January 16, 2017

US stocks surged again today on the back of better than expected earnings announcements. The Dow is currently up 150 pts and the SPX is up .26%. But don’t expect all of that to stick; the earnings news wasn’t that great. Believe it or not, the real estate is leading the way +1.2%. The healthcare sector (specifically pharmaceuticals) is also up big after Merck’s (MRK) new drug Keytruda fared well in a clinical trial. Finally, semiconductors are up .9% after Taiwan Semiconductor (TSM) beat earnings expectations. European stock markets are mixed today but Asia was mostly positive overnight. Commodities are trading lower today. Copper is down 1% (and 3% on the year). WTI crude oil is down .5% to trade just under $64/barrel. Bond prices are slightly higher today. The 5-year Treasury yield is hovering around 2.35% and the 10-year yield is trading at 2.54%. 

Speaking at a National Retail Federation conference, representatives of Adobe Analytics said online shopping during the holiday season set a new record. Americans spent $108.2bil online during the season, up nearly 15% from year-ago levels. 

Citigroup (C) reported slightly better than expected fourth quarter revenue (up 1% y/y) and earnings (+5% y/y) this morning. Consumer banking rose 6% in the quarter, which is encouraging and helped to offset weakness in corporate banking. Management said the new tax law is a long-term positive but did have to take one-time $19bil charge to write down deferred tax assets. This was largely expected by Wall Street analysts. Management also confirmed that the bank remains committed to raising the dividend and buying back stock. That was received warmly by investors. The stock is up .7% today.

Congressional leaders are meeting with President Trump this week in negotiations aimed at preventing another government shutdown. Government operating funds will apparently run out Friday if authorization isn’t given to increase federal budget caps. Congress, of course, doesn’t mind spending money but Republicans are looking for a boost in defense spending and Democrats want more spending on social programs (i.e. DACA, hurricane disaster aid). Of course, congress could simply pass a short-term measure to deal with the issue and kick the can down the road. But at this point there’s a lot of political posturing.    

Thursday we’re scheduled to get some key economic data from China (industrial production & retail sales). Some high profile economists are projecting slightly slower economic growth for China this year so the reports could move the market. 

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