While all three major benchmarks once again scored new high ground, not all market sectors participated in the rally. Telecom stocks were negative by nearly 2.7% on the week and consumer goods followed with a decline of 1.3%. Industrials, basic materials and healthcare were also losers on average, as were transportation stocks, which haven’t been participating of late and not an encouraging sign. Technology once again shined with a nearly 2% advance, but was outpaced by energy stocks as West Texas oil gained $1.94/bbl. or 3% to settle at $55.64. Brent crude closed out the week at $62.07/bbl. its highest level since the middle of 2015. In all, the Dow Industrials were up 105 points or 0.45% and the S&P 500 by half that amount. The tech-heavy NASDAQ saw a nearly 1% pop with large gains from Alphabet, Apple and Amazon.com.
House Republicans unveiled their long-awaited tax reform plan, with a proposed cut in the corporate tax rate from 35% to 20% and consolidates the personal tax rates into five brackets from zero to 39.6%, along with a host of other measures. President Trump announced a chair replacement to the Federal Reserve naming widely expected Fed Governor Jerome Powell, who plans to continue the course on gradual interest rate increases, with a likely one-quarter percent hike next month.
Traders received a batch of economic news this week including non-farm payrolls that increased by 261,000 in October, coming in weaker than had been anticipated. However, the headline unemployment rate dipped to 4.1%, which was a positive surprise, especially as the labor-force participation rate declined to 62.7%. September payroll numbers were revised upward, but wages remained relatively flat during the month. While this suggests that inflation is not yet a concern, it could eventually put some pressure on the consumer. Elsewhere, the ISM Non-Manufacturing Index edged up to 60.1 during the month of October, which was a solid reading. In addition, factory orders increased 1.4% in September, which was also a positive development.
This week we will hear from CVS Health as to its third quarter results with estimates of $1.48 per share vs. $1.64 a year ago and word on their proposed acquisition of Aetna. The bulls continue to ride high, with the key averages rising to records on an almost daily basis. Such sustained strength, however, is raising multiples to frothy levels, which likely will require earnings to remain on the rise or for stock prices to retreat to correct to more normal valuations.
Here is the answer to last week’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. Answer: Excluding dividends, a whopping $1,171,772 – a 117,077% price increase over the past 100 years.
Today’s Trivia Question: What U.S. company is the largest broiler chicken producer? Tyson Foods, Pilgrim’s Pride, Sanderson Farms or Perdue.