December 9, 2016

Stocks opened higher yet again this morning (Dow +57 pts; SPX +.3%). The best performing sectors in early trading are healthcare (+1.2%), consumer staples (+1%) and technology (+.5%). Banks, semiconductors and telecoms are lower in early trading. The pharma/biotech space is rebounding a bit after a monster beating earlier this week. President-Elect Trump indicated he’d like to address high prices for pharmaceuticals. The healthcare sector is now flat over the last two years. Most commodities are higher on the day (copper, oil, iron ore). WTI crude oil is trading up over $51/barrel. Bonds are flat on the day. The 5-year and 10-year Treasury yields are trading around 1.84% and 2.42%, respectively.  

In a CNBC interview earlier this week, Wells Fargo analyst John LaForge said he expects oil prices to go sideways ($40-$50) for a long period of time. Global supply is still relatively high, and if oil spikes to $60/barrel, US oil companies will really start ramping up production. Despite the appearance of continued OPEC dominance and a 40% global market share, Saudi Arabia really needs higher oil prices to help balance the country’s budget. A CNBC reporter noted, “The majority of the Saudi population does not work. They get paid by the government, for the most part.” And oil revenue has enabled that. They need to make more money to “pay off the population.” 

Thus far, the Trump Rally has pushed the SPX up about 5.6% and the Dow up about 7%. But the real story is how the different market sectors have responded. Financials (especially banks) are the clear leader, up 18%. Energy and industrial sectors are up about 9%. But while the healthcare sector initially shot up in anticipation of a Trump presidency, it has fallen of late and is up only .5% since the election. Bringing up the rear, the utilities sector is down 3.5%.

US consumer sentiment surged this month to 98.0 from 93.8 in November. That’s an 11-year high for the index. Bloomberg says the University of Michigan survey discovered rising optimism around “the positive impact form new policies…with more people expecting the economy and job market to strengthen in the coming year.” And the improved growth outlook the survey’s 1-year inflation outlook actually fell to 2.3% from the prior outlook of 2.4%.


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