January 25, 2018.

Market Drops from Intraday High

Yesterday, after all of the major indexes had hit intraday highs earlier in trading, they summarily fell, only the blue chip Dow coming out marginally up. It was a day that saw a lot of twists and turns, from Treasury Secretary, Mnuchin’s comment that signaled Trump’s policy preference for a weak dollar, to GE’s shockingly large insurance loss – and news of an SEC investigation – and a massive fine imposed on Qualcomm by the European Commission for its under the rug payments to Apple.

Wall Street honed in on the comments of President Trump’s Treasury Secretary, Steven Mnuchin, who said the administration supports “bilateral trading agreements.” He also noted, “a weaker dollar is good for trade.” The U.S. dollar, which tumbled 10% last year, traded yesterday at a new three year low. Who does a weak dollar benefit? The obvious answer is multinational companies, vying for market share in price-competitive service and product offerings. The comments made by Mnuchin, though, also had an effect on the home front, pushing up yields on the 10-year T-bond; a weaker dollar can undermine demand for government bonds.

The greatest fear perhaps in the marketplace, besides Trump’s protective trade measures, is high stock valuations. In gauging valuations some look at the standard Price/Earnings ratio; others look at what’s called CAPE. CAPE refers to the Cyclically Adjusted Price Earnings ratio.

Index Summary: The Dow rose 0.16% to record a new record, led by gains in Goldman (GS) which rose 2.15% and American Express (AXP) which climbed 1.35%. Apple (AAPL), though, shed 1.59%. The S&P 500 fell 0.06%, the tech-heavy NASDAQ falling 0.61%. All-in-all, the three indexes are up between 6% and 8.1% this year, riding the wave of higher corporate profits. Whereas the PE on the S&P 500 is slightly higher than the level seen before the Great Crash in the 1920s, Capital Economics Chief Market Economist, John Higgins, noted, “Nonetheless, the CAPE remains well below its all-time high of just above 44, which it reached in December 1999, before the dot-com bubble burst.”

Qualcomm (QCOM) was definitely in the spotlight yesterday, after word broke that it was undercutting competitors like Intel (INTC) by making illegal payments to Apple to ensure the latter would only use its chips for its iPhones and iPads. At present, Apple is not under investigation in the said claim. That notwithstanding, with its $1.2 billion fine, the European Commission has solidified itself as the strongest governmental force in the world in anti-trust regulation and enforcement. Both Qualcomm and Apple benefitted from the ongoing collusive arrangement which muscled out competitors and hurt consumers.

General Electric (GE), which was already under SEC investigation, got worse news yesterday, the SEC announcing that it was also investigating the company’s whopping insurance charge. GE slipped 2.7%. The conglomerate has been trying to shed legacy businesses, finding that comes at a very large cost.

Comcast (CMCSA) rose 1.3%, after reporting an earnings boost from broadband; it also announced a $5 billion stock repurchase plan for 2018. Texas Instruments (TXN) fell 8.5% after releasing in-line results, coupled with a modest outlook.

One industry that took a big hit yesterday was the airline industry. The bloodbath was prompted by United Continental Holdings (UAL) which fell 11%. The company precipitated a panic after announcing expansion plans. The finances of the airline industry are such that when companies compete in a new market the way they do it is by undercutting each other. That put shock waves through the industry and market players who remember the last price war and what it did to bottom-line earnings.

United President Scott Kirby, though, defended its growth strategy. He said that the company had lost market share to Delta and American and that now it had to catch up. Kirby noted that United was losing high-paying connecting passengers flying between small cities and big airports. “The best way to compete with a low-cost carrier is matching prices,” noted Kirby. “No one chooses to fly on an ultra-low-cost carrier if they can get the same price on United Airlines, nobody.”

Today’s Economic Calendar: International trade numbers and jobless claims will be released at 8:30, with both wholesale inventories and new home sales numbers coming out at 10:00.

The U.S. IHS Markit flash services PMI dropped in January to 53.3. The manufacturing figure climbed to 55.5. Like always, a reading of 50 or higher means expansion. Existing home sales came out at a seasonally adjusted annual clip of 5.57 million for December, beneath the consensus of a rate of 5.73 million.



Daily change


Thursday’s Hot Stocks: LVS, DFS, FFIV, WHR, F, AAPL

Have a great trading day!

                                              Economic Calendar


DAYTIME (EST)EventForecastImpact
Wednesday9:00FHFA House Price Index0.5 %Medium
Wednesday10:00Existing Home Sales5.750 MMedium
Wednesday10:30Oil Inventories-6.9 M barrelsLow
Thursday8:30International Trade in Goods
$-68.9 BMedium
Thursday8:30Jobless Claims240 KMedium
Thursday10:00Wholesale Inventories683 KMedium
Thursday10:00New Home Sales0.5 %Medium
Friday8:30Durable Goods Orders0.8 %Medium
Friday8:30GDP2.9 %High


Earning Calendar


STTState Street CorporationAMTuesday
KMBKimberly-Clark CorporationAMTuesday
VZVerizon Communications Inc.AMTuesday
PGThe Procter & Gamble CompanyAMTuesday
JNJJohnson & JohnsonAMTuesday
TXNTexas Instruments IncorporatedPMTuesday
COFCapital One Financial CorporationPMTuesday
UALUnited Continental Holdings, Inc.PMTuesday
GDGeneral Dynamics CorporationAMWednesday
SWKStanley Black & Decker, Inc.AMWednesday
RCLRoyal Caribbean Cruises Ltd.AMWednesday
GEGeneral Electric CompanyAMWednesday
CMCSAComcast CorporationAMWednesday
ABTAbbott LaboratoriesAMWednesday
UTXUnited Technologies CorporationAMWednesday
LVSLas Vegas Sands Corp.PMWednesday
LRCXLam Research CorporationPMWednesday
CCICrown Castle International Corp. (REIT)PMWednesday
FFord Motor CompanyPMWednesday
WHRWhirlpool CorporationPMWednesday
XLNXXilinx, Inc.PMWednesday
URIUnited Rentals, Inc.PMWednesday
MKCMcCormick & Company, IncorporatedAMThursday
NOCNorthrop Grumman CorporationAMThursday
RTNRaytheon CompanyAMThursday
LUVSouthwest Airlines Co.AMThursday
AALAmerican Airlines Group Inc.AMThursday
CELGCelgene CorporationAMThursday
UNPUnion Pacific CorporationAMThursday
CATCaterpillar Inc.AMThursday
MMM3M CompanyAMThursday
BIIBBiogen Inc.AMThursday
INTCIntel CorporationPMThursday
SBUXStarbucks CorporationPMThursday
WDCWestern Digital CorporationPMThursday
KLACKLA-Tencor CorporationPMThursday
MXIMMaxim Integrated Products, Inc.PMThursday
CLColgate-Palmolive CompanyAMFriday
ABBVAbbVie Inc.AMFriday
HONHoneywell International Inc.AMFriday


New York Strategy Swing



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