During this holiday-shortened week, markets were positive across all sectors, with the S&P 500 and the NASDAQ hitting mid-week records, and higher by 0.9% and 1.8%, respectively. The Dow Industrials came close to a new high closing the week at 23,558 – a nearly 1% gain. Once again, small and mid-cap stocks outperformed the leading averages. As said, the advances were broad, with all key industries in the green, led by telecommunication and technology stocks. Transports finally joined the crowd with a gain of 1.5% for the Dow Transportation Index. Crude oil managed to close near the $59/bbl. mark, sending energy stocks higher by about 0.75%. And advancing issues on the NYSE outnumbered losers by 2 to 1.
Economic news remains mostly positive. Behind the confidence are stabilizing auto sales; recent increases in housing starts and building permits; further growth in incomes; developing strength in industrial production and factory utilization; solid job growth; and a falling jobless rate. These pluses, however, are countered by tepid wage growth; lower than Federal Reserve targeted inflation; and rising household debt and consumer loan delinquencies. Still, while the up cycle isn’t memorable for its strength, it does get high marks for durability. In the equity markets, the third quarter earnings reporting season was solid, with three-quarters of the companies in the S&P 500 delivering positive earnings surprises and nearly two-thirds beating expectations on the revenue side. For the latest period, earnings growth was in the high single-digit range, led by gains in energy, technology and material stocks.
Looking ahead for the week, we will get an indication on new home sales, the Census Bureau’s release of October Advance Economic Indicators, Chicago’s Purchasing Manager’s Index for November along with Friday’s release of November’s Manufacturing Index by the Institute of Supply Management. On Wednesday, outgoing Federal Reserve Chair Janet Yellen will present to the Congressional Joint Economic Committee on the outlook for the economy in 2018. The stock market’s relentless rise and the consequent increase in valuations – now about 20 times trailing earnings – leaves little room for disappointments. Hence, a diversified mix of quality, dividend growing equities is the best investment approach for now.
Here is the answer to last week’s trivia question: The ticker symbol “RACE”, is associated with which company’s common stock? International Speedway Corp.; Ferrari, NV; Churchill Downs, Inc.; or Adidas, AG. Answer: Italian sports car manufacturer Ferrari, following its divestiture by Fiat Chrysler in October 2015.
Today’s Trivia Question: Diamond and jewelry stores Zales, Jared and Kay Jewelers are all owned by? Signet Jewelers, Ltd., Kroger Co., Berkshire Hathaway or Tiffany & Co.