What a week for the market – it’s been full of sound and fury, and it’s up for interpretation as to what it’s signifying.

Politics

GOP House members passed the budget, which is good news, but the thin margin points to a more serious challenge for tax reform. Consequently, markets drifted lower into the close on Thursday.

From the markets point of view, as long as the big fight swirls around individual rates and not on corporate rates, it’s great news. Of course, you want consumers to spend more money, which would result in greater growth and profits beginning at the top of the income statement, not the net income after the tax line.

On that note, I continue to believe the final tax package will see corporate rates between 22.5% and 25.0%, which would still be great for industries that hire a lot of people and have been hit, not only by changing consumer behavior but also by mandatory minimum wage increases.

Economic Underpinnings

Stop me if I’ve told you this before; the nation is in the midst of a Manufacturing Renaissance. Not only would it provide economic healing, but it also will help to fight against hopelessness that’s also a major component of the drug epidemic.

The Kansas City Fed report on manufacturing shows the composite is at its highest level since March 2011, surging 35% in the past month.

Comments from manufacturers on tax reform:

 “If tax reform is real and significant we will be adding people, equipment and expanding our facility.”

This is a warning on the skills gap crisis, resulting in more jobs for machines and robots:

“We are unable to find the necessary skilled workers we need to meet customer delivery requirements. We will be investing heavily in the next 12 months on automation to fill the gap.”

Earnings

Earnings season has added credibility to the rally even as some initial reactions to good results have been mixed. The bottom fishing theme has been big with several well-known losers coming to life big time.

Buffalo Wild Wings (BLWD) and Twitter (TWTR) were up huge on earnings news and short squeezes as money continue to rotate out of winners into stocks that have been under immense pressure.

Yesterday, after the close, it was all about Big Tech with Big results:

• Amazon (AMZN) posted earnings of $0.53 or 1,600% more than Wall Street was anticipating.  The company beat on revenue and gave guidance above the Street for the current quarter. The initial reaction sees the shares a lot higher.
• Alphabet (GOOGL) beat on revenue and earnings, which came in at $9.57 versus a consensus of $8.33, as paid clicks rose 47% from a year ago. The stock moved higher on the news.
• Microsoft (MSFT) earned almost one billion dollars, more than expected and earnings of $0.84, well above $0.72. The business mix was intriguing with Azure (AZRE) cloud up 90%, which might be less than hoped.
• Intel (INTC) beat on revenue and earnings of $1.01, well above consensus of $0.80 as both Client Computing and Data Center segments beat estimates. Intel management raised its outlook from the previous guidance.

Today’s Session

Stocks opened higher with the focus of the action on NASDAQ, as old and new tech bellwethers are rising on the wave of cloud and the never-ending mounds of data generated daily.

There is additional economic data out today, and earnings beyond technology that has to be considered, but the investment proposition and reason to be excited about the market continues.

New homes sales

Business investment in durable goods

And 3.0% GDP against consensus of 2.7% = highlights:

• Consumer +2.4%
• Domestic Investment 6.0%

 

 

Comments

Your insight and reporting infuses my morning before the gym. Keep up the fight for freedom. John from Annapolis John Dennstaedt on 10/27/2017 10:19:28 AM

But what about JC Penny. Will these box storez fold? Thdn what doez the average consumer do, example us old Baby Bommers Bob Medkeff on 10/27/2017 3:15:17 PM

I think there will be options but fewer of course and at some point you'll go kicking and screaming into the Internet and online shopping. Charles Payne on 10/27/2017 4:18:32 PM

This market seems to be slightly in the dark about which way to go. I believe that within the next 60 days the path to profits will be much clearer. Remember, there is still a lot of cash on the sidelines just waiting to buy us into a rising market. Chuck H on 10/28/2017 9:29:02 AM

Tweet

 

Home | Products & Services | Education | In The Media | Help | About Us | Disclaimer | Privacy Policy | Terms of Use | All Rights Reserved.