In Portfolioticker today
Today at the stock market
“The latest round of strong earnings reports, including from Intel and AbbVie, along with continued weakness in the dollar lifted each of the major Wall Street indexes to closing records on Friday.
The three main indexes notched their best four-week run since 2016
- The S&P 500 index rose 33.62 points, or 1.18%, to 2,872.87
- The Dow Jones Industrial Average rose 223.92 points, or 0.85%, to 26,616.71
- The Nasdaq Composite index rose 94.61 points, or 1.28%, to 7,505.77
- For the week, the Dow rose 2.08%, the S&P 500 rose 2.22% and the Nasdaq rose 2.31
- Advancing issues outnumbered declining ones on the NYSE by a 1.20-to-1 ratio; on Nasdaq, a 1.54-to-1 ratio favored advancers.
- The S&P 500 posted 125 new 52-week highs and 2 new lows; the Nasdaq Composite recorded 178 new highs and 22 new lows.
- Volume on U.S. exchanges was 6.58 billion shares, compared to the 6.81 billion average for the full session over the last 20 trading days.
Intel’s shares surged as high as $50.15, their highest level since Oct 2000, and closed up 10.55% at $50.08 after results indicated that the chipmaker’s shift to higher-margin data-center business was working.
AbbVie’s shares jumped 13.77% after the drugmaker significantly boosted its 2018 earnings forecast with help from U.S. tax reform and said it hopes to accelerate dividend growth and share buybacks.
“We continue to see these positive steps in the right direction and definitely earnings are clearly justifying a lot of the recent move that we’ve had,” said Ryan Detrick, senior market strategist at LPL Financial in Charlotte, North Carolina.
Fourth-quarter earnings growth for the S&P 500 is now estimated at 13.2%, according to Thomson Reuters data, up from 12% at the start of the year. Of the 133 companies in the index that have reported through Friday, 79.7% have topped expectations.
The earnings enabled investors to shrug off a reading on economic growth that came in below expectations.
Gross domestic product increased at a 2.6% annual rate in the fourth quarter, the Commerce Department said in its advance GDP report, below the 3% forecast, as the strongest pace of consumer spending in three years resulted in a surge in imports.
“You have manufacturing and the consumer doing well at the same time and the globe is doing better, so that’s a path for future GDP gains, which has always provided a fertile backdrop for earnings gains,” said Brent Schutte, chief investment strategist at Northwestern Mutual Wealth Management in Milwaukee.
Weakness in the USD, which is supportive for large multinational companies, continued. The Bloomberg Dollar Spot Index (DXY) was down 0.34% against its basket of major currencies. The USD was on track for its worst week since May 2017 after comments from senior U.S. officials this week backing a weak currency.
Buoyed by AbbVie, the S&P healthcare index gained 2.17%, scored its best day since Nov 2016 and was the best performer among the 11 major S&P sectors.
Also lifting the index were gains in Pfizer, up 4.78% after a European regulator recommended granting marketing approval to a diabetes drug developed by the company and Merck, up 1.21%.
Starbucks dropped 4.23% after it warned 2018 global cafe sales growth would be at the low end of its forecast.” Reuters
^ Market indices today (mouseover for 12 month view) Chart: Google Finance
|Index||Ticker||Today||Change||31 Dec 17||YTD|
|S&P 500||SPX (INX)||2,872.87||+1.18%||2,673.61||+7.45%|
^ USD and AUD denominated indices over the past 52 weeks Chart: Bunting
|Index||Currency||Today||Change||31 Dec 17||YTD|
Portfolio stock prices
Alphabet Class A closed on a record high of $1,187.56, up 0.46% on yesterday’s record of $1,182.14
Alphabet Class C closed on a record high of $1,175.84, up 0.46% on yesterday’s record of $1,170.37
Amazon closed on a record high of $1,402.05, up 1.75% on yesterday’s record of $1,377.95
Ebay closed on a record high of $40.89, up 2.17% on yesterday’s record of $40.02
Facebook closed on a record high of $190.00, up 1.34% on yesterday’s record of $189.35
PayPal closed on a record high of $85.45, up 1.32% on yesterday’s record of $84.34
Visa closed on a record high of $126.32, up 0.88% on yesterday’s record of $125.22
VMware closed on a record high of $150.00, beating its 23 Jan 2018 record of $137.96
|Stock||Ticker||Today||Change||31 Dec 17||YTD|
^ Bloomberg Dollar Spot Index (DXY) movements today (mouseover for 12 month view) Chart: Bloomberg
“Trump and his officials roiled markets this week with protectionist rhetoric and conflicting positions on the USD. Treasury Secretary Steven Mnuchin made an unusual endorsement of a weak USD, prompting a veiled scolding from the European Central Bank. Trump then countermanded his cabinet member by supporting a strong USD.
The Bloomberg Dollar Spot Index (DXY) fell 0.3%, touching the lowest in more than 3 years.
The EUR rose 0.2% to USD 1.2426, the strongest in more than 3 years.
Britain’s GBP rose 0.3% to USD 1.4185.
Japan’s JPY rose 0.7% to 108.67 per USD, the strongest since Sep 2017.” Bloomberg
^ AUD movements against the USD today (mouseover for 12 month view) Chart: xe.com
Oil and Gas Futures
Prices are as at 15:39 ET
- NYMEX West Texas Intermediate (WTI): $66.12/barrel +0.93% Chart
- ICE (London) Brent North Sea Crude: $70.42/barrel +0.00% Chart
- NYMEX Natural gas futures: $3.52/MMBTU +2.09% Chart
“VMware Inc. (VMW) opened sharply higher Friday morning and has continued to rise in early trade on above average volume. Dell announced this morning that it is exploring a range of options, which could include a transaction with VMware. Dell is the majority owner of the company.” RTT News
“U.S. computer maker Dell Technologies Inc is exploring a range of options that could see the world’s largest privately held technology company grow further through acquisitions or go public, people familiar with the matter said on Thursday
Dell’s board of directors will meet later this month to consider the biggest shakeup in the company’s history since it acquired data storage provider EMC Corp for $67 billion in 2016,the sources said.
The Round Rock, Texas-based company, headed by its founder Michael Dell, is under pressure to boost its profitability after the EMC deal failed to deliver the cost savings and performance it projected, while higher component costs and a challenging data storage market have eroded its margins.
Dell is reviewing a list of several possible acquisition targets that would boost its cash flow and expand its offerings, the sources said.
Dell’s review is at its very early stages and no deal is certain, according to the sources, who requested anonymity to discuss the deliberations. The company did not respond to a request for comment outside of regular U.S. business hours. The news of Dell’s review was first reported by Bloomberg.
Dell is also considering a sale or initial public offering (IPO) of its one of its fast-growing divisions, Pivotal Software Inc, the sources said. It may also consider a transaction with its majority-owned VMware Inc, a virtualization software maker. VMware shares, which have gained more than 62% in the past 12 months, touched an all-time high on Thursday.” Reuters
US: GDP, Q4 and Year 2017 (Advance)
Press Release Extract [us_gdp]
Real gross domestic product (GDP) increased at an annual rate of 2.6 percent in the fourth quarter of 2017, according to the “advance” estimate released by the Bureau of Economic Analysis. In the third quarter, real GDP increased 3.2 percent.
The Bureau emphasized that the fourth-quarter advance estimate released today is based on source data that are incomplete or subject to further revision by the source agency. The “second” estimate for the fourth quarter, based on more complete data, will be released on February 28, 2018.
The increase in real GDP in the fourth quarter reflected positive contributions from personal consumption expenditures (PCE), nonresidential fixed investment, exports, residential fixed investment, state and local government spending, and federal government spending that were partly offset by a negative contribution from private inventory investment. Imports, which are a subtraction in the calculation of GDP, increased.
The deceleration in real GDP growth in the fourth quarter reflected a downturn in private inventory investment that was partly offset by accelerations in PCE, exports, nonresidential fixed investment, state and local government spending, and federal government spending, and an upturn in residential fixed investment. Imports, which are a subtraction in the calculation of GDP, turned up.
Current-dollar GDP increased 5.0 percent, or $238.3 billion, in the fourth quarter to a level of $19,738.9 billion. In the third quarter, current-dollar GDP increased 5.3 percent, or $250.6 billion.
The price index for gross domestic purchases increased 2.5 percent in the fourth quarter, compared with an increase of 1.7 percent in the third quarter. The PCE price index increased 2.8 percent, compared with an increase of 1.5 percent. Excluding food and energy prices, the PCE price index increased 1.9 percent, compared with an increase of 1.3 percent.
Current-dollar personal income increased $178.9 billion in the fourth quarter, compared with an increase of $112.3 billion in the third. The acceleration in personal income primarily reflected an upturn in personal interest income and an acceleration in nonfarm proprietors’ income.
Disposable personal income increased $139.0 billion, or 3.9 percent, in the fourth quarter, compared with an increase of $73.8 billion, or 2.1 percent, in the third. Real disposable personal income increased 1.1 percent, compared with an increase of 0.5 percent.
Personal saving was $384.4 billion in the fourth quarter, compared with $478.3 billion in the third. The personal saving rate — personal saving as a percentage of disposable personal income — was 2.6 percent in the fourth quarter, compared with 3.3 percent in the third.
Real GDP increased 2.3 percent in 2017 (that is, from the 2016 annual level to the 2017 annual level), compared with an increase of 1.5 percent in 2016.
The increase in real GDP in 2017 primarily reflected positive contributions from PCE, nonresidential fixed investment, and exports. Imports, which are a subtraction in the calculation of GDP, increased.
The acceleration in real GDP from 2016 to 2017 reflected upturns in nonresidential fixed investment and in exports and a smaller decrease in private inventory investment. These movements were partly offset by decelerations in residential fixed investment and in state and local government spending. Imports, which are a subtraction in the calculation of GDP, accelerated.
Current-dollar GDP increased 4.1 percent, or $762.3 billion, in 2017 to a level of $19,386.8 billion, compared with an increase of 2.8 percent, or $503.8 billion, in 2016.
The price index for gross domestic purchases increased 1.8 percent in 2017, compared with an increase of 1.0 percent in 2016. The PCE price index increased 1.7 percent, compared with an increase of 1.2 percent. Excluding food and energy prices, the PCE price index increased 1.5 percent, compared with an increase of 1.8 percent.
During 2017 (measured from the fourth quarter of 2016 to the fourth quarter of 2017), real GDP increased 2.5 percent, compared with an increase of 1.8 percent during 2016. The price index for gross domestic purchases increased 1.9 percent during 2017, compared with an increase of 1.4 percent during 2016. “
Bureau of Economic Analysis, “Gross Domestic Product, Q4 and Year 2017 (Advance)“, 22 Jan 2018 (08:30) More
US: International Trade, Retail, & Wholesale. Dec 2017
Press Release Extract [us_trade]
Advance International Trade in Goods
The international trade deficit was $71.6 billion in December, up $1.6 billion from $70.0 billion in November. Exports of goods for December were $137.6 billion, $3.6 billion more than November exports. Imports of goods for December were $209.2 billion, $5.2 billion more than November imports.
Advance Wholesale Inventories
Wholesale inventories for December, adjusted for seasonal variations but not for price changes, were estimated at an end-of-month level of $611.4 billion, up 0.2 percent (±0.4 percent) from November 2017, and were up 3.3 percent (±0.7 percent) from December 2016. The October 2017 to November 2017 percentage change was revised from up 0.8 percent (±0.4 percent) to up 0.7 percent (±0.4 percent).
Advance Retail Inventories
Retail inventories for December, adjusted for seasonal variations but not for price changes, were estimated at an end-of-month level of $620.4 billion, up 0.2 percent (±0.2 percent)* from November 2017, and were up 2.2 percent (±0.5 percent) from December 2016. The October 2017 to November 2017 percentage change was unrevised at up 0.1 percent (±0.2 percent).”
US Census Bureau, “Advance Economic Indicators Report (International Trade, Retail, & Wholesale). Dec 2017“, 26 Jan 2018 (08:30) More
US: Advance Report on Durable Goods
Press Release Extract [us_durables]
New orders for manufactured durable goods in December increased $7.0 billion or 2.9 percent to $249.4 billion, the U.S. Census Bureau announced today. This increase, up four of the last five months, followed a 1.7 percent November increase. Excluding transportation, new orders increased 0.6 percent. Excluding defense, new orders increased 2.2 percent. Transportation equipment, also up four of the last five months, led the increase, $6.0 billion or 7.4 percent to $87.2 billion.
Shipments of manufactured durable goods in December, up seven of the last eight months, increased $1.5 billion or 0.6 percent to $246.8 billion. This followed a 1.3 percent November increase. Fabricated metal products, also up seven of the last eight months, led the increase, $0.5 billion or 1.5 percent to $33.5 billion.
Unfilled orders for manufactured durable goods in December, up four consecutive months, increased $6.9 billion or 0.6 percent to $1,144.1 billion. This followed a 0.1 percent November increase. Transportation equipment, up following two consecutive monthly decreases, led the increase, $6.0 billion or 0.8 percent to $775.9 billion.
Inventories of manufactured durable goods in December, up seventeen of the last eighteen months, increased $1.3 billion or 0.3 percent to $406.5 billion. This followed a 0.2 percent November increase. Machinery, up ten of the last eleven months, led the increase, $0.4 billion or 0.6 percent to $70.4 billion.
Nondefense new orders for capital goods in December decreased $0.1 billion or 0.1 percent to $75.1 billion. Shipments decreased $0.3 billion or 0.4 percent to $74.3 billion. Unfilled orders increased $0.9 billion or 0.1 percent to $707.3 billion. Inventories increased $0.4 billion or 0.2 percent to $180.9 billion. Defense new orders for capital goods in December increased $2.1 billion or 19.5 percent to $12.8 billion. Shipments decreased less than $0.1 billion or 0.2 percent to $11.1 billion. Unfilled orders increased $1.7 billion or 1.2 percent to $143.8 billion. Inventories increased $0.2 billion or 0.7 percent to $23.2 billion.
Revised November Data
Revised seasonally adjusted November figures for all manufacturing industries were: new orders, $489.6 billion (revised from $488.1 billion); shipments, $492.5 billion (revised from $491.2 billion); unfilled orders, $1,137.2 billion (revised from $1,137.1 billion) and total inventories, $665.2 billion (revised from $665.1 billion).”
US Census Bureau, “Advance Report on Durable Goods – Manufacturers’ Shipments, Inventories, and Orders“, 26 Jan 2018 (08:30) More
BOJ Minutes of Monetary Policy Meeting: 20 and 21 Dec 2017
“I. Summary of Staff Reports on Economic and Financial Developments
A. Money Market Operations in the Intermeeting Period
The Bank, in accordance with the short-term policy interest rate of minus 0.1 percent and the target level of the long-term interest rate, both decided at the previous meeting on October 30 and 31, 2017, had been providing funds through purchases of Japanese government bonds (JGBs) and other measures.5 In this situation, 10-year JGB yields had been at around 0 percent, and the shape of the JGB yield curve had been consistent with the guideline for market operations.
B. Recent Developments in Financial Markets
In the money market, interest rates on both overnight and term instruments had generally been in negative territory. The uncollateralized overnight call rate had been in the range of around minus 0.03 to minus 0.06 percent. As for interest rates on term instruments, yields on three-month treasury discount bills (T-Bills) had been in the range of minus 0.15 to minus 0.20 percent recently.
The Nikkei 225 Stock Average remained in its highest range since the start of 2017, mainly owing to solid corporate profits, and was moving in the range of 22,500-23,000 yen recently. In the foreign exchange market, the yen had appreciated somewhat against the U.S. dollar temporarily, but had generally been more or less flat throughout the intermeeting period. Meanwhile, it had depreciated somewhat against the euro.
C. Overseas Economic and Financial Developments
Overseas economies continued to grow at a moderate pace on the whole.
The U.S. economy continued to recover firmly, mainly in household spending, owing to a steady improvement in the employment and income situation. Exports had been on a moderate increasing trend, while business fixed investment also continued to pick up. As for prices, both the year-on-year rate of increase in the personal consumption expenditure (PCE) deflator for all items and that for all items excluding food and energy had been at around 1.5 percent.
The European economy continued to recover steadily. Exports had been increasing moderately. Private consumption had been on an increasing trend, partly supported by improvements in the labor market and consumer sentiment, while business fixed investment also had been on a moderate increasing trend. With regard to prices, the year-on-year rate of change in the Harmonized Index of Consumer Prices (HICP) for all items had been at around 1.5 percent, and that for all items excluding energy and unprocessed food had been in the range of 1.0-1.5 percent. Meanwhile, the pace of economic recovery in the United Kingdom had been slowing as the rise in prices had been weighing on private consumption.
With regard to emerging economies, the Chinese economy continued to see stable growth on the whole, partly due to the effects of authorities’ measures to support economic activity. As for prices, the year-on-year rate of increase in the consumer price index (CPI) had been in the range of 1.5-2.0 percent. In the NIEs and the ASEAN countries, domestic demand had been resilient, as business and household sentiment had improved, with exports being on an increasing trend. Economic activity in Russia and Brazil had been recovering moderately, mainly on the back of the decline in their inflation rates. In India, an upheaval in the economy due to the effects of the introduction of the Goods and Services Tax (GST) was coming to an end, and the economy was recovering moderately.
With respect to overseas financial markets, although U.S. long-term interest rates had declined temporarily, reflecting uncertainties surrounding the political situation in the United States, these rates had been generally unchanged throughout the intermeeting period, with factors such as expectations for U.S. tax reform exerting upward pressure on them. Meanwhile, stock prices in advanced economies had been at high levels, mainly reflecting solid corporate earnings and expectations for U.S. tax reform, and capital inflows to emerging economies continued.
D. Economic and Financial Developments in Japan
1. Economic developments
Japan’s economy was expanding moderately, with a virtuous cycle from income to spending operating.
Exports had been on an increasing trend on the back of the growth in overseas economies. Those to advanced economies continued on their increasing trend when fluctuations were smoothed out; those to emerging economies had picked up for a wide range of items including electronic parts, intermediate goods, and capital goods to Asia. Exports were expected to continue their moderate increasing trend, especially for IT-related goods and capital goods.
Public investment had been more or less flat, remaining at a relatively high level. It was likely to start declining as the positive effects resulting from the second supplementary budget for fiscal 2016 diminished, and then maintain a relatively high level underpinned by Olympic Games-related construction.
Business fixed investment continued on an increasing trend with corporate profits and business sentiment improving. Looking at the Financial Statements Statistics of Corporations by Industry, Quarterly (FSSC), the ratio of current profits to sales for the July-September quarter of 2017 had stayed at around 6 percent, a historically high level, supported in part by solid domestic demand and the growth in overseas economies. According to the second preliminary estimate of GDP for the July-September quarter, the growth rate of real business fixed investment had marked 1.1 percent on a quarter-on-quarter basis, representing a fourth consecutive quarterly increase. The December 2017 Tankan (Short-Term Economic Survey of Enterprises in Japan) showed that the year-on-year rate of change in business fixed investment plans for fiscal 2017 had clearly exceeded the past average for the December Tankan surveys during the period of fiscal 2004-2016. Machinery orders and construction starts in terms of planned expenses for private and nondwelling construction — both of which were leading indicators of business fixed investment — continued on an increasing trend, albeit with monthly fluctuations. Business fixed investment was likely to continue increasing, mainly on the back of an improvement in corporate profits, accommodative financial conditions, and heightened growth expectations.
As for the employment and income situation, supply-demand conditions in the labor market continued to tighten steadily and employee income had increased moderately. The active job openings-to-applicants ratio had followed a steady improving trend, and the unemployment rate had declined to the range of 2.5-3.0 percent.
Private consumption had been increasing moderately, albeit with fluctuations, against the background of steady improvement in the employment and income situation. The consumption activity index (CAI) — calculated by combining various sales and supply-side statistics — had been more or less flat on the whole, although there had been a decline in durable goods recently that was due mainly to supply factors for automobiles and mobile phones. Private consumption was expected to follow a moderate increasing trend, supported by an increase in employee income and the wealth effects stemming from the rise in stock prices, as well as replacement demand for durable goods.
Housing investment had been more or less flat.
Industrial production had been on an increasing trend against the background of rises in demand at home and abroad. It was likely to continue to increase firmly for the time being on the back of the rises in demand at home and abroad.
As for prices, the rate of increase in the producer price index (PPI) relative to three months earlier — adjusted for the effects of seasonal changes in electricity rates — continued to accelerate, reflecting developments in international commodity prices and foreign exchange rates. The year-on-year rate of change in the CPI for all items less fresh food was in the range of 0.5-1.0 percent, while the rate of change for all items less fresh food and energy remained slightly positive. With regard to the outlook, the year-on-year rate of change in the CPI (all items less fresh food) was likely to continue on an uptrend and increase toward 2 percent, mainly on the back of an improvement in the output gap and a rise in medium- to long-term inflation expectations.
2. Financial environment
Financial conditions were highly accommodative.
Inflation expectations remained in a weakening phase. Real long-term interest rates — calculated as long-term interest rates minus medium- to long-term inflation expectations — had been negative.
Firms’ funding costs had been hovering at extremely low levels. With regard to credit supply, financial institutions’ lending attitudes — as perceived by firms — had been highly accommodative. Issuing conditions for CP and corporate bonds had been favorable. Firms’ credit demand continued to increase, such as for funds related to mergers and acquisitions, as well as for those for business fixed investment. Against this backdrop, the year-on-year rate of increase in the amount outstanding of bank lending had been in the range of 2.5-3.0 percent. The year-on-year rate of increase in the amount outstanding of CP and corporate bonds had been at a relatively high level. Firms’ financial positions had been favorable.
The monetary base had been increasing at a high year-on-year growth rate in the range of 10-15 percent. The year-on-year rate of growth in the money stock had been at around 4 percent.“
Other headings in the minutes include:
- II. Summary of Discussions by the Policy Board on Economic and Financial Developments
- A. Economic Developments
- B. Financial Developments
- III. Summary of Discussions on Monetary Policy for the Immediate Future
- IV. Remarks by Government Representatives
- A. Vote on the Guideline for Market Operations
- The Chairman’s Policy Proposal on the Guideline for Market Operations
- B. Vote on the Guideline for Asset Purchases
- VI. Discussion on the Statement on Monetary Policy
- VII. Approval of the Minutes of the Monetary Policy Meeting
Bank of Japan, “Minutes of Monetary Policy Meeting 20-21 Dec 2017” Minutes
“The JPY rose to the strongest since September versus the USD after Bank of Japan Governor Haruhiko Kuroda commented on inflation. It later pared the gain when a BOJ spokesperson clarified what was said.” Bloomberg
^ JPY movements against the USD over the past month (mouseover for inverse) Chart: xe.com
Stockmarket: Nikkei 225
^ Nikkei 225 movements over the past week Chart: Google Finance
^ CNY movements against the USD over the past month (mouseover for inverse) Chart: xe.com
^ Shanghai CSI300 movements over the past week Chart: Google Finance