TradeTheNews.com Weekly Market Update: Stocks Continued to Climb the Wall of Worry, Waiting for Trump to Deliver
Fri, 24 Feb 2017 16:07 PM EST
Early on this week, US stocks looked poised for a fifth consecutive week of record high closes. The economic data generally remained robust globally. A hotter than expected print for US CPI figures and a FOMC minutes release that pointed to a committee inclined to pull the trigger sooner rather than later kept the reflation narrative intact. President Trump continued to meet with high-profile business leaders and talk up his soon-to-be-announced tax and regulatory reforms. By Friday, the Dow was riding a 10-day winning streak.
The second half of the week though, saw the tone reach an inflection point, and investor appetite for risk began to wane. Polls out of Europe drummed up populism/nationalism concerns ahead of key elections in France and Germany later this year. President Trump doubled and tripled down on many of his most controversial campaign promises/tactics, while his Treasury Secretary laid out a timeline for growth reforms that underwhelmed. The narrative shifted its focus onto the growing number of obstacles that stand in the way of his administration and Congress reaching a deal on substantial fiscal reforms. The markets seemed to reflect this in rising bond and gold prices, while stock gains were notably more subdued. Trading may have also hit a bit of a dead spot; with earnings season nearing an end and a relatively sparse economic calendar, markets have become beholden to headlines out of Washington ahead of Trump's congressional address next week. The Dow S&P and the NASDAQ finished a fifth consecutive week at all-time highs, but the Russell 2000 lost ground. For the week the Dow rose 1%, the S&P added 0.7% and the NASDAQ eked out a gain.
Fixed income markets continued to rally and yields fell throughout the week, leading to a lot of hand-wringing over the divergence in sentiment being projected by exuberant stock and stubborn fixed income markets. Treasury yields were further pressured by a decline in German government bond rates. Political concerns and talk of an ECB-induced short squeeze sent the German 2-year yield towards -1%. The US benchmark 10-Year yield peaked for the week at 2.43% to slide lower to 2.32% today. The Feb FOMC minutes appeared to pull forward hopes for the next rate hike, but the market is not yet behind a move at the next meeting. Futures prices suggest most believe the best bet could be May or more likely June, when the Fed is currently scheduled to hold a post-meeting press conference.
As earnings season plows on, it was retailers’ turn to report this week, and the results were mixed. Nordstrom beat on top and bottom line, and investors were pleased despite its outlook coming in below street estimates. Gap reported a strong end to its year and sees next year same store sales flat to up slightly. Discount giant TJX topped analyst expectations, and its outlook also saw a slight increase in same store sales for next year. Macy’s beat street estimates on earnings, but posted its eighth quarterly same-store sales decline in a row. JCP shares slid on its results and a restructuring announcement. Walmart beat and guided initial FY18 rev above consensus, and Home Depot posted a solid end to the year. On the M&A front, Kraft Heinz slumped and Modelez rose after Unilever's offer from late last week was rescinded, and Yahoo came to an amended agreement with Verizon for a reduced asset sale price.
MONDAY, FEB 20
(UK) FEB CBI INDUSTRIAL TRENDS TOTAL ORDERS: 8 V 4E
(JP) JAPAN FEB PRELIMINARY PMI MANUFACTURING: 53.5 V 52.7 PRIOR (6th month of expansion and highest level in 35 months)
HSBC Reports FY16 Adj pretax $19.3B v $20.3Be; Adj Rev $50.2B v $51.4B y/y; Launches $1.0B share buyback program (0.6% of market cap) to be completed in H1
TUESDAY, FEB 21
BHP.AU Reports H1 Net profit $3.2B v loss $5.7B y/y, underlying Pretax $3.24B v $2.9Be, Rev $18.8B v $18.5Be
(FR) FRANCE FEB PRELIMINARY MANUFACTURING PMI: 52.3 V 53.5E (5th month of expansion)
(DE) GERMANY FEB PRELIMINARY MANUFACTURING PMI: 57.0 V 56.0E (27th month of expansion and highest since May 2011)
(EU) EURO ZONE FEB PRELIMINARY MANUFACTURING PMI: 55.5 V 55.0E (44th month of expansion and highest since Apr 2011)
HD Reports Q4 $1.44 v $1.33e, R$22.2B v $21.8Be; raises dividend 29% to $0.89/shr (implied yield 2.5%); announces new $15B share repurchase program (8.5% of market cap)
M Reports Q4 $2.02 v $1.97e, R$8.52B v $8.58Be
(US) FEB PRELIMINARY MARKIT MANUFACTURING PMI: 54.3 V 55.3E
(UK) DRAFT BREXIT BILL PASSES HOUSE OF LORDS FOLLOWING ITS 2ND READING (without a vote); Bill moves onto its next stage
(CN) CHINA JAN PROPERTY PRICES M/M: RISE IN 45 OUT OF 70 CITIES VS 46 PRIOR; Y/Y: RISE IN 66 OUT OF 70 CITIES V 65 PRIOR
WEDNESDAY, FEB 22
AIR.FR Reports FY16 Net €995M v €2.70B y/y, Adj EBIT €3.96B v €3.80Be, Rev €66.6B v €65.4Be
BAYN.DE Reports Q4 Net profit €453M (adj) v €690Me, EBITDA adj €2.18B v €2.07Be, Rev €11.8B v €11.7Be
LLOY.UK Reports Q4 PBT £973M v £1.3Be, Underlying Profit €1.79B v €1.91B y/y, Total Income £4.35B v £4.28B y/y
(DE) GERMANY FEB IFO BUSINESS CLIMATE: 111.0 V 109.6E (matches high from Feb 2014); CURRENT ASSESSMENT: 118.4 V 116.6E
(UK) Q4 PRELIMINARY GDP Q/Q: 0.7% V 0.6%E; Y/Y: 2.0% V 2.2%E (lowest annual pace since Q1 2013)
(EU) EURO ZONE JAN CPI M/M: -0.8% V -0.8%E; Y/Y (final reading): 1.8% V 1.8%E; CPI CORE Y/Y (final reading): 0.9% V 0.9%E
TJX Reports Q4 $1.03 v $1.00e, R$9.5B v $9.47Be; Raises dividend 20% to $0.3125/shr (1.64% yield); To buyback between $1.3-1.8B of stock (2.4-3.7% of market cap)
(US) JAN EXISTING HOME SALES: 5.69M V 5.55ME (highest since Feb 2007)
(US) Association of American Railroads weekly rail traffic report for week ending Feb 18th: 531.1K carloads and intermodal units, +6.8% y/y (sixth straight week of gains)
(US) FOMC MINUTES FROM FEB 1 MEETING: FOMC TO START BALANCE SHEET DEBATE AT UPCOMING MEETINGS
TSLA Reports Q4 -$0.69 v -$0.13e, R$2.28B v $2.20Be
(BR) BRAZIL CENTRAL BANK (BCB) CUTS SELIC TARGET RATE BY 75BPS TO 12.25%; AS EXPECTED
(US) Weekly API Oil Inventories: Crude: -0.9M v +9.9M prior; first draw in 5 weeks
(KR) BANK OF KOREA (BOK) LEAVES 7-DAY REPO RATE UNCHANGED AT 1.25%; AS EXPECTED
THURSDAY, FEB 23
ORA.FR Reports FY16 EBITDA €12.68B v €12.6Be, Rev €40.9B v €40.7Be; Raises dividend 8.3% to €0.65/shr
(DE) GERMANY Q4 FINAL GDP Q/Q: 0.4% V 0.4%E; Y/Y: 1.7% V 1.7%E; GDP NSA Y/Y: 1.2% V1.2%E
BA.UK Reports FY16 EPS 40.3p v 40.2p y/y, Underlying EBITA £1.91B v £1.68B y/y, Rev £19.0B v £17.9B y/y
BARC.UK Reports Q4 Net £99M v loss £2.42B y/y, adj Pretax £284M v £646Me, Core Net Rev £4.99B v £4.45B y/y; cuts FY dividend from 6.5p to 3.0p/shr; Provides update on Barclays Africa sell down & Seperation
(US) Treasury Sec Mnuchin: number one committment is to growth and passing significant tax reform - CNBC
(US) INITIAL JOBLESS CLAIMS: 244K V 240KE; CONTINUING CLAIMS: 2.06M V 2.07ME
(US) DOE CRUDE: +0.6M V +3.5ME; GASOLINE: -2.6M V -1ME; DISTILLATE: -4.9M V -0.5ME
(MX) Mexico Foreign Min Videgaray: US-Mexico relationship took steps in the right direction today
BIDU Reports Q4 $1.91 v $0.93e, R$2.62B v $2.51Be (2 est)
FRIDAY, FEB 24
BAS.DE Reports Q4 Net €689M v €688Me, EBIT (before items) €1.18B v €1.16Be, Rev €14.9B v €14.1Be
RBS.UK Reports FY16 Net loss £6.96B* v loss £1.98B y/y, adj Op profit £3.67B v £3.30Be, Rev £12.4B v £12.0Be
STAN.UK Reports FY16 Statutory Pretax profit +$409M v -$1.5B y/y, adj Pretax $1.09B v $1.42Be; Underlying Op Rev $13.8B v $13.7Be
(US) JAN NEW HOME SALES: 555K V 571KE
(US) FEB FINAL MICHIGAN CONFIDENCE: 96.3 V 96.0E
(US) White House Econ Adviser Cohn says White House doesn't support House GOP version of border adjustment tax - Axios
(US) Weekly Baker Hughes US Rig Count: 754 v 751 w/w (+0.4%) (6th straight rise)
(US) White House reportedly blocks CNN, NY Times, LA Times, Politico and BuzzFeed correspondents from White House press gaggle - Politico
