MARKET-ALERT – Rumblings Up, Down, and Around Wall Street – Issue #421 dated February 19, 2017 with Ray Dirks of RAYDIRKS Research and his team of securities analysts and money managers, along with the internationally-followed Web Sites : www.CorporateProfile.com and www.CPreports.com, where Fashion meets Finance, and where Stocks meet Blonds.
Well, well, well…’Twas another exciting week on Wall Street in the United States as the major indexes all closed at new all-time highs on Friday, February 17. And Rumblings’ Favorite Stocks for 2017 also did very well, led by Apple, Inc., which set a new all-time daily closing high at $135.72 per share.
Let’s take a look at “The Trader” column in tomorrow’s Barron’s, the Dow Jones Financial and Business Weekly, where the headline reads : “Beltway Turmoil Can’t Deter New Stock Highs”. The article starts off : “A wild and crazy week in Washington wasn’t enough to prevent major indexes from closing at all-time highs.
The Dow Jones Industrial Average climbed 355 points, or 1.7%, to 20,634 last week, after seven consecutive days of record highs. The Standard & Poor’s 500 index rose 1.5% to 2,351, and the Nasdaq gained 1.8% to 5,839, setting records of their own. What’s driving the market higher? It certainly isn’t Washington hijinks. Investors continue to wait for the pro-business policies President Trump has promised. But instead of passing tax cuts last week, Trump was forced to deny accusations of ties to Russia, and GOP lawmakers their time defending the president, instead of writing laws. “Is the Flynn-Russia-Trump leaks-Russian missile ball of wax a distraction that is causing market agents to think more about things other than economic issues?” asks David Kotok, founder of Cumberland Advisors, “You bet.”
The market has been willing to wait as long as the economy keeps on keeping on. Data reported last week revealed robust retail sales, firming inflation, and rebounding manufacturing. That improving data, more than talk of a Trump bump, appears to have sent the market higher.. Instinct quantitative strategists Joseph Mezrich and Roman Maranets compared economic growth as implied by two gauges, one on their own version of the OECD U.S. Leading Indicator Index, the other by returns of a basket of economically sensitive stocks – think companies like Alcoa (AA) and Caterpillar (CAT) versus defensive ones like Coca-Cola (KO) and Verizon Communications (VZ). When the gap between the two gets too wide, stocks typically play catch-up.
That’s what happened in January, when an extra-large difference between the two was followed by a 1.9% rise in the S&P 500. That didn’t close the gap, however, and even after climbing 3.2% this month, further gains could be ahead for the benchmark. “There is, in fact, an economic expansion behind the market rally, Mezrich says.
Market juices appear to be flowing in a big way, as companies have shown a willingness to explore major mergers. Last week. General Motors (GM) acknowledged talks to sell its Opel brand to PSA Group, the maker of Peugot and Citroen. Then there was Kraft Heinz (KHC), which made a play for Unilever (UL), offering to pay $143 billion, or $50 a share by Unilever’s math, for the Anglo-Dutch consumer-staples company.
That’s an 18% premium to Thursday’s close – but if Kraft, which is backed by Brazilian private equity firm and Warren Buffett;s Berkshire Hathaway (BKK.B), wants to get a deal done, it will have to sweeten its offer, says Bernstein analyst Ali Dibadj. He notes that previous consumer mergers have typically paid roughly 30% premiums. The real winner could be Colgate-Palmolive (CL), which would make a nice target for Kraft Heinz if it can’t close a Unilever deal, or for Unilever, if it decides it needs to get bigger to fend off Kraft, Dibadj says. Colgate rose 4.3% to $71.98 Friday, while Kraft climbed 11% to $96.65. and Unilever’s American depository receipt jumped 14% to $48.47.
Now if we could only get those tax cuts.
As Rumblings noted earlier in this issue, our largest Favorite Stock for 2017 – Apple, Inc – closed up strongly for the week ended February 17, and many of the other Rumblings’ Favorite Socks also performed very well.
Rumblings suggests that readers/investors do their due diligence, consult with their investment advisers, and then purchase shares in Apple and some of the other Favorite Stocks of Rumblings as soon as possible.
Rumblings also suggests that readers/investors place no more than 1% of the funds they devote to common stocks in the securities of any one company. It pays to diversify…!
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