October 26, 2017

Stocks opened higher after yesterday’s rout (Dow +76 pts; SPX +.18%). Most sectors are headed higher, save real estate and healthcare. Individual stocks, not the indexes, are ruling the tape as earnings announcements come fast and furious. The VIX Index, which spiked briefly to 13 yesterday, is trading back down to 11. European markets are poised to close higher by over 1% in reaction to the European Central Bank’s policy meeting. The Euro sank vs. the dollar as well. Most commodities are lower on the day, but WTI crude oil is trading back up around $52.20/barrel. Bonds are slightly lower in price, higher in yield. The 5-year Treasury yield ticked up to 2.05% and the 10-year yield is hovering around 2.43%. The 10-year yield may take a breather here, but soon could very well test the next resistance level of 2.54%. 

ConocoPhillips (COP) reported third quarter results that cheered investors. Revenue growth of 10% y/y beat Wall Street expectations, as did earnings per share. COP benefited from a recent rise in oil prices. But aggressive cost-cutting also helped the company boost profit margins. Management cut its capital spending guidance to $4.5bil this year from $4.8bil and intends to continue reducing debt to less than $20bil. A Barlcays analyst noted, “People will look at the cashflow and whether they will continue to be able to break even and pay their dividends at $45, $50 Brent [crude oil prices].” The stock is up 3%  this morning. 

Raytheon (RTN) reported third quarter revenue and earnings per share growth of 4% and 10%, respectively. That’s OK, but Wall Street expected modestly higher revenue. Management did raise earnings guidance for full-year 2017, but lowered revenue guidance. The stock is down 5% this morning. 

Altria (MO) reported better than expected third quarter results. Despite a 1% y/y decline in sales, earnings per share grew 10%. That’s the highest rate of earnings growth since the first quarter of 2016. It’s the same old story: smoking rates are declining but Altria raised prices and cut operating costs. Traditional cigarettes still account for about 85% of profits, but other areas (i.e. vaping, wine, and the 10% ownership stake in Anheuser Busch In-Bev) provide some measure of diversification. The stock is up 2.3% this morning. 

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