Stocks moved in tandem this week with news from the Senate on passage of their version of tax reform. And a report that former National Security head Michael Flynn admitted to the FBI that the Trump Administration directed him to communicate with a Russian envoy, pulled the Dow Industrials down 400 points on Friday, only to recover most of the losses by the end of the day. When the dust settled, the outcome for equities was mostly positive for the week with the Senate tax vote narrowly passing after the market closed. The House has approved one version of a tax bill, the Senate, another. Lawmakers must now fuse the legislative differences into a final, unified bill to send to the President to sign; hopefully before Christmas. So, all is far from over and the details are still in limbo, including a corporate tax cut to 22% vs. 20% next year or 2019.
With some optimism of a reconciliation, equities moved mostly higher with the Dow 30 reaching a new high, up 2.9%. Likewise, the S&P 500 set a record with a 1.5% advance, but weakness in technology stocks kept the NASDAQ in negative territory, losing 0.6%. Semiconductor and semi-equipment makers were the hardest hit, following a spectacular two-year run. Most encouraging was the Dow Transportation Average gaining nearly 6%. Elsewhere, all but the techs were in the green, led by telecom stocks (up 6.4%), which have been unusually volatile of late. With the prospect of lower taxes and reduced regulations, financials were also strong, gaining 3.4% on average. The price of oil appears to have stabilized near the $60/bbl. mark, as OPEC is looking to continue its production cutbacks through 2018. Energy stocks popped 2.7%.
Rotation by traders out of growth stocks into value plays may continue for a while, as bottom-feeders are looking to find some hidden gems in beaten down retail, biotech and energy. So far, the bulls are believers, as they mostly take the stock market – while far from undervalued – higher on optimism about the economy, earnings, a stable Federal Reserve position and taxes.
Here is the answer to last week’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. Answer: Signet Jewelers, Ltd.
Today’s Trivia Question: From 2012-2106, holiday in-store sales have risen 11%. During the same period, online holiday sales rose? 9%, 16%, 29% or 42%.