Market Perspective for February 10, 2017

Mixed trading early in the week gave way to a bullish breakout on Thursday and Friday. Asian and European markets also rallied this week. Consumer staples, technology and industrial stocks led large-cap indexes to new highs, bolstered by strong earnings and reports.  On Thursday morning, President Trump said an initial tax cut proposal would be out in two to three weeks, sparking a bullish move that continued into the Friday close.

The Job Openings and Labor Turnover Survey (JOLTS) showed 5.5 million new job openings in December. Unemployment claims dipped to a 43-year low at 234,000, and below an estimated 249,000 initial claims. The weekly mortgage applications index rose 2.3 percent, aided by the dip in interest rates. Another significant oil inventory increase led to a selloff in crude prices, but the oil market recovered after OPEC announced nearly 90 percent compliance with production cuts.

In overseas economic news, the Royal Bank of Australia kept its benchmark interest rate unchanged and will continue with its current quantitative easing policy. China’s exports increased 8 percent in January, a sign that the global economy may be on the mend.

Gallup’s U.S. Economic Confidence survey hit a new all-time high in January. The YPO Global Pulse survey of CEOs also indicates high U.S. confidence as businesses leaders around the world anticipate U.S. tax and regulatory cuts.

Earnings season was mixed this week. General Motors (GM) handily beat earnings and revenue estimates on the back of record sales in 2016.

Weakness at EPSN weighed on Walt Disney (DIS); it reported a 4.9 percent drop in earnings and a 3 percent slide in sales. Time Warner (TWX) reported quarterly earnings and revenues that beat analysts’ forecasts. The market remains unsure about regulatory approval for AT&T’s potential acquisition of the company. An increase in traffic and advertising during the election cycle failed to benefit Twitter (TWTR). TWTR posted disappointing earnings and shares fell more than 15 percent in the days following the report. Coca-Cola (KO) slipped more than 2 percent Thursday after the company met expectations, but lowered guidance. CVS Health (CVS) beat earnings estimates and missed on sales; shares rallied in the wake of the news. Mondelez (MDLZ) missed both earnings and sales estimates, but shares advanced following strong guidance.  Although consumer staples earnings were mixed this week, the sector led S&P 500 performance.

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