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Week Ending 1/28/2017

Stock markets around the world moved higher for the week with the Dow Industrials gaining 266 points, or 1.3%, to close above 20,000 for the first time. The Dow Jones record high this week was accompanied by records for the S&P 500 and NASDAQ as well. As the graph shows though the biggest winner was International Emerging Markets, markets such as India and China, that gained almost 3% for the week. Everything else lagged behind including losses greater than 1% for both real estate and gold. Year-to-date everything except commodities remains higher.

Notable Market Headlines

  1. Earnings Season Update (source: Factset)
    • 34% of S&P 500 companies have reported
    • 65% have beaten analyst estimates
      • On average, earnings have been 2.7% better than analysts had expected…unfortunately this is lower than in prior quarters
  2. Dow 20,000 – the Dow crossed 20,000 for the first time, a psychological milestone for investors.
    • FYI – Dow 10,000 happened three times!
      • 3/29/1999 – extending the Great Bull Market of the ‘80s and ‘90s
      • 12/11/2003 – following Tech Wreck of 2000 - 2002
        • High 1/14/2000 at 11,723 and low of 7,286 on 10/9/2002
      • 10/14/2009 – following the 2008 Financial Crisis
        • High 10/9/2007 at 14,165 and low of 6,547 on 3/9/2009
  3. 10-Year Government Bond Yield at 2.489% – yields moved higher for a second week as yields have edged higher around the world arguable due to some uncertainty in the U.S.

Market Leaders

Top 10 Performers – Summary

  1. This week’s winners have been the winners for the past 12 months
    • This week’s top 10 have been up an average 50.5% the past 12 months!
  2. Seagate Technology
    • Computer data storage company
    • Stock jumped 22% this week on strong earnings
    • Industry competitors Western Digital and Micron Technology followed Seagate higher up 9.5% and 9.2% respectively
  3. Homebuilders
    • Pulte Homes and D.R. Horton jump 11.2 and 9.3% respectively on strong earnings as well. These stocks are both up double-digits for the year.

Market Laggards

Bottom 10 Performers – Summary

  1. The bottom 10 performers for the week have an average dividend yield that is 50% higher than the average S&P 500 stock
  2. Poor earnings explain losses for most of the bottom 10
  3. $12 Billion Losses!
    • Telecom Verizon and technology company Qualcomm each lost in excess of $12 billion in market value for the week

Economic Indicator - Reported

The U.S. Gross Domestic Product (GDP) grew by 1.9% in the fourth quarter, consistent with recently year trends in the 2% range but was below economists’ estimates.

December Existing Home Sales fell -2.9% due to a lack of homes for sale. It is estimated that homes for sale have fallen to their lowest level since 1999.

Economic Indicators – Upcoming

  • Employment Report – consensus estimate is for 175,000 new jobs created in January.
  • Vehicle Sales – motor vehicle sales have been trending higher for the past several years but are expected to ease in December.

Investor Trivia

Microsoft is one of the most valuable companies in the world with a market value in excess of $500 BILLION. It is best known for its software used on personal computers (PCs) made by IBM, Dell, and many others. That’s today but who was Microsoft’s big customer during some of its earliest days?

Apple Computer. In 1983 Microsoft software sales for Apple’s Mac accounted for half of Microsoft’s total sales.

Contact Mark A. Patton :