January 30th – Weekly Update

  • It was a strong week for the U.S. equity market with the Dow Jones industrial setting a new record and breaking through 20,000. The S&P 500 and Nasdaq were also up. Gold dipped and oil concluded the period with a gain. The 10-year U.S. Treasury yield closed at approximately 2.49%.
  • With 34% of S&P 500 companies having reported fourth quarter results, 65% have beaten earnings expectations while 52% have beaten sales expectations. According to FactSet, the fourth quarter blended earnings growth rate for the S&P 500 is 4.2%. If the index reports earnings growth for the quarter, it will mark the first time the index has recorded year-over-year earnings growth for two consecutive quarters since Q4 2014 and Q1 2015. Northern Oil and Gas, Alibaba and GoPro impressed this week; Verizon, Johnson & Johnson and Brinker International were among the disappointments.
  • President Trump opened his first week with a focus on manufacturing. Trump said he believes his administration can cut corporate regulations by 75% or more, and argued that companies wishing to build factories could benefit from an expedited environmental clearance process. On taxes, he said he planned to cut taxes “massively” for companies and the middle class, positing a new corporate tax rate in the 15-20% range.
  • President Trump also issued executive orders calling for a federal hiring freeze and a withdrawal from the Trans-Pacific Partnership.
  • Markit’s flash manufacturing PMI for January came in at 55.1, beating consensus for 54.4 and ahead of December’s 54.3 level. The release noted overall operating conditions improved at the quickest pace since September 2014.
  • December existing home sales came in at a 5.49M SAAR, below expectations for 5.53M and November’s upwardly revised 5.65M rate. The release noted higher mortgage rates and housing prices combined with record low inventory stunted sales for much of the country during the month.
  • Initial jobless claims came in at 259K, higher than the 245K consensus. However, the 246K four-week average still represented a new cycle low.
  • New home sales fell 10.4% to a 536K SAAR in December, much weaker than the 588K consensus and November’s 598K reading.

CPWM Weekly Market Monitor (2017.01.30)