Wednesday, January 31, 2018

Markets climb higher led by Boeing

Dow vaulted 192 after 2 days of losses, advancers over decliners almost 2-1 & NAZ gained 39.  The MLP index rose 1+ to the 292s.  Junk bond funds fluctuated & Treasuries edged higher.  Oil was off pennies in the 64s & gold went up 8 to 1348.

AMJ (Alerian MLP Index tracking fund)

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The global stock declines that have shaped the week showed signs of easing, with US & European equities edging higher.  The $ slump deepened in the wake of Pres Trump's State of the Union address & the € rose after inflation data.  The S&P 500 gained for the first time in 3 days ahead of the release of earnings after the close popular tech companies.  The Stoxx Europe 600 Index pared an advance but stayed in the green amid a flurry of corp results.  The $ fell against almost every major peer after Trump offered few new clues on US policy in his speech & most bonds gained as the Bank of Japan increased asset purchases.  It's been a big month for stock markets, with stellar gains across most major gauges that were followed this week by the MSCI All-Country World Index's biggest 2-day slide since Sep 2016.  Investors will now be focusing on the Federal Reserve rate decision, the accelerating earnings season & more big economic data points to see if the uptrend can resume.  The yield on the benchmark Treasury fell, fluctuating around 2.7%.  The MSCI Asia Pacific Index declined for a 3rd session as a slump in Japanese shares weighed on the broader gauge.  The £ rose for a 2nd day.  South Africa's rand hit the strongest level in almost 3 years as Pres Jacob Zuma's future once again came into focus.  Oil extended its decline & industrial metals reversed losses.  A measure of China's manufacturing sector came in below expectations, while the services gauge topped estimates.

U.S. Stocks Surge After a Two-Day Losing Streak

Boeing (BA), a Dow stock, jumped as earnings rose on surging deliveries of the 737, the company's largest source of profit & an unexpectedly large one-time gain from US tax cuts.  BA pocketed a tax boost of $1.74 a share in Q4 & expects more benefits to come this year.  Corp levies are falling just as the company starts to see large cash gains from its 787 Dreamliner after a decade of losses.  Lower taxes are combining with record jetliner deliveries to fuel the cash gush at BA, the biggest gainer on the Dow in 2017 & so far this year.  The company predicted the first annual sales growth since 2015 & said operating cash flow would climb to $15 B.  Adjusted Q4 EPS was $4.80 ($3.06 excluding the tax gain).  Analysts had predicted $2.90.  Revenue rose 8.9% to $25.4B, compared with the $24.7B expected.  The aerospace manufacturer has pledged to return the equivalent of its free cash flow to investors thru an $18B share buyback program & 20% dividend increase approved in Dec.  Revenue has declined since 2015 as BA slowed deliveries of its highly profitable 777 jetliners amid waning sales & a shift to a new model.  But EPS have continued to rise as buybacks contributed to a 15% drop its average share count.  The stock surged 19.36 (6%).
If you would like to learn more about BA, click on this link:

Boeing Blows Past Estimates With Help From Tax Cut; Shares Surge

Total US employee compensation rose in Q4 & matched the biggest 12-month gain since 2008, as private-sector pay picked up, Labor Dept figures showed.  Index rose 0.6% Q/Q (matching est) after 0.7% gain in prior 3 months.  Wages & salaries rose 0.5% Q/Q following 0.7% gain. & benefit costs increased 0.5% Q/Q after rising 0.8%.  Total compensation, which includes wages & benefits, rose 2.6% over past 12 months; matches Q1-2015 as highest since 2008.  Private-sector wages & salaries rose from a year earlier by 2.8%, also matching the best gain of this expansion.  Several industry groups registered increases of 3% or higher, led by transportation & material moving at 3.5% & service occupations at 3.3%, underscoring demand for labor.  While wage growth has gradually improved, a sustained acceleration is yet to occur in the current economic expansion.  The latest year-over-year increase in compensation indicates employers are making more generous offers as they compete for workers in the tightening labor market.  The gov's quarterly read on the ECI, which measures employer-paid taxes such as Social Security & Medicare in addition to the costs of wages and benefits, offers Federal Reserve policy makers another look into how compensation may feed into inflation.  Central bankers later today will conclude a 2-day policy meeting & they're expected to leave interest rates unchanged in Janet Yellen's final gathering as chair.

Employment Costs in U.S. Match Fastest 12-Month Gain Since 2008

The bulls have returned after the earnings report from BA blew traders away.  Economic data remains strong & the earnings reports continue strong.  The Dow is within 400 of the record set on Fri & chances are that Janet's last press conference in a few hours will bring more stock buying.

Dow Jones Industrials

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