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KEY 15: Investors begin buying again

KEY 15: Investors begin buying again

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They’re back. Investors returned to bid stocks higher last week. After finding stock prices had been pressured downward to attractive levels in prior weeks, the buying began on Monday. And the full week delivered a 42.47 gain for our Quad-City Times Key 15 to close at 2345.47.

Never mind that there were few economic reports to excite investors. Never mind that the market yield on 10-year U.S. Treasury notes climbed to a 3 percent for the first time in years. Never mind that crude oil prices climbed from $69.81 per barrel during the week to $71.40 Thursday on the nearby NYMEX futures contract, suggesting higher energy and gasoline costs. And, no, investors did not mind.

In fact, the few economic reports told of continued business growth. Few were more remarkable than the National Federation of Independent Business “small business optimism index”, reported Tuesday. This key monthly finger on the pulse of small businesses (which create a disproportionately sizable share of job creation) came in at a record high 104.8 reading, and reported that a record level of surveyed businesses are growing profits.

They say that small business earnings rose to the highest level in at least 45 years. Labor is their top issue: 89% of those surveyed reported trying to hire, and finding few or no qualified prospects. Said NFIB Chief Economist Bill Dunkelberg, “Consumer spending, the new tax law, and lower regulatory barriers are all supporting the surge in optimism across all small industry sectors.” He did say all. That’s a very powerful message to investors. And, it’s a powerful message to Quad Citians, who are considering building or expanding businesses or applying for jobs.

Here in the area, our Quad-City Area Realtors Association April home sales closings surged to a 7-percent rise over last April, up from 505 to 530. The dollar volume surged more, up 12.2 percent from $79.8 million one year ago to $89.5 million. They still report a shortage of listings, despite our recently warmer days bringing more to the market.

And hey, Quad-Cities, look at farm equipment sales: The Association of Equipment Manufacturers on Thursday reported April combine sales, industry-wide, were up an impressive 58.9 percent over last April. Combine sales for the first four months were up 21.2 percent, compared to last April, up from 1012 then to 1227. And combines are made right here, remember.

In that same four month period, four-wheel drive tractor sales climbed 3.9 percent. Large two-wheel drive tractor sales, however, slowed by 5.7 percent.

Among Key 15 companies, the week began with Tyson Foods, where over 2,500 folks work in their Joslin facility during two shifts to process beef for the nation, reporting second quarter profits. Second quarter sales climbed 7.6 percent from one year ago to $9.77 billion. Adjusted earnings per share climbed a healthy 25.7 percent from $1.01 last year to $1.27 in the latest period.

Tyson reaffirmed their 2018 profit outlook, but trimmed their sales outlook to 6 percent, from a 6-percent-to-7-percent range. It was a quarter, according to Tyson, that they also paid out a one-time cash bonus to frontline employees. Tyson shares retreated briefly, then recovered to gain 1.27 for the week to 68.24.

Monday was also the day that Monsanto, with Muscatine herbicide operations, reported that Chairman and CEO Hugh Grant announced his intent to leave the firm upon the closing of Bayer’s acquisition of Monsanto. They reported that they expect that closing in the second quarter of this year.

Until then, Monsanto says Grant will continue to focus on securing the remaining regulatory body approvals for the merger. A 35-year employee, Grant has served as CEO since 2003. Monsanto shares were quiet last week, up .13 at 124.97.

HNI Corporation, with Muscatine headquarters, office furniture, and hearth product manufacturing, announced on Tuesday that they will raise their quarterly stockholder dividend. The dividend will go up by 4 percent for the June payout to 29.5 cents per share, for an indicated annualized $1.18 per share. HNI stock trended upward last week, rising 1.07 to 36.00.

Watch Tuesday’s retail sales report to see where the strong consumer spending reported by that NFIB survey was the strongest. Wednesday’s industrial production report will tell us what factories are doing to respond to demand. And, will these help investors optimism to continue?

James Victor is senior vice president-wealth management and financial adviser with Morgan Stanley, Davenport.

The Key 15 reflects stocks of local interest. It is not a product and cannot be purchased as one. Information contained herein has been obtained by the writer from sources believed to be reliable, but he does not guarantee its accuracy or completeness. Neither the information nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Past performance is no guarantee of future results. 

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