Picks of the Day February 28,2017

Dow Scales from 11 to 12 Straight Days of Gains

Stocks on Wall Street ended at a high on Monday, the Dow Jones succeeding in stretching its jaw-dropping winning streak to 12 on the background of Trump’s announcement that today he’ll make a “big statement” on infrastructure. The rally is now on par with the index’s impressive 12 day rally in 1987. The current rally has gotten its biggest push from Boeing (BA) and United Health (UNH), the strongest Dow performers of late. The S&P 500 also closed at a new historic high. For the S&P 500, the energy sector (XLE) was the biggest driver, with gains of 0.9%.

During the index’s 1987 12-day winning streak, the Dow rallied a full 9.2%, compared to the gains of “just” 3.9% in the latest historic rally. While the S&P 500 has recorded gains of 10.8% since the November 8^th elections, the market’s performance has slowed this year.

In summary for the day, the Dow Jones is up 0.08%. The S&P 500 tacked on 0.1%, the NASDAQ benefitting from gains of 0.28%.

Trump, who met yesterday with a number of governors in the White House, said that he’s planning a “historic” rise of over 11% in military spending, adding that the administration will act quickly in regard to all reforms. Trump’s declarations come just a day before his first address to the Joint Sessions of Congress which will be held this evening. Investors will look for specific details about the White House’s different initiatives, considering that until now the market has given “The Donald” substantial credit regarding the at time vague promises he’s made.

Investors this evening are expected to get a clearer picture of Trump’s agenda, so expect significant market movement on the buy and sell side tomorrow.

Yesterday, arms companies like Boeing (BA), Raytheon (RTN), General Dynamics (GD), and Lockheed Martin (LMT) recorded significant gains after Trump announced that he’d increase military spending by about $54 billion in his budget proposal.

On the S&P 500, 63 stocks rose to new 52-week highs, just one stock dipping to new yearly lows; on the NASDAQ, 143    stocks recorded new 52-week highs, 45 falling to new yearly lows.

Tuesday: Trump has helped the market ride a significant wave of gains with promises of business and growth friendly policies, though now, the market wants to see him put his money where his mouth is. Trump will be speaking this evening before both the Senate and the House of Representatives, his main two topics expected to be military and infrastructure spending. Likewise, he’s expected to talk about replacing Obamacare, though more than anything else, investors want to hear what he has to say about his “phenomenal” tax reform.

In our view, the market’s in for a disappointment. It’s not clear than investors will get the details they’ve been yearning for. That doesn’t mean that we’re not going to hear more detail in a couple of weeks. The topic of taxes is #1 on the market agenda. The only reason that the market’s rallied 10% now is the hope for an actual tax cut. The question now is just what would its scope be. We’ve come to the point where details matter!

Before Trump’s speech, the market will have to deal with a deluge of economic announcements that will include the second Q4 2016 growth reading at 8:30 N.Y. time. The Case Shiller home price index will be released at 9:00, the Chicago PMI coming out at 9:45. Later in the day, the Consumer Confidence Index will be released at 10:00.

Earnings reports are expected from Target (TGT), AutoZone (AZO), SeaWorld (SEAS), Valeant Pharmaceuticals (VRX) and Sempra Energy (SRE), all before opening. After closing, be primed for the results of Salesforce (CRM), ETSY (ETSY), Weight Watchers (WTW) and Ross Stores (ROST).

Tuesday’s Hot Stocks: TGT, VRX, SEAS, PRGO, THC, WDAY

IPOs: None

Have a great trading day!

 28.2.2017

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