Wall Street has gotten off to a rocky start for the year, but still higher by about 1.5%. Not bad for a two-week run. Nonetheless, the road ahead will continue to be bumpy as the new president takes office and continues to take aim at various industries and specific companies, almost on a daily basis. To wit: The pharmaceutical and biotechnology group was hit hard following a press conference when President-elect Trump said that the drug industry has been “getting away with murder”, referring to pricing policies. The sector was down 3% immediately after the comment. Defense contractors have also been a target of Mr. Trump, citing gross cost over-runs on some projects. Traders will need to get used to such “Tweets” and off-the-cuff remarks as markets tend to (over) react to these mentions. In all, there is still a lot of uncertainty about tax reform, spending plans, repatriation of corporate cash held abroad and global trade. However, investors best take a longer-term view as the economy should start to pick up speed.
For the week, equities were mostly flat to mixed. The NASDAQ was able to bring home a one percent advance despite a negative biotech group, but other technology was the sector performer. Consumer discretionary stocks also tacked on about a percentage point, which was offset by telecom and energy, retreating 1% and 2%, respectively. Crude oil moved lower on the week, but gold continues to make a run at $1,200/oz., tacking on $23.32 to close at $1,195.30/oz.
Fourth quarter earnings’ reports will perk up in the coming weeks, which will also move stocks and the sectors they represent. JPMorgan Chase reported this past week with above average results sending shares to a new all-time high. Rails will be out this week, with aggressive choice CSX indicating a $0.49 per share profit in the final period vs. $0.48 a year ago. Oil service provider Schlumberger reports on Friday, with estimates of $0.27 per share vs. $0.65. SLB’s outlook for the new year will certainly be in focus as oil prices continue to stabilize.
A pricey stock market is starting out 2017 in uncertain fashion, as concerns persist about profit taking, fiscal and monetary adjustments and interest rates. So far, equities are holding up fairly well, but the path to still higher levels is ill-defined. Going forward, the test will be if earnings and economic news is positive enough to boost already elevated valuations.
Markets will be closed on Monday in observance of Martin Luther King, Jr. Day. Enjoy the rest of the long-weekend.
Here is the answer to last week’s trivia question: Sears Holdings announced the closing of 150 K-Mart and Sears stores and will sell its iconic Craftsman tool brand to? Stanley Black & Decker, The Toro Co., Snap-On Tools or Fortive Corp. (Matco Tools Div.). Frank from New Jersey got it right: Stanley Black & Decker.
Today’s Trivia Question: Deere & Co. began when blacksmith John Deere opened a small tool shop in Grand Detour, Illinois in? 1829, 1837, 1882 or 1904.