January 11, 2017

Stocks surged at the open (Dow +97 pts; SPX +.13%). Yesterday, the Nasdaq hit a fresh all-time high. Energy and industrials sectors are leading this morning as oil prices bounces back. Biotechs, gold miners, telecom carriers and REITs aren’t participating. The dollar is stronger on the day, but oil prices are up 2% to $52/barrel anyway. Bonds are pretty much unchanged. The 5- and 10-year Treasury yields are hovering around 1.89% and 2.39%, respectively. 

Traders are nervously awaiting the president-elect’s press conference this morning. Or maybe they’re hopeful; hard to say. Bloomberg says Mr. Trump’s comments “may provide details on the timing and scope of planned policies from infrastructure spending to trade pacts that will set the tone on financial markets in 2017.” That seems like a lot to ask, and the stock market may be down by the end of the day. 

General Motors (GM) surprised the investing world yesterday with wildly optimistic earnings guidance for 2017. The company think it can grow earnings by as much as 7%. Wall Street analysts had been forecasting a down year for profits at GM (i.e. year-over-year earnings decline of 5%). So the gap between Wall Street and GM management is a whopping 8.5%. Management said it expects higher revenue, better profit margins and stronger cashflow this year. The stock was up 3.7% yesterday and is up another 1.3% this morning. This is pretty big surprise for a stock that has done nothing in five years. And it makes you think that perhaps 1) China’s economy may be improving and 2) maybe US auto sales haven’t yet peaked. 

The NFIB Small Business Optimism Index just surged to the highest level since the end of 2004. And this is the biggest monthly move in at least that long. NFIB is a survey of roughly 600 small businesses and it attempts to gauge optimism about the future. 

Fourth quarter 2016 earnings announcement season is nearly upon us. Wall Street strategists currently forecast S&P 500 companies to report 8% y/y earnings growth and 4% earnings growth. So it looks like the earnings recession is over and corporate America is on the mend. 

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