Wall Street: Battery Fully Charged

Picks of the Day  January 12, 2018.

Wall Street: Battery Fully Charged

One day of a respite was enough for Wall Street to recharge its battery and resume its jaw-dropping ascent. The indexes rallied higher on Thursday, closing at new historic highs, while the price of crude propelled energy stocks higher. In the meantime, investors are betting that the American earnings season – which opens today – will be strong.

The energy sector (XLE) soared 2% against the backdrop of a rise in the price of crude which is now trading at $63.59 a barrel, its highest level since December ’14. The gains in crude followed on the heels of news of a surprise drop in the pace of U.S. crude production, along with low inventory levels.

The consumer discretionary sector (XLY) recorded sharp gains in light of a surge in media and retail stocks, the industrial sector (XLI) enjoying gains in airline stocks after a news release from the second largest U.S. airline, Delta (DAL). DAL ended up 4.76%. Delta said that it is expected to benefit twice-over from the tax cut, first from lower corporate taxes and secondly, an uptick in business flights given the lower corporate tax rate. United (UAL), which released its numbers on Wednesday, savored a second day of gains, soaring 4.61%.

The common factor in yesterday’s movement – and the whole week for that matter – was the stress placed by market players on the confidence out and about and the pace of business activity.

Daily Summary: The Dow Jones rose 0.81%. The S&P 500 tacked on 0.70%, the NASDAQ closing up 0.81%.

The large indexes took a short hiatus from the gains in the afternoon, after N.Y. Fed Bank President, William Dudley, stated that the tax cut is likely to lead to the economy heating up. He projects a faster than average growth pace and an uptick in inflation in 2018. Dudley touched upon something that investors have to take into account. The one threat on the stock market now is high interest rates. In the event interest rates rise quickly, the valuation we’re now seeing for stocks is likely to become too high.

On the S&P 500, 107 stocks rose to new 52-week highs, 8 dipping to new yearly lows; on the NASDAQ, 176 stocks recorded new 52-week highs, 18 falling to new yearly lows.

About 6.74 billion shares changed hands on U.S. exchanges, above the 6.39 billion average over the last 20 trading days.

Friday: Investors are betting on a solid earnings season from the large firms on Wall Street. The earnings seasons opens at full strength today, with the results of the large banks, J.P. Morgan (JPM) and Wells Fargo (WFC). The earnings figures for the S&P 500 are expected to grow at an 11.8% clip in Q4 2017, the energy sector being a large contributor.

Other companies from the financial sector that are expected to report before the opening bell include PNC and the largest hedge fund manager in the world, Blackrock (BLK).

Today’s Economic Diary will include the Consumer Price Index which is expected to point to a slight rise of 0.1% in December. Furthermore, retail sales figures for the critical holiday season will be released at 8:30 N.Y. time. Retail stocks will grab investors’ attention today. Also on the economic front, business inventories will be released at 10:00.

The IPO market for 2018 will also be kicking off with the issue of Liberty Oilfield, which provides services to oil and natural gas exploration and production companies. On two different occasions, the company tried to go public in 2017, only to then withdraw the issue after it didn’t achieve the desired price.

Friday’s Hot Stocks: JPM, WFC, PNC, BLK, AMD, EXAS, FNSR

IPOs: LBRT

Have a great trading day!

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New York Strategy Swing

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No.1 – WRK