DAILY MARKET RECAP – January 18, 2019
• S&P 500 up 1.32% to 2,670.71
• DJIA up 1.38% to 24,706.35
• NASDAQ up 1.03% to 7,157.23
• Russell 2000 up 1.04% to 1,482.56
• U.S. 10-yr up 4.1 bps to 2.788%
• WTI Oil up 3.46% to 53.87
Markets closed higher for the fourth straight week after huge trade optimism with China offering a 6-year import boost in trade talks with the US. The offer was a bid to raise annual goods imports from the US by a combined value of more than $1 trillion in order to reduce its trade surplus to zero by 2024. The DJIA rose 1.4%, led by gains in Caterpillar and Home Depot. The S&P 500 climbed 1.3% out of correction territory, with materials and industrials leading. The NASDAQ was up 1.1%. Meanwhile, the government shutdown continues into its 28th day, which could bring economic growth to its slowest pace since Donald Trump took office. The 10 year Treasury rose 4 basis points and WTI Oil jumped 3.5% on continued US-China trade optimism.
Consumer Sentiment (January) – 90.7 vs 97 expected
The effects of the government shutdown have started to show, with consumer sentiment much lower than consensus. Inflation expectations, in contrast, have held steady for the year-ahead outlook. In addition to the effect of the government shutdown, the impact of tariffs and instability in the financial markets may have rattled consumer confidence this month.
Industrial production (December) – 0.3% vs. 0.3% expected
Industrial Production showed solid strength in December, growing by 0.3%, as expected, driven by a surge i motor vehicle production, gains in business equipment and a rare year-end increase in maufacturing. For the year, total industrial production grew 4% vs. a 2.9% gain in 2017 and only 0.5% in 2016. Manufacturing production was soft in November but rose greatly in December at 1.1% vs. .1% consensus due to a surge in construction supplies and a strong gain in business equipment. Overall economic numbers have disproved sentiment that the factory sector would slow at year end, although some data has been delayed due to the government shutdown and we don’t yet have the full picture of manufacturing’s contribution to Q4 GDP.
In earnings news, several regional banks reported today including SunTrust Bank, Citizens Financial Group, Regions Financial Corp, and First Horizon National Corp, with only First Horizon missing on earnings.. State Street Corp also reported, beating Q4 adjusted EPS expectations by a penny. State Street Corp also announced plans to cut about 6% of its workforce to cut costs. The stock was up 0.35% to end the day. The SPDR S&P Regional Bank ETF (KRE) was up over 2% as a result of the positive bank earnings.
VF Corp. (VFC), the parent of North Face and other apparel brands earned an adjusted $1.31 per share for the fiscal third quarter, 21 cents a share above estimates. Revenue also beat forecasts, and VF raised its full-year outlook on strong demand for North Face apparel and Vans shoes, among other factors. Stock rose 12% on the news.
• US Holiday. Martin Luther King Jr. Day. Markets Closed
All estimates come from Econoday’s survey of economists/analysts. Earnings per share estimates are from Factset, are set against year ago results, and represent adjusted earnings.