For the holiday-shortened week, stocks were somewhat mixed. The large-cap Dow Jones Industrial Average and the S&P 500 Index finished with modest gains of 1.0% and 0.7%, respectively, while the tech-heavy NASDAQ was virtually flat and the smaller-cap Russell 2000 gave up a bit of ground; though neither of these two indexes finished the week too far removed from their all-time highs. Transportation stocks also took a rest giving back about 0.75% on average. As was the case last week, all sectors had green arrows except for shares of oil and gas companies, which retreated 1.5%, despite a small uptick in crude prices. The stars of the week were two “high-income” groups: Utilities – up nearly 4% – and telecommunications with a 2% pop.
New home sales increased by 3.7% sequentially in January and were up 5.5% versus the year-earlier period. Although the pace of growth was a bit below the consensus expectation, it was another encouraging reading on the U.S. economy. Likewise, the University of Michigan’s take on consumer sentiment for February came in at 96.3, which was down slightly from January, but up 5% year-over-year. The Sentiment Index has been higher during the past three months than any time since March 2004. Minutes of last month’s Federal Reserve meeting indicated the next rate increase to be “fairly soon”, possibly at the March get together as the economy continues to heat up and inflation fears linger.
One must remain cautious with stock prices at elevated levels. Although the backdrop is still in the favor of markets moving higher, risks to the downside cannot be ignored. Most of the anticipated news from the White House on tax reform and job growth is pretty much priced into stocks at current levels. Now we need to see some definitive action on the part of the new administration and Congress to fulfill these expectations.
Here is the answer to last week’s trivia question: DineEquity (NASDAQ: DIN) operates the Applebee’s Neighborhood Grill franchise and what other restaurant concept? Chili’s, Outback Steakhouse, IHOP or Ruby Tuesday. Answer: IHOP. IHOP acquired Applebee’s in November, 2007 and changed its name to DineEquity the following year.
Today’s Trivia Question: About how many U.S. publicly listed companies currently exist? 4,985, 5,734, 6,021 or 6,887.