Business strength and possible tax reform passage combined to create a week of impressive investor opinion. Most favored by investors were companies in the industrial sector, among them area manufacturing farms, and the banking sector, expected to benefit from indications that the strengthening economy could bring further interest rate increases. For the week, our Quad-City Times Key 15 gained a remarkable 67.25 to close at 2,375.02 and another new record high.
The litany of economic reports suggesting healthy continuing growth began with Monday’s latest Commerce Department report on new home sales. They say October sales surged 6.2 percent compared to September. We should allow some of the resurgence could have been normalization following hurricane related interference. Still, October sales up are impressive 18.7 percent compared to one year ago. And September was really no decline, regardless of hurricanes. September new home sales were up a hearty 11.6 percent over last year.
Tuesday’s consumer confidence index from the Conference Board showed more of the confidence that it takes to buy homes and other big-ticket items. Its index climbed yet again, up from an upwardly revised 126.2 October reading to 129.5 in November. The report was a fifth consecutive monthly gain and a new 17 year high. Comments from Lynn Franco, director of economic indicators at the Conference Board, included this upbeat assessment, “Consumers are entering the holiday season in very high spirits and foresee the economy expanding at a healthy pace into the early months of 2018.”
The Board said survey respondents were positive on the jobs market and optimistic for labor market growth even in the near term.
Now, all of this comes in a week where, clearly, an assessment of holiday shopping, so far, was being taken by investors. Indeed, a host of observations of both traditional retail outlets and internet shopping combined to give investors a gratifying picture of progress so far. Among those assessments, Adobe Analysts on Tuesday estimated that “Cyber Monday’s” sales were up 17 percent over the same Monday of 2016.
And, my own checks with mall managements and longtime individual store employees gave the impression of satisfying growth in the busy post-Thanksgiving shopping days as well.
Among the manufacturing stocks contributing to gains in our Quad-City Times Key 15 was Deere & Company, where shares gained 4.40 last week to 149.90. An impressive 74 percent year-over-year growth in earnings per share reported on the day before Thanksgiving helped investors’ moods. Deere’s outlook was upbeat in that report. And, in the recent week, a number of major investment firms increased their price targets for Deere shares in coming months, contributing to investor motivation.
FedEx is continuing to see growth in demand for package shipping, fed by both a growing economy and growth in stay-at-home internet shopping. To handle growing demand, FedEx Express announced on Tuesday that they’ve agreed to purchase 50 new Cessna SkyCourier 408 aircraft with option to buy 50 more.
Interestingly, the new aircraft, made by Textron, was helped in its development stage by cooperation between FedEx and Textron. It’s an aircraft that will be used to modernize FedEx’s fleet for small- and medium-sized markets, and referred to as a “feeder aircraft,” as package loads are “fed” into larger markets. FedEx shares advanced impressively on Wednesday and Thursday, leading to a full week gain of 13.72 to 230.87, and surely powering the Key 15 gain, as well.
Finally, the intended acquisition of Monsanto, with Muscatine herbicide operations here, by Bayer of Germany took another step forward. The two companies jointly reported on Friday that the Committee on Foreign Investment in the United States, or CFIUS, has completed its review of the proposed merger and has no unresolved national security concerns. More approvals here in the U.S. and in Europe are needed. The companies reiterated that they expect to complete that corporate combination in early 2018. Monsanto shares opened higher on Friday. For the full week, shares were up .88 to close at 118.93.
Another full week of economic reports awaits investors, including major employment reports. Can their optimism continue to be fed?
The information contained herein has been obtained from sources believed to be reliable, but we do not guarantee its accuracy or completeness.
James Victor is a senior vice president-wealth management and financial advisor with Morgan Stanley Wealth Management in Davenport.
The views expressed herein are those of the author and do not necessarily reflect the views of Morgan Stanley Smith Barney LLC, Member SIPC, or its affiliates.
All opinions are subject to change without notice. Neither the information provided nor any opinion expressed constitutes a solicitation for the purchase or sale of any security.
Past performance is not guarantee of future results.
The Quad City Times Key 15 reflects stocks of local interest. It is not a product and cannot be purchased as one. The list includes: ARCONIC, Deere, Exelon, First Midwest Bancorp, Heinz, HNI Industries, Eldorado Resorts Inc, IPSCO, Kraft Foods, Lee Enterprises, Monsanto, 3M, Tyson Foods, Archer Daniels Midland and Wells Fargo.
1 SOURCE: NYSE