It was all about technology this week, after some big names reported earnings well above expectations. Amazon.com, Microsoft, Google parent Alphabet and Intel were among the leaders with gains of 13%, 6.4%, 4.4% and 9.8%, respectively. Needless-to-say, the NASDAQ Composite Index climbed to a record high of 6,701, up 1.1%. The Dow Industrials and the S&P 500, by comparison, were up 0.45% and 0.23%, but also at record levels. Technology stocks on average were higher by 2.75%. Elsewhere, the market was somewhat mixed, with healthcare stocks falling nearly 2% on average and the telecoms were negative by 2.6% as a group; in part by a disappointing earning’s report from AT&T. Transports trended lower, as crude oil popped $2.43 to $53.90/bbl.
The headline numbers for the economy paint a mixed picture. Reports confirming a solid recovery in orders for durable goods, a nice comeback in retail sales and a reassuring outlook from the Federal Reserve’s Beige Book on overall economic activity are positives. However, these factors are countered to a degree by data showing a decline in some of the leading indicators, a drop in housing starts and mixed trends in home sales (with resale activity sluggish but demand for new dwellings strong). Importantly, this selective weakness seems more the result of the devastation from recent hurricanes than from a fundamental shift in direction. On the horizon to digest all these reports is the prospect of a new Federal Reserve chair, as President Trump is likely to name a replacement for Janet Yellen later this week. The Fed will also be wrapping up its meeting on Wednesday and will release a statement on monetary policy. In addition . . .
. . . the House Ways and Means Committee unveils details of the long-awaited tax package. With earnings from Apple and Facebook this week, there can be continued volatility in technology and sector rotation out of some of the industrial, telecommunication, utility and healthcare names are possible. On balance, equities remain a decent investment option in a period of low fixed-income returns, but the high valuations make it essential that investors proceed carefully, emphasizing good quality stocks with growing dividends.
Here is the answer to last week’s trivia question: The most valuable company by market capitalization today is Apple. Fifty years ago, which company made the top of the list? IBM, AT&T, General Motors or General Electric. Answer: IBM. Today, IBM ranks about 43 on the list.
Today’s Trivia Question: A $1,000 investment in Deere & Co. in 1917 would be worth approximately how much today? $98,877, $485,500, $746,299 or $1,171,772.