There’s a lot of earnings and data news to digest this morning, and the markets look like they’re slowing down a little to take
it all in after the recent record highs. The Dow Jones Industrial Average ($DJI) set another record yesterday, but the S&P 500
Index (SPX) couldn’t scratch out a victory.
Though we’re in the heart of earnings, the market seems sluggish, with no sector standing out as far as up or down performance.
Futures trading pointed to a flat open Friday amid little direction. Asian and European markets also looked subdued.
The takeaway from the massive earnings download this week is that companies seem headed in the right direction. Though not every
report has been fantastic, there’s a sense of optimism from CEOs on their conference calls, and executives are saying companies are
in a place where things could get really good.
It’s a defense morning today, meaning the defense industry, with earnings from General Dynamics (NYSE:
GD) and Honeywell (NYSE: HON). It could be interesting to see how their executives paint the picture going
forward. Also, energy starts getting into the game, with Chevron (NYSE: CVX) in the lineup, followed next Tuesday by Exxon Mobil (NYSE:
XOM).
Technology stocks took center stage Thursday with earnings from Microsoft (NASDAQ: MSFT), Intel (NYSE: INTC) and Alphabet (NASDAQ: GOOG), among others. The technology sector has surged 4% over the last month,
though it fell slightly on Thursday. INTC had a nice quarter, and MSFT earnings and revenue topped consensus estimates, with the
company’s cloud computing business looking strong.
GOOG shares fell in pre-market trading Friday after reporting earnings that failed to meet Wall Street analysts’ expectations.
The miss on profit stemmed from a higher-than-expected tax adjustment. Keep in mind, however, that the tech giant still posted
higher-than-anticipated revenue in Q4, and in its press release the company called 22% year-over-year revenue growth “exceptional.”
The company’s performance was led by mobile search and YouTube, GOOG said.
One more earnings note: Starbucks (NASDAQ: SBUX) shares fell sharply in pre-market trade. Same-store Q4 sales missed the
Street’s average estimate, and a company executive told MarketWatch that long lines may be driving away potential customers. That’s
something SBUX plans to fix, which is good news for all of those with SBUX addictions.
On the economic data front, durable goods came out this morning. Data on durable goods can often serve as a good measure of the
economy’s health, revealing how often consumers purchased big-ticket items like refrigerators. We also had the government’s first
look at Q4 gross domestic product (GDP). The GDP rise of 1.9% was a bit below the average analyst estimate of 2.2%.
The dollar regained some of its momentum late this week, rising against the euro, yen, and Mexican peso. The peso took a hit
after the Mexican president called off a previously scheduled meeting with President Trump as the two scuffled over Trump’s
proposed border wall. The Canadian dollar also fell.
Bears Waking Up?
The latest reading from the American Association of Individual Investors’ Investor Sentiment Survey is 37% bullish, down 6.6
percentage points from the previous week. Bearish sentiment rose by five percentage points to 32.7%. It’s probably not wise to read
too much into such surveys, but the rise in bearishness may “bear” watching.
Sentiment Reading Due
One way to get a sense of how the economy is going is to monitor consumer sentiment. The one economic reading left this week
comes from the University of Michigan, which tracks consumer sentiment and reports its final read for January at 10 a.m. ET.
Consensus among economists is for a reading of 98.0, down from the preliminary January estimate of 98.1 and still near cyclical
peaks, Briefing.com said. One interesting outcome from the preliminary January report was the University of Michigan’s observation
that sentiment varied quite a bit based on individual consumers’ political leanings. We’ll see if that remained a factor later in
the month as the new U.S. president took office.
55 of One; 1,200 of the Other
Like ships passing in the night, gold prices fell back below $1,200 over the last couple of days even as crude oil prices rose
back toward $55 a barrel resistance for the front-month U.S. contract. Gold took a beating due to the rising dollar, and fell to
two-week lows. The price of gold continues to pivot around that $1,200 figure, and seems unable to stay above it for long.
Meanwhile, oil has been stuck between $50 and $55 a barrel since early December. Hefty U.S. production, which is up about 500,000
barrels a day since mid-2016, has helped put a cap on gains. Today brings the weekly Baker Hughes oil rig count, which spiked last
week and is now at multi-month highs.
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