Market Perspective for October 20, 2017

Technology, industrials, healthcare, materials and financials all achieved new all-time highs on Friday. Positive earnings from mega-caps the Dow to a gain of 2.00 percent this week. The S&P 500 Index followed with a 0.86-percent return. The Dow also topped 23,000 for the first time this week.

Economic data was strong across the board this week. Homebuilder confidence rose in October. September existing home sales beat expectations. iShares U.S. Home Construction (ITB) finished the week at a new all-time high. Employment data was also surprisingly strong. Initial claims for unemployment fell to 222,000, the lowest figure since 1973.

Honeywell (HON) and Kansas City Southern (KSU) boosted the industrial sector. Both firms beat earnings and revenue estimates. Honeywell climbed to a new 52-week high on Friday. General Electric (GE) disappointed with an earnings miss and weak guidance. The firm cut its 2017 earnings estimate to between $1.05 and $1.10, down from guidance of $1.60 to $1.70 only three months ago. Shares of GE fell 8 percent in early trading, but had battled back into the black by the close. SPDR Industrial (XLI) gained 1.2 percent for the week.

Intuitive Surgical (ISRG) earned $2.77 per-share versus a consensus forecast of $1.97 per-share. Earlier in the week, Dow component Johnson & Johnson (JNJ) beat estimates and raised guidance. Shares rose more than 4 percent on the week. SPDR Healthcare (XLV) climbed 1.8 percent for the week.

Financials saw strong earnings from insurers, investment banks, financial services and regional banks. Analysts expected Travelers would report 52 cents per-share in the hurricane-hit quarter, but earnings were 91 cents. Morgan Stanley (MS) beat earnings estimates by 15 percent. American Express (AXP) and several regional banks also impressed investors. SPDR S&P Regional Banking (KRE) advanced 2.4 percent on the week.

International Business Machines (IBM) shares gained more than 10 percent on the week following earnings and revenue beats and raised guidance. Although revenue has fallen for 22 consecutive quarters, cloud services have renewed investor optimism.

Crude oil held steady this week and finished near $52 a barrel. Energy equities remain in a consolidation phase. Earnings from oil service companies weighed on the sector. Shares of Schlumberger (SLB) fell 6 percent.

Increased defense spending lifted iShares U.S. Aerospace & Defense (ITA) to a new all-time high. The U.S. Dollar Index gained 0.2 percent, with larger gains versus commodity currencies such as the Canadian dollar, emerging-market currencies, and the Chinese yuan. WisdomTree Bloomberg U.S. Dollar Bullish (USDU) returned 0.8 percent.

The 10-year Treasury yield finished the week at 2.38 percent after tax reform. Although the rally over the past 6 weeks has been impressive, it still trades below the 2.6-percent high we saw back in March.

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