Picks of the Day December 29, 2017
Dow Hits 71st High for 2017!
What an amazing year to be in the market. It’s obvious that the performance of the major indexes this year is not reflective of their historical averages – but what a year it’s been! The Dow, a price-weighted exchange of 30 top stocks on the NYSE and the NADSAQ has given every reason for those not in the market to feel like they’ve missed the boat, or at least, given them reason to reconsider whether they should remain on the sidelines in 2018. The Dow has risen 5,000 points this year, for the first time ever – and is now up close to 26% on the year. To some extent, it’s been earnings growth, but the real catalyst has been Trump’s tax reform bills, an equalizer that has placed more and more moneys in the hands of the wealthiest. As noted yesterday, the world’s richest made $1 trillion more this past year, and you can definitely attribute a huge portion of those gains to the market’s performance, a redistribution of wealth whose effects will play out this coming year, the top percentile getting even richer. From dividends to stock buybacks, all of these things will consolidate wealth in the hands of equity investors.
The question is, “Are they already priced into the market?” And like we said yesterday, when stocks at are overbought levels, historically, they climb to even more overbought levels, reaching even higher valuations. So, now what’s left to be seen now is the contours and ins and outs of the $1 trillion infrastructure bill the Trump administration hopes to unveil in 2018. Will that justify already historically high valuations? Will earnings rise substantially to push prices higher? For all of Trump’s bombastic rhetoric, will the U.S. avoid a trade war and will things get messy with North Korea and U.S.’s China relations? All of these factors and more are now on investors’ minds!
Yesterday, the Dow was led higher by a rally in shares of UnitedHealth (UNH), which rose 1.07%, and Caterpillar (CAT), which tacked on 0.59%. The Dow’s last record high was on December 18th, meaning that the Dow seems to have regained a little of its momentum. The S&P 500 was up 0.2%. Of the broad market index’s 11 sectors, only consumer staples ended off, down 0.2% on the day. Financials outperformed, ending up 0.4% on the day. The NASDAQ, like the S&P 500, ended up 0.2% on the day.
Chesapeake Energy (CHK) rallied 4%, crude oil gaining ground late in the session as signs grew that inventories have tapered. Oil futures could mount gains going into 2018. Apple (AAPL), continued to have the Midas touch. Facing scandal after admitting to manipulating iPhone performance to enhance battery life, Apple’s stock rebounded after news spread of lawsuits and sales concerns about the iPhone X earlier in the week. AAPL was up 0.3% on the session. Trying to quell the furor, in a rare move, Apple offered consumers a discount on replacement batteries for its iPhone 6 or later models. The discount will span all of 2018. Batteries were discounted from $79 to $29. In the letter from Apple, consumer who felt “let down” received an apology as to the “the way we handle performance for iPhones with older batteries and how we have communicated that process.”
Tesla (TSLA) rose 1.2%, after having shed 1.8% on Wednesday after analysts slashed its Model 3 deliver forecast.
On the macro-front, the Chicago PMI beat out expectations, initial unemployment claims ending unchanged at 245,000. The U.S. deficit in goods increased for November by 2.3% to $69.7 billion. Gold hit a 10-week high, trading at $1,297.20 an ounce. Natural gas futures also saw large gains, trading up more than 13% this past week, with an uptick in demand and expectations for more frigid weather.
Today’s Economic Calendar: Today’s Economic Calendar has slim pickings. Keep your eyes peeled for the Baker-Hughes Rig Count at 13:00.
Friday’s Hot Stocks: S, AAPL, MOS
Have a great trading day!
|Wednesday||9:00||S&P Corelogic Case-Shiller HPI||0.6 %||Medium|
|Wednesday||10:00||Pending Home Sales Index||0.6 %||Medium|
|Thursday||8:30||Jobless Claims||240 K||Medium|
|Thursday||11:00||Oil Inventories||0.4 %||Low|
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