Archive for the ‘Market Update’ Category

Conagra’s Post Earnings Pullback Provides Opportunity

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Back on Dec. 21st shares of Conagra surged following a solid second quarter earnings report.  Unfortunately the early strength didn’t last and by the close that day an ugly spike high was in place.  The stock has struggled since as a healthy pullback developed.  By last week CAG had fallen over 6% and was testing the December lows.  Shares have firmed up since and may now be poised for a fresh rally leg.  We believe the stock is a fairly low risk buy near current levels.  A close back below $36.00 would push CAG back below its 200 day moving average indicating a more drawn out basing pattern is on the way.  Until then CAG is on solid footing with layers of support underneath.  If the stock can continue to hold above $36.50 in the near term a rally back up to the December peak appears likely.

At time of publication we are long CAG in most managed accounts.

Apple Repatriates

Key bit from CNBC: 

  • Apple says the new tax law will help it contribute $350 billion to the U.S. economy over the next five years.
  • It says it will create 20,000 new jobs and open a new campus.
  • Apple expects to pay about $38 billion in taxes for the horde of cash it plans to bring back to the United States.

(Emphasis mine)

More:  Apple also said it will spend over $30 billion in capital expenditures over the next five years. About $10 billion in capital expenditures will be investments in U.S. data centers, the company said.

Apple added that it will spend $5 billion as part of an innovation fund, up from the $1 billion CEO Tim Cook announced last year on CNBC’s “Mad Money.”

The job creation will include direct employment and also suppliers and its app business, which it had already planned to grow substantially (app developers earned $26.5 billion in 2017.) The new campus will focus on customer support.

This is huge folks, read the whole thing:  www.cnbc.com

U.S. Manufacturing Rises, Again

The details from Bloomberg.com:  U.S. factory production rose for a fourth straight month in December, capping the strongest quarter since 2010 and underscoring a resurgence in manufacturing that’s primed for further advances, Federal Reserve data showed Wednesday.

Highlights of Industrial Production (December)

  • Factory output rose 0.1% (est. 0.3% gain) after rising an upwardly revised 0.3%
  • Total industrial production, which also includes mines and utilities, increased 0.9% (est. 0.5% rise) after a revised 0.1% decrease
  • Capacity utilization, measuring the amount of a plant that is in use, rose to 77.9% (est. 77.4%) from 77.2%

Rollbacks matter…

Wages Will Not Increase

So says the democrat/media complex.  Great video montage below from the Washington Free Beacon.  Enjoy:

More here:  www.freebeacon.com

Nasty Reversal

spx

The major indexes(Dow 30 Industrials/S&P 500 Index/Nasdaq Composite)all gave back their very strong openings today, a sure sign of exhaustion.  Considering the blistering rally we’ve had already this year a bit of a shake out would be welcome.  Optimism is at extremely high levels due to the fact that we haven’t had a meaningful pullback(5%)in nearly 400 days.  We believe a much needed correction is on the way and with it, much more attractive entry levels.  Earnings season is about to get into full gear which will very likely increase volatility.  Initial target for the S&P 500 Index is the 2017 peak($2695.00), a dip of nearly 4% from today’s high.

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Hat tip Charlie Bilello

 

Breaking Formation

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From Strategypage.com:   JOINT BASE PEARL HARBOR-HICKAM, HI, UNITED STATES 01.11.2018 Four U.S. Air Force F-15C Eagle fighter jets from California Air National Guard’s 144th Fighter Wing return to base during Sentry Aloha 18-01 at Joint Base Pearl Harbor-Hickam, Hawaii Jan. 11, 2018. Sentry Aloha provides tailored, cost effective and realistic combat training for U.S. Air Force, Air National Guard and other Department of Defense services to provide U.S. warfighters with the skill sets necessary to perform their homeland defense and overseas combat missions. (Air National Guard photo by Senior Master Sgt. Chris Drudge)

After A Full Year Without A 5% Correction, What’s Next?

In one word, volatility.

Ryan Detrick with the details:  We looked at all the times the S&P 500 Index didn’t pullback 5% and found the average correction the next year is 12%.  There is also a big jump in 1% daily changes, but also tends to be higher when all is said and done.

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Hat tip LPLResearch

Trickle Down

Wal-Mart Raises Hourly Wages in Wake of Tax Reform

The lede:

Wal-Mart Stores Inc. is boosting its starting hourly wage to $11 and delivering bonuses to employees, capitalizing on the U.S. tax overhaul to stay competitive in a tightening labor market.

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The increase takes effect next month and will cost $300 million on top of wage hikes that were already planned, the world’s largest retailer said Thursday. The one-time bonus of up to $1,000 is based on seniority and will amount to an additional $400 million. The company is also expanding its maternity and parental leave policy and adding an adoption benefit.
“Tax reform gives us the opportunity to be more competitive globally and to accelerate plans for the U.S.,” Chief Executive Officer Doug McMillon said in the statement.

This is what ‘trickle down’ looks like.  For decades liberals/democrats have blasted trickle down theory as fake science without any push back.  The theory was always valid, it just didn’t fit the narrative.  No matter how hard the MSM tries to ignore it a vast number of millennials will now see it first hand.  Wal-Mart is not the only company ‘spreading the wealth’ around.  Can you imagine all the head scratching going on inside the economics departments at the elite universities?

From Investopedia.com:

What is the ‘Trickle-Down Theory’

Trickle-down economics, or “trickle-down theory,” argues for income and capital gains tax breaks or other financial benefits to large businesses, investors and entrepreneurs in order to stimulate economic growth. The argument hinges on two assumptions: all members of society benefit from growth; and growth is most likely to come from those with the resources and skills to increase productive output.

More on Wal-Mart here:  www.bloomberg.com

What Works In January

After a very impressive start, what will the remainder of January look like?  Here’s a look at the seasonal patterns as the winter season settles in: 

getting-technical-january-seasonality-trends

Key bit from LPL Research:  The information technology, healthcare, utilities, and consumer discretionary sectors have on average tended to exhibit the highest relative strength. However, if you are interested in looking under the hood for a more targeted strategy, out of the top 10 industry groups, you may want to consider the information technology, consumer discretionary, and healthcare sectors as they have represented seasonally strong breadth for select industry categories in the month of January over the period analyzed. As we start 2018, we can shift our thoughts away from the frigid temperatures to the warmth of the equity markets. But should stocks hit a cold spell this month after a hot start, let us warm up to the seasonal statistics that we tend to see in January—as well as the possibility that it could be a good time to consider implementing this type of analysis as part of your portfolio management plan.

Up to Number 2

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After today’s close the S&P 500 Index has now remained above its 200 day moving average for 386 straight days.  Second longest such streak in history.

Steady.  Higher.  Relentless.

Hat tip Charlie Bilello

 

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