Market Perspective for October 27, 2017

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.

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