Month: October 2017

Equities started the week in record territory. Technology, healthcare, financials and materials continued outperforming on Monday.

Flash manufacturing and service PMIs will be out on Tuesday. Last month, the PMIs came in surprisingly high around the world. September new home sales will be out on Friday. Economists forecast 563,000 homes were sold, in line with August’s number. Jobless claims are expected to rise from last week’s 44-year low of 222,000 up to 233,000. On Friday, the Bureau of Economic Analysis will release the first estimate of third-quarter GDP growth. The Atlanta Federal Reserve’s GDP Now model and economists’ models both anticipate 2.7 percent growth.

Crude oil opened the week near $52 a barrel. The 10-year Treasury yield held steady at 2.37 percent. The U.S. Dollar Index closed at a new two-month high, aided by the weaker yen.

Later this week, the Bank of Canada and European Central Bank will make policy decisions. The ECB could announce a start date for tapering quantitative easing. An October announcement was widely expected two months ago, but a delay until December is possible.

After reporting earnings on Monday, shares of Illinois Tool Works (ITW) rallied and Halliburton (HAL) fell. As a major component in energy funds, the dip in Halliburton weighed on the sector. Illinois Tool Works lifted the industrial sector, but renewed selling in General Electric (GE) offset it. GE reversed Friday’s gain and fell to a new 52-week closing low.

Major components in defense, telecom, pharma, technology, consumer, biotech, energy and industrial funds will report this week. The bulk of iShares U.S. Aerospace & Defense (ITA) will report.

3M (MMM), AT&T (T), McDonald’s (MCD), Novartis (NVS), Eli Lilley (LLY), United Technologies (UTX), Lockheed (LMT), Texas Instruments (TXN), Caterpillar (CAT), Biogen (BIIB) and General Motors (GM) will report on Tuesday.

Wednesday brings Visa (V), Coca-Cola (KO), Boeing (BA), Amgen (AMGN), GlaxoSmithKline (GSK), Walgreens (WBA), General Dynamics (GD) and Northrop Grumman (NOC).

Alphabet (GOOGL), Microsoft (MSFT), Amazon (AMZN) and Intel (INTC) will headline Thursday’s reports, along with Anheuser-Busch Inbev (BUD), Comcast (CMCSA), Altria (MO), Gilead Sciences (GILD), Bristol-Myers Squibb (BMY), Celgene (CELG) and United Parcel Service (UPS).

The week will close out with the major integrated oil producers. Exxon Mobil (XOM), Chevron (CVX), Total SA (TOT), Phillips 66 (PSX), AbbVie (ABBV), Colgate-Palmolive (CL) and Simon Property Group (SPG) are on Friday’s reporting schedule.

Technology, industrials, healthcare, materials and financials all achieved new all-time highs on Friday. Positive earnings from mega-caps the Dow to a gain of 2.00 percent this week. The S&P 500 Index followed with a 0.86-percent return. The Dow also topped 23,000 for the first time this week.

Economic data was strong across the board this week. Homebuilder confidence rose in October. September existing home sales beat expectations. iShares U.S. Home Construction (ITB) finished the week at a new all-time high. Employment data was also surprisingly strong. Initial claims for unemployment fell to 222,000, the lowest figure since 1973.

Honeywell (HON) and Kansas City Southern (KSU) boosted the industrial sector. Both firms beat earnings and revenue estimates. Honeywell climbed to a new 52-week high on Friday. General Electric (GE) disappointed with an earnings miss and weak guidance. The firm cut its 2017 earnings estimate to between $1.05 and $1.10, down from guidance of $1.60 to $1.70 only three months ago. Shares of GE fell 8 percent in early trading, but had battled back into the black by the close. SPDR Industrial (XLI) gained 1.2 percent for the week.

Intuitive Surgical (ISRG) earned $2.77 per-share versus a consensus forecast of $1.97 per-share. Earlier in the week, Dow component Johnson & Johnson (JNJ) beat estimates and raised guidance. Shares rose more than 4 percent on the week. SPDR Healthcare (XLV) climbed 1.8 percent for the week.

Financials saw strong earnings from insurers, investment banks, financial services and regional banks. Analysts expected Travelers would report 52 cents per-share in the hurricane-hit quarter, but earnings were 91 cents. Morgan Stanley (MS) beat earnings estimates by 15 percent. American Express (AXP) and several regional banks also impressed investors. SPDR S&P Regional Banking (KRE) advanced 2.4 percent on the week.

International Business Machines (IBM) shares gained more than 10 percent on the week following earnings and revenue beats and raised guidance. Although revenue has fallen for 22 consecutive quarters, cloud services have renewed investor optimism.

Crude oil held steady this week and finished near $52 a barrel. Energy equities remain in a consolidation phase. Earnings from oil service companies weighed on the sector. Shares of Schlumberger (SLB) fell 6 percent.

Increased defense spending lifted iShares U.S. Aerospace & Defense (ITA) to a new all-time high. The U.S. Dollar Index gained 0.2 percent, with larger gains versus commodity currencies such as the Canadian dollar, emerging-market currencies, and the Chinese yuan. WisdomTree Bloomberg U.S. Dollar Bullish (USDU) returned 0.8 percent.

The 10-year Treasury yield finished the week at 2.38 percent after tax reform. Although the rally over the past 6 weeks has been impressive, it still trades below the 2.6-percent high we saw back in March.

The Dow Jones Industrial Average topped 23,000 for the first time on Tuesday, driven by strong earnings at Johnson & Johnson (JNJ) and International Business Machines (IBM), whose shares rose almost 10 percent on Wednesday. Strength in financials, healthcare and industrials has also lifted the DJIA.

Healthcare hit a new all-time high on Tuesday following a bipartisan deal on insurance subsidies. Last week, President Trump ended payments to insurance companies, citing illegality under existing law. A proposed bill that would restore the payments for 2 years sent shares of health providers sharply higher.

The technology sector has climbed on 15 of the past 17 trading days. SPDR Technology (XLK) gained 5 percent over this period. Semiconductors and Internet stocks have led the advance, while networking has lagged.

Shares of Amazon (AMZN) and Google (GOOGL) moved back above $1000 during this run. Both had struggled during the summer before rallying.

Financial shares held steady over the past week as rate hike expectations hardened. The odds of a December rate hike were at 93 percent on Wednesday in the futures market. This week investment banks and regional banks will begin reporting. Morgan Stanley (MS) hit a new 52-week high following its earnings release.

One of the better-performing country funds over the past month has been Japan. Both the currency hedged and unhedged funds have outperformed the developed and emerging market indexes.

The yen is approaching 2017 lows amid a rally in the U.S. dollar. A breakdown in the yen would benefit currency-hedged funds.

The U.S. Dollar Index is approaching an important resistance area. PowerShares U.S. Dollar Index Bullish (UUP) needs to climb above $24.50 to signal the next leg up.

The U.S. Dollar Index has traced out an inverse head-and-shoulders pattern. A bullish breakout of this pattern would have an upside target around 96.

Oil prices hit a four-month high on Wednesday. Crude oil has not traded above $55 a barrel since July 2015.

Currently, oil-related equities are consolidating gains following a powerful six-week rally. Oil services ETFs such as XES have been the weakest segment of the energy market this year and are performing worst during the current consolidation.

Interest rates have increased over the past month and Treasury bonds have fallen. Investment-grade, corporate and high-yield bonds have advanced, however, as investors demand income. Strong economic data has also lowered credit risk over this period, offsetting much of the rise in rates.