Dow 20K Redux
…..Another record high close for the Dow. Earnings reporting in full bloom. J&J buys Actelion. Oprah ends world hunger. Jobless claims up. New home sales down. Tomorrow 4Q GDP. More on the wall. Mexico cancels meeting.
Financial Review by Sinclair Noe for 01-26-2017
DOW + 32 = 20,100
SPX – 1 = 2296
NAS – 1 = 5655
RUT – 6 = 1375
10 Y + .02 = 2.51%
OIL + 1.00 = 53.75
GOLD – 12.90 = 1188.80
Yesterday the Dow Industrial Average, the S&P 500 Index and the Nasdaq Composite all hit record high closes, but lest you think what’s happening is merely a US phenomenon, let me remind you: The entire world is now breaking out, in concert. the MSCI All Country World Index Ex-US ETF, which holds everything else other than US stocks, just broke out to the highest level in almost 2 years.
The big focus today was another flood of earnings results. It was the busiest day for the fourth quarter reporting season as 39 S&P firms release their numbers. After the closing bell, Microsoft report earnings of 83 cents per share, topping estimates of 79 cents, with better than expected revenue of $26.07 billion. Microsoft traded today at an all-time high.
Shares of Alphabet fell in extended trading after reporting weaker-than-expected fourth-quarter earnings. The Google and YouTube parent reported net income of $5.3 billion, or $7.56 a share, compared with $6 billion, or $7.06 a share, in the year-earlier period. Revenue topped estimates.
Intel reported quarterly earnings and revenue that beat estimates. Intel posted fourth-quarter earnings per share of 79 cents. Revenue for the quarter came in at $16.37 billion. Analysts expected Intel to post earnings of 74 cents a share and 15.752 billion in revenue. Intel has made efforts to move away from reliance on the declining PC business. The company’s focus has shifted to the “Internet of things” and to its data center group, which creates chips for large computers.
Comcast beat expectations for fourth quarter earnings and revenue. Earnings were up 9.9 percent from 81 cents per share a year earlier, while revenue rose 9 percent from $19.25 billion. The parent company of NBCUniversal also announced a 15 percent increase in its dividend and reported a 2-for-1 stock split.
Ford Motor matched estimates with fourth quarter profit of 30 cents per share after items, while revenue beat estimates. Ford posted a fourth quarter loss but full-year profit for 2016 was its second-best on record, trailing only its 2015 results. And if that sounds a bit confusing, well, add Ford to the list of companies that are reporting muddled and confusing reports. Ford reaffirmed its forecast that profits for 2017 would be lower, in contrast to more upbeat forecasts from GM and Fiat Chrysler.
Southwest Airlines earned an adjusted 75 cents per share for its fourth quarter, beating estimates by 5 cents, while revenue was also above estimates – despite higher fuel costs and pay increases for its workers.
Caterpillar reported adjusted quarterly profit of 83 cents per share, beating estimates of 66 cents, but revenue was below forecasts. Caterpillar warned of much lower profits for 2017, saying results continue to be impacted by weak economic conditions around the world.
Biogen beat earnings estimates but missed revenue forecasts. The drug maker lowered its 2017 revenue guidance.
Northrop Grumman beat earnings and revenue estimates. Northrop saw better sales of in its aerospace systems business, which is involved in F-35 fighter jet production.
Seeds and chemical maker Dow Chemical reported a better-than-expected quarterly adjusted profit, helped by its focus on consumer markets such as agriculture and automotive, and a move to take full control of its Dow Corning venture. Excluding the Dow Corning transaction, Dow’s sales rose 2.5 percent to $11.75 billion in the fourth quarter, with sales increasing in four of its five businesses.
Stanley Black & Decker earned $1.71 per share for its latest quarter, 3 cents above estimates, with revenue very slightly below forecasts. Its earnings were lower year over year, hurt by higher restructuring costs.
Whirlpool, the world’s largest appliance maker missed estimates by 11 cents with adjusted quarterly profit of $4.33 per share, though revenue did slightly beat forecasts. Declining sales in the U.K. following the Brexit vote was among the factors hurting its results.
EBay posted quarterly results in line with forecasts at an adjusted 54 cents per share, while revenue was also in line with forecasts. The company did give a lighter than expected current quarter outlook, but made optimistic comments about its revamped platform.
Johnson & Johnson announced a $30 billion deal to acquire Actelion, a Swiss biotechnology firm; the all-cash deal includes spinning off Actelion’s research and development pipeline. The biggest European drugs takeover in 13 years gives J&J access to the Swiss group’s range of high-price, high-margin medicines for rare diseases.
WGL Holdings agreed to be acquired by AltaGas for about $6.4 billion in cash.
McKesson is buying privately held CoverMyMeds for about $1.1 billion to strengthen its technology offerings.
United Rentals is purchasing NES Rentals Holdings II for about $965 million.
Ant Financial Services Group, an affiliate of Chinese e-commerce firm Alibaba Group, said it would buy U.S. money-transfer company MoneyGram in a deal valued at about $880 million.
And here’s a potential deal to watch. Verizon Communications is interested in exploring a combination with cable company Charter Communication as part of a long list of acquisition targets but no proposal has been made for a tie-up between the two companies.
Oprah Winfrey is starting a joint venture with Kraft Heinz called Mealtime Stories. Kraft will develop and sell the new line, which will initially focus on ready-to-eat refrigerated dishes; 10% of products’ profits will be donated to charities that seek to eradicate hunger.
The trade gap in goods — services are excluded — slipped 0.5% to $65 billion, the government said Thursday in its advanced report. The full report will be released next week. Wholesale inventories, meanwhile, jumped 1% in December and retail inventories were flat.
The number of Americans who applied for unemployment benefits climbed by 22,000 to a one-month high of 259,000 in late January.
New-home sales declined to a seasonally adjusted annual rate of 536,000, the Commerce Department said Thursday. That was 10.4% lower than an upwardly adjusted November pace of 598,000 and 0.4% lower than a year earlier.
Tomorrow we get the government’s first estimate of fourth quarter GDP. Gross domestic product, the sum of the economy’s performance, is forecast to taper off to 2.2% in the fourth quarter. The economy expanded at a 3.5% pace in the late summer and early fall.
Authorities in Brazil have issued an arrest warrant for former billionaire Eike Batista, the latest business leader implicated in a giant corruption investigation. Batista, once ranked by Forbes as the world’s seventh-richest man, is the most recent target of Operation Car Wash, an alleged multi-billion-dollar kickback scheme that has led to the arrest of hundreds of politicians and business moguls. Federal prosecutors accuse him of laundering money and bribing state officials in exchange for lucrative construction and mining contracts. Federal police issued the warrant and raided Batista’s Rio de Janeiro mansion but did not find Batista; his lawyer says he is in New York and would turn himself in as soon as possible.
President Trump signed an order Wednesday to start the planning process to build the wall. There are already about 650 miles of fencing along the border, mostly in more populated areas. Presumably, most of that will stay in place. That means about 1,300 miles of wall need to be built. As far as cost goes, Trump has cited a $10 billion estimate. That comes to about $7.4 million per mile. By comparison it only costs about $3 million to build a mile of a typical two-lane road. So, for $10 billion you could build a road roughly from Seattle to Miami. But other estimates have the cost of the wall climbing to as much as $25 billion not including land acquisition costs.
This morning, Mexican President Enrique Peña Nieto canceled a planned visit to the White House, saying Mexico will not pay for the wall. Later in the day, Trump said the meeting was called off by mutual agreement. White House spokesman Sean Spicer later said that Trump would pay for the wall with a 20 percent tax on all imports from Mexico.