Investors went on a feeding frenzy today and gobbled up stocks across the board.
The buying started in Asia with the Hong Kong Hang Seng Index surging +1.91% and lighting a fire in both the Asian and European markets. The equity rally continued into the US markets and all the major indexes surged to new highs. Thanksgiving week is normally bullish and this one is definitely off to a good start.
A final flurry of earnings reports were also helping to lift the market. Medtronic (MDT) reported earnings of $1.07 that beat estimates for 99 cents. Revenue of $7.05 billion beat estimates of $6.98 billion. Hurricane Maria cut $55-$65 million from revenue. The company made a point of complaining about the three hurricanes and the California fires as impacts to sales. Their manufacturing operations in Puerto Rico were significantly challenged because of flooding and power. They guided for revenue growth in 2018 of 4% to 5% and earnings growth of 9% to 10%. Shares rose 5% on the news.
Lowe's Cos (LOW) reported earnings of $1.05 that rose 15.9% and beat estimates for $1.02. Revenue rose 6.5% to $16.77 billion and beat estimates for $16.568 billion. Same store sales of 5.7% beat estimates for $4.6%. The company said hurricanes increased demand both before and after the storms. The company guided for full year revenue to rise about 5% and same store sales to grow 3.5%. Full year earnings guidance was $4.20-$4.30. Shares closed fractionally lower after trading up intraday.
Dollar Tree (DLTR) reported earnings of $1.01 that rose 9.6% and beat estimates for 90 cents. Revenue of $5.32 rose 6.3% and beat estimates for $5.28 billion. Same store sales rose 3.3% system wide and Dollar Tree branded stores rose 5.0%. The Family Dollar brand rose only 1.5%. They guided for the current quarter for revenue of $6.32-$6.43 billion and analysts expected $6.36 billion. For the full year they guided for earnings of $4.64-$4.73 per share on revenue of $22.20-$22.31 billion. Last week Goldman Sachs called them the "top pick" in food retailing. Shares rallied 2.4% to a new closing high.
Campbell Soup (CPB) reported earnings of 92 cents that missed estimates for 97 cents. Revenue of $2.16 billion missed estimates for $2.18 billion. Full year revenue is expected to decline -2% and earnings decline 1% to 3%. Prior guidance was full year earnings of $2.95-$3.02. Shares fell $4 to support at $45.
Signet Jewelers (SIG) was crushed after disappointing on revenue and guidance. The company reported earnings of 15 cents that matched estimates. Revenue of $1.16 billion missed estimates for $1.17 billion. Same store sales fell -5% and total sales declined -2.5%. The company blamed the sales decline on the hurricanes and unexpected disruptions to their credit services. The company guided for the full year for earnings of $6.10-$6.50 per share, down from $7.16-$7.56. Shares fell 30% on the disappointing guidance.
Shoe retailer DSW Inc (DSW) reported earnings of 45 cents that missed estimates for 53 cents. Revenue of $708.3 million missed estimates for $709.6 million. Same store sales fell -0.4%. The company guided for the full year for earnings of $1.40-$1.45, down from $1.45-$1.55. The company blamed the hurricanes and warm weather that kept their "cold weather products from gaining anticipated traction." DSW shares failed to gain traction as well and fell -13%.
After the bell, Hewlett Packard Enterprise (HPE) reported earnings of 31 cents, down from 61 cents that beat estimates for 28 cents. Revenue of $7.66 billion missed estimates for $7.77 billion. There were some divestments that skewed the numbers. The company guided for Q4 earnings of 20-24 cents compared to estimates for 27 cents. The guidance was bad but shortly thereafter, another press release said Meg Whitman was resigning from the role of CEO effective Feb 1st and would be replaced by long time employee Antonio Neri. Shares fell up to 8% on the news to close at $13.25.
HP Inc (HPQ) reported earnings of 44 cents that matched estimates. Revenue of $13.9 billion rose 11% and beat estimates for $13.4 billion. They guided for 40-43 cents for the current quarter and gave 2018 estimates for $1.75-$1.85. Analysts were expecting 42 cents and $1.79. Shares fell 4% on the report.
Gamestop (GME) reported earnings of 54 cents that easily beat estimates for 43 cents. Revenue of $1.99 billion also beat estimates for $1.96 billion. Same store sales rose 1.90% and beat estimates for 1.15%. The company guided for full year earnings of $3.10-$3.40. Shares spiked $2 on the news.
Salesforce.com (CRM) reported earnings of 39 cents that beat estimates for 37 cents. Revenue of $2.68 billion beat estimates for $2.65 billion. Deferred revenue of $4.39 billion rose 26% and beat estimates for $4.18 billion. However, the company guided for Q4 earnings of 32-33 cents and revenue of $2.80-$2.81 billion and analysts were expecting 34 cents and $2.79 billion. For the full year they guided for revenue of $10.43-$10.44 billion, up from $10.35-$10.40 billion. Earnings guidance rose slightly to $1.32-$1.33. Current quarter guidance for billings was $5.00-$5.07 billion and analysts were expecting $5.37 billion. Shares were volatile in the afterhours session with a high of $112 and low of $106 and they closed the session with a loss of $1.
This concludes the earnings for the week with the exception of Deere (DE) before the open on Wednesday.
Paypal (PYPL) is going to allow customers to buy stocks through app-based micro investor Acorns. The app automatically invests your spare dollars into securities you select. This can be a one-time investment or can be set up as a recurring investment. You can also have the app "round up" your Paypal purchases and invest the change into low cost diversified ETFs. Paypal shares gained another $1.76 to close at a new high.
Uber, is the gift to the news community that keeps on giving. We found out today that Uber was hacked and data on 57 million users and drivers had been stolen. That is not surprising in today's economy. However, what is surprising is that they paid the hackers $100,000 to delete their tracks and Uber did not report the hack. This happened in October 2016. Uber said they believe the information was never used and they declined to identify the hackers. Almost immediately, multiple AGs announced they were going to investigate the hack.
Just last week Uber was fined $9 million for allowing persons in Colorado to drive that had items on their background checks that should have kept them from being a driver.
Last October, two hackers accessed a private GitHub coding site used by Uber software engineers and then use the login credentials they obtained there to access data stored on the Amazon Web Services account that handled company data. From there the hackers discovered an archive of rider and driver information. After copying the data, they emailed Uber asking for a payoff. Uber said they were obligated to report the hack and did not do it. They have since implemented significantly stronger security. The New York AG had previously fined Uber for failing to disclose another breach in 2014.
On the economic front, the existing home sales for October rose from 5.37 million to 5.48 million. That was up 2% from September but down -0.9% from October 2016. The months of supply on the market fell from 4.2 to 3.9 and the lowest level since March. Single-family sales were 4.87 million, up 2.1%, and multifamily sales of 610,000 rose 1.7%.
Single-family home listings declined -2.4% to 1.6 million. Multifamily listings fell -7.4% to 201,000. All cash sales accounted for 20% of the purchases. Sales are booming around areas that were devastated by the hurricanes as homeowners move to higher ground or more secure locations.
The Chicago Fed National Activity Index for October rose from 0.36 to 0.65. This was the first time since late 2014 that the index has posted positive numbers back to back. It was also the highest reading since Nov 2014.
After the close, the API crude inventories showed a decline of -6.356 million barrels for the week ended last Friday. Analysts were expecting a decline of -2.1 million. Gasoline inventories rose 869,000 barrels and close to estimates for one million. Distillate inventories fell -1.67 million barrels. Refinery utilization rose to 90% last week and that prompted the drop in crude inventories.
Crude prices spiked over $1.50 in afterhours rising from the $56.09 close to $57.65.
The calendar for the rest of the week only has one highlight and that is the FOMC minutes on Wednesday. Unless the minutes claim a fistfight broke out between Fed members at the last meeting, the minutes will probably be ignored.
Today was a shock. Up until this week the markets had been showing declining internals with individual new highs shrinking and the advance/decline lines teetering on the edge of collapse. All of that has been reversed in only four days. The short squeeze on Thursday kicked it off and follow through appeared this week. All the major indexes closed at new highs on Tuesday despite volume being the second lowest day since October 23rd. Monday was the lowest volume at 5.6 billion shares and Tuesday was only slightly higher at 6.18 billion.
Art Cashin has always said ships can still sink in a quiet sea. Apparently, a rising tide even in a quiet sea can float all boats.
Wednesday is likely to be the lowest volume in months and I would be very surprised to see a continued rally like we saw today. The market can continue higher but I doubt we will see major gains. I have been wrong before and I definitely did not expect Tuesday's gains.
Thanksgiving week is normally bullish but we are also facing an extended weekend since there will be nobody at their trading desks on Friday. This is the equivalent of a 4.5-day weekend because most traders will close up shop after the open on Wednesday.
The S&P surged to a new high with a 17-point gain and closed just under round number resistance at 2,600. This is blue sky territory and we are already well above all but the most optimistic analyst estimates for the end of the year.
We are starting to get forecasts for 2018 and they are off the charts. I should have a graphic in the next week or two. UBS is targeting 2,900 in 2018. Goldman Sachs is targeting 2,850 with 3,000 in 2019 and 3,100 in 2020. Trying to forecast that far out is mostly wishful thinking. Morgan Stanley is projecting 3,000 in 2018 and then 2,000 in 2019. Yes, 2,000 because they expect a recession.
BMO Capital Markets is projecting a bull case for 2018 at 3,250, base case at 2,950 and bear case for 2,200. That pretty much covered all the bases for them. Regardless of what happens they can say they called it.
With only 5-weeks left in 2017, we should be nearing an exhaustion top for the rally. Whether that is 2650, 2700 or even 2800 is just a guess today. However, with every point we move higher we are getting that much closer to a decent correction. I expect it in January but negative tax headlines could trigger it at any time when lawmakers return to work next week.
It was a big day for the Dow with only 5 decliners and a lot of nice gains. Apple, 3M, Home Depot and Boeing led the list. All of which are positions in the LEAPS Newsletter.
The Dow stalled at round number resistance at 23,600, which was also the intraday high back on November 7th. While the Dow may go higher, it is still in the grip of that consolidation pattern from the last four weeks. We need at least one more good move to break free.
There was no doubt about the breakout on the Nasdaq. The index ran for 72 points and closed at the highs for the day. The big cap techs were on fire and that powered the index through that round number resistance at 6,800. This is the kind of move we need to see on the Dow, to stimulate a new round of price chasing.
The Russell 2000 small caps have been exploding higher for the last four days. The index has rallied 54 points or +3.7% in just four days! I wrote on Monday that a Russell breakout to a new high could set the market on fire and one more day like today and anything is possible by year-end.
I am shocked and thrilled to see the markets close at new highs. This is supposed to be a bullish week but this exceeded expectations and there are two days to go. Not having the constant headlines about the potential failure of the tax bill in the senate has been a positive factor. Sometimes traders have short memories. Out of sight, out of mind. Unfortunately, that worry will return next week. There were some positive comments on the various Sunday shows suggesting the GOP leaders were ready to capitulate on anything just to get the tax reform passed. Without it they could lose their majority in the 2018 elections and that would be a disaster for the party. They have to get this passed or die trying.
I would not chase prices here. I do not like buying explosive new highs because they can implode just as fast as they explode. Besides, options premiums are significantly inflated from levels we saw last week. You have my permission to shut down your PC and take the next five days off. Do something constructive like build a snowman with your kids or go shopping with your wife. I guarantee the market will still be here on Monday.
Enter passively, exit aggressively!
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