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Week Ending 2/10/2017

Summary

  • U.S. stocks hit record highs on Trump Tax Rally
  • Bond yields ease slightly
  • Quarterly corporate earnings continue to be reported
  • No economic reports of any significance

U.S. stocks started the week with little movement then rallied Thursday and Friday to close the week higher by nearly 1%. Year-to-date the S&P 500 is up 3.6% and smaller U.S. stocks are higher by 2.3%.

The stocks in International Developed countries, on average, closed unchanged. This flat performance is balanced by gains in Japan, Australia, and the United Kingdom while there were losses for markets in Italy, Spain, and Germany. International Emerging markets added to their strong year-to-date gains lead by a 3.8% rally for the week in China’s market.

Notable Market Headlines

  • Record Highs for Stocks – all of the major U.S. stock market averages hit new highs this week. It was the Trump Tax Rally on Thursday that pushed markets into record territory as investors anticipate news that could help drive corporate profits higher.
  • 10-Year Government Bond Yield at 2.409% – yields eased slightly again for the week.

Market Leaders

Top 10 Performers – Summary

  1. Hasbro Inc.
    • Leading toy maker
    • Reported strong quarterly results
    • Stock jumped 18%
  2. Arconic Inc.
    • Formerly known as Alcoa Inc. provides metal and engineering products
    • Stock gained all 5 days during the week closing up +14% and is higher by 59% year-to-date. This is the best performing stock in the S&P 500 in 2017. The next closest stock has gained only 35%!

Market Laggards

Bottom 10 Performers – Summary

  1. 1-year winners that are this week’s losers
    1. Akamai Technologies
      • Provides cloud services for businesses over the internet
      • Stock is higher by 61% during the past 12 months
      • Reported strong sales and earnings for the quarter
      • Stock dropped 8% for the week because some costs are expected to rise in 2017 due to the company’s pursuit of longer-term profitable business
      • Earnings have grown by 66% compounded annually for the past 5 years
    2. Marathon Oil
      • Oil exploration business
      • Up 103% during the past year
      • Stock down 6% for the week as investors apparently worry about weakening energy prices
  1. Dun & Bradstreet
    • Leading provider of commercial data on businesses and credit history and more
    • Reported earnings slightly below expectations. This was the company’s only quarterly earnings miss in 2016
    • Stock tumbled 18% for the week but remains higher by 31% compared to year ago levels

Economic Indicator - Reported

There were no market-moving economic reports during the week.

Economic Indicators – Upcoming

The Produce Price Index, a measure of wholesale inflation, will be reported Tuesday and the Consumer Price Index, a measure of retail inflation, will be reported Wednesday. Inflation has been running at about 2% annually, slightly higher than a years ago when energy prices were falling. Economists generally expect this trend to continue.

January Retails Sales will be reported Wednesday. It is expected that there will be little growth due to a slowdown in auto sales. Retail sales account for roughly two-thirds of the U.S. economy so it is an important number to gauge the health of the overall economy.

Housing Starts will be reported Thursday and are expected to show a small increase over last month.

Investor Trivia

The total value of a company’s stock, known as its Market Value, is determine by the price of the stock times the number of shares. There are 500 stocks in the S&P 500 index with a total Market Value of $20.37 TRILLION. What percentage of this $20 trillion is made up by the 57 largest companies?

50%! In other words, the largest 57 stocks have approximately the same total value as the other 443 stocks. This is important to investors because it can dramatically impact the performance of the S&P 500 index. For example, the 57 largest stocks rising by 10% in value has the same impact as if the smaller 443 stocks ALL rose by 10%. Therefore, there can be times when only a handful of very large company stocks are moving, pushing the S&P 500 higher, while many other stocks may not be going higher.

Source: S&P Compustat as of February 10, 2017

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