A 188 point gain in the Dow Industrials on Thursday and Friday, helped soften a two-day decline earlier in the week when the average fell nearly 150 points. In all, the Dow 30 closed the week at 24,329, up 23.14 points or 0.4%. The S&P 500 traded in lockstep with the Dow with a similar percentage gain, but the NASDAQ lagged with only a fractional rise, as technology gave back recent advances. Once again, road, air and rail stocks were clear winners with the Dow Transportation average in the green by over 2%. Elsewhere, equities were mostly mixed with industrials (helped by the transports) and financials gaining about 1% on average. These sectors, along with consumer stocks, were offset by weakness in energy and utilities. West Texas crude fell $1.00 for the week as inventories continue to grow.
Recent approvals of the Republican-crafted tax reform proposals, by both the House and the Senate, may lead to a final bill being presented to the President for his signature later this month or early in 2018. Traders have been busy trying to handicap the final version and noodling what industry sectors will benefit the most. So, rotation in and out of these sectors continued. Clearly bank stocks will benefit along with ongoing deregulation and large multi-nationals with an incentive to move offshore funds back home at a 10% tax rate will like what they see in tax reform. Elsewhere, the House passed a two-week spending bill, keeping the government afloat, but passage by the Senate will take some doing. The economy also added a respectable 228,000 jobs in November with many key industries busy hiring. Manufacturing added 31,000 jobs while health care added 29,500 workers and construction 24,000. Average hourly paychecks increased 2.5% over the past twelve months and the unemployment rate remained at a seven-year low of 4.1%.
This week we will get results from Oracle’s second quarter with estimates of $0.68 per share vs. last year’s $0.61. And aggressive choice Jabil Circuit will report on Thursday with consensus first quarter per share earnings of $0.79 vs. $0.69. The stock market remains strong with most factors propelling the bulls forward and the momentum has been hard to break with any weakness followed by bidding. Thus, the case for equities remains compelling. But the continuing strength is also supporting the need for care in equity selection, which should center on quality and dividend growth.
Here is the answer to last week’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%. Answer: A whopping 42%.
Today’s Trivia Question: Iconic chocolate syrup Bosco, formulated in Camden, New Jersey in 1928, is a product of? The J.M. Smucker Co., Bosco Products, Inc., The Hershey Co. or Unilever, N.V.