industrial sector this week. The company is considering a dividend cut and will announce its decision in November. Relative to SPDR Industrials (XLI), GE is cheaper than it has ever been. This increases the likelihood that shares could bottom, at least in the short- and intermediate-term, around the time of the November announcement.

Financials hit a new 52-week high on Tuesday. Insurance stocks pulled the sector higher, aided by J.P. Morgan (JPM) and Bank of America (BAC).

The energy sector has continued to decline despite crude oil holding its gains. The oil service subsector (tracked by XES) is on the cusp of being “oversold” following weak earnings reports.

Later this week, integrated oil giants Exxon Mobil (XOM) and Chevron (CVX) will report.

China completed its 5-year national congress this week. Last week, the head of China’s central bank warned of a financial crisis if credit growth isn’t contained. Economic data was solid, but real estate sales and prices declined. A credit-fueled boom in Chinese real estate has lifted commodities over the past 18 months.

Global X Copper (COPX) fell on heavy volume on Wednesday, but steel (SLX) and coal (KOL) producers did not see a similar rise in volume. PowerShares DB Base Metals (DBB), however, rose to a new 52-week high.

Alphabet (GOOGL), Microsoft (MSFT), Amazon (AMZN) and Intel (INTC) will report earnings on Thursday. SPDR Technology (XLK) hit a new 52-week high on Friday. Amazon (AMZN) is the top holding in SPDR Consumer Discretionary (XLY).

The 10-year Treasury yield crossed 2.4 percent on Tuesday. The yield pushed higher still on Wednesday. iShares 20+ Year Treasury Bond (TLT) is approaching a long-term trend line going back to 2010. The increase in rates over the past week hit investment grade and high-yield bonds. Thompson Bond (THOPX) and floating-rate funds ignored the rise in rates.