January 24, 2018.
S&P 500 on a Tear!
The S&P 500 has reached another record, recording the greatest number of record highs ever for the month of January. The S&P 500 has traded up in 12 of this year’s 15 trading sessions. The market has ridden the wave of stronger domestic and international growth, tax reform, and solid corporate earnings.
Ray Dalio, the founder of Bridgewater Associates, the largest hedge fund in the world with $150 billion in assets, noted, “We are in this Goldilocks period right now. Inflation isn’t a problem. Growth is good, everything is pretty good with a big jolt of stimulation coming from changes in tax laws.” In his view, we’re going to see a “blowoff rally” – or a melt-up – that will take all 3 major indexes to new heights. “If you’re holding cash,” he noted, “you’re going to feel pretty stupid.”
Valero Energy rose in yesterday’s extended session, the largest refiner in the world approving a $2.5 billion stock buyback program, the company’s quarterly dividend raised 10 cents to 80 cents. Up 7% already in 2018, the stock rose 1% yesterday in afterhours trading.
Before opening today, General Electric (GE) will be reporting its quarterly numbers. Last time GE reported – despite the negative earnings surprise – the company’s stock managed to end higher on the day. Despite that bounce, the stock fell for 9 consecutive sessions thereafter. With the conglomerate trying to remake itself, the new CEO, Flannery, announced its transformation plan in mid-November. Players weren’t amused, the stock taking a further hit after word got out of a gaping loss from the company’s legacy insurance business. GE soared 4.5% yesterday. The stock, though, has fallen 43% over the past 12 months, and 24% over the past 3 months.
Ford will be reporting today. The stock has seen both lows and weak guidance of late – and more than anything, it’s played second fiddle to GM, which received two thumbs up after selling its European business and taking the helm in developing electric cars. What is going Ford’s way is its best-selling pickup trucks and SUVs.
Intel (INTC) will be reporting on Thursday after closing. The company has faced headwinds after a flaw was found in its microchips, making them vulnerable to hackers. Linux creator, Linus Torvalds, recently referred to the patches created by Intel as “complete and utter garbage,” placing the company even more in the hot seat. The patches could affect data center power users’ performance, which constitutes Intel’s largest area of expected growth, Wall Street expecting a 9% revenue increase to $5.09 billion for Q4.
Natural gas prices should also be watched today, soaring after forecasts for frigid weather in swaths of the U.S. Futures on the commodity have risen, February natural gas up 4%.
One of the biggest risk factors for the market now is the fate of international trade in a protectionist Trump era. With the tariffs recently placed on washing machines and solar panels, many are worried.
Senior international trade advisor at the law firm Miller & Chevalier, Welles Orr, noted: “I think it plays in nicely to the administration’s plan on being tough on enforcing trade rules and fighting out against the Chinese and other Asian countries that are clearly trying to circumvent the normal trade rules.” A decision to plop tariffs on aluminum and steel is expected soon. Orr added, “This all fits with the administration’s play to be tough trade negotiators. This comes in nicely just before or during the sixth round of negotiations on NAFTA. The administration shows its muscle. It’s not backing down from its campaign pledge.”
The operative question is whether NAFTA will be terminated. And what remains to be seen vis a vis the tariffs plopped on LG and Samsung, is the extent to which the new plants they’re opening in the U.S. will mitigate the fallout. Consumers likewise would be hurt by the price increases, Goldman noting that the cost for large imported residential washers could rise from 8% to 20% in the first year the tariff goes into effect.
Today’s Economic Calendar: The FHFA House Price Index will be released at 9:00, followed by existing home sales at 10:00, and then oil inventories at 10:30.
Wednesday’s Hot Stocks: COF, CNR, TXN, UAL, VLO, GE
| Economic Calendar|
|Wednesday||9:00||FHFA House Price Index||0.5 %||Medium|
|Wednesday||10:00||Existing Home Sales||5.750 M||Medium|
|Wednesday||10:30||Oil Inventories||-6.9 M barrels||Low|
|Thursday||8:30||International Trade in Goods||$-68.9 B||Medium|
|Thursday||8:30||Jobless Claims||240 K||Medium|
|Thursday||10:00||Wholesale Inventories||683 K||Medium|
|Thursday||10:00||New Home Sales||0.5 %||Medium|
|Friday||8:30||Durable Goods Orders||0.8 %||Medium|
|EDU||New Oriental Education & Technology Group Inc.||AM||Tuesday|
|TRV||The Travelers Companies, Inc.||AM||Tuesday|
|STT||State Street Corporation||AM||Tuesday|
|VZ||Verizon Communications Inc.||AM||Tuesday|
|PG||The Procter & Gamble Company||AM||Tuesday|
|JNJ||Johnson & Johnson||AM||Tuesday|
|TXN||Texas Instruments Incorporated||PM||Tuesday|
|COF||Capital One Financial Corporation||PM||Tuesday|
|UAL||United Continental Holdings, Inc.||PM||Tuesday|
|GD||General Dynamics Corporation||AM||Wednesday|
|SWK||Stanley Black & Decker, Inc.||AM||Wednesday|
|RCL||Royal Caribbean Cruises Ltd.||AM||Wednesday|
|GE||General Electric Company||AM||Wednesday|
|UTX||United Technologies Corporation||AM||Wednesday|
|LVS||Las Vegas Sands Corp.||PM||Wednesday|
|LRCX||Lam Research Corporation||PM||Wednesday|
|CCI||Crown Castle International Corp. (REIT)||PM||Wednesday|
|F||Ford Motor Company||PM||Wednesday|
|URI||United Rentals, Inc.||PM||Wednesday|
|MKC||McCormick & Company, Incorporated||AM||Thursday|
|NOC||Northrop Grumman Corporation||AM||Thursday|
|LUV||Southwest Airlines Co.||AM||Thursday|
|AAL||American Airlines Group Inc.||AM||Thursday|
|UNP||Union Pacific Corporation||AM||Thursday|
|WDC||Western Digital Corporation||PM||Thursday|
|MXIM||Maxim Integrated Products, Inc.||PM||Thursday|
|HON||Honeywell International Inc.||AM||Friday|
New York Strategy Swing