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KEY 15: It was a week to sell and take profits

KEY 15: It was a week to sell and take profits

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Investors paused and stocks pulled back last week. Following an amazing uptrend that has lifted broad market averages for weeks, stock investors chose to, on balance, do somewhat less buying and to sell and take some of those profits. How good was that uptrend? Our Quad-City Times Key 15, from Nov. 3 until last Sunday, Jan. 28, had climbed by 296 points to 2554, a 13.1 percent advance in just 11 weeks.

In the latest week, the profit-taking contributed to a 82.81 retreat, with the area business barometer closing at 2471.21. (1)

It was a week with dozens of major corporate profit reports, including Quad-Cities firms Lee Enterprises and First Midwest Bancorp. But it was also a week where economic inputs continued to speak to investors. Notably, Wednesday afternoon’s commentary from the Federal Reserve was plain talk. Choosing to leave the overnight interest rate, the fed funds rate, unchanged at this meeting, it plainly told investors to expect “further gradual” rate increases as it foresees continued further business growth in 2018. It says that we should see economic expansion at a moderate pace.

The first of the January economic reports confirmed the growth. On Wednesday morning, Automatic Data Processing, the nation’s largest payroll processor, released its estimate of a hearty 234,000 job addition to private sector employment. The report follows its 242,000 jobs added estimate for December. Investors know that more employment means more paychecks and correspondingly more buying of goods and services from companies.

Thursday morning’s release from the Institute of Supply Management showed its purchasing managers index remaining strong. Its January index slipped just minimally from December’s 59.3 reading to 59.1. The institute says that, loosely interpreted, a sizable 59.1 percent of manufacturers are upping buying of parts and supplies, suggesting similar manufacturing growth lies ahead, using those parts.

Closer to home, First Midwest Bancorp’s Monday afternoon earnings report showed that, after actions taken by the company to adjust to the new tax code were adjusted out, reported earnings climbed by 30.8 precent from one year ago, up from $.26 per share to $.34 per share. The company reported increased commercial and industrial lending, up 25 percent from one year ago, and core bank deposits up 23 percent from one year ago, both helped by acquisitions. Importantly, higher interest rates have helped their net interest income, the spread between interest earned by them and interest paid to depositors, to rise by an even stronger 35.6 percent. First Midwest shares finished the week down .76 at 25.28. (1)

Lee Enterprises, parent of this paper and many more in 50 markets, reported on Thursday morning. Initial results were $.63 per share earned compared to $.22 one year ago. Excluding the impact of the new tax law, earnings were $.19 per share. Digital advertising revenue climbed 2.8 percent. Digital retail advertising revenue grew 5.7 percent compared to one year ago. And consumers continue to increase their use of the internet sites, with monthly visits to Lee mobile and tablet and app sites up 6.1 percent compared to one year ago.

Debt reduction continues, down $16.4 million in the quarter, down $67.5 million in the year, cutting its interest cost by $1.3 million in the quarter, and by $6.2 million for the year. Investors sent Lee shares down .17 last week to 2.48. (1)

And, just in time for Super Bowl Sunday, Kraft Heinz Company, with operations in both Davenport and Muscatine, on Monday told consumers, “Don’t just watch Kraft’s Super Bowl LII commercial…Be in it.” Kraft, expecting 111 million fans watching, says it is giving the spotlight to real families, in real time, with photos and videos shared by people like you and me. It says share how you dance, how you snuggle, how you cheer, for their 30-second spot. Sunday, between 5 a.m. and 7:30 p.m. Central, enter via Twitter or Instagram with #FamilyGreatly+KraftEntry for a chance to appear. It’s the first such opportunity, says Kraft. Kraft Heinz stock retreated 2.20 to 77.19.1

A new week begins with another look at purchasing managers' input, on Monday for the services sector. And six of the Key 15 will report profits, including Arconic and Macerich on Monday, shaping investor opinion for renewed buying or a further pullback.

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

The information contained herein has been obtained from sources believed to be reliable, but we do not guarantee its accuracy or completeness.

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.

(1) Source: NYSE


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