Equity markets rose to new record highs this week while interest rates remained in the same narrow trading range they’ve been in since early December. It was actually a relatively uneventful week for the markets. Rumors of Congress working toward a pro-growth tax reform package pushed markets out of the sideways pattern they’ve been in over the past several weeks.

Your Weekly Anecdotes:

  • 71% of S&P 500 companies have reported Q4 results. Both sales and earnings are registering 5% year over year growth. These results are beating the estimates on 12/31/16 for sales growth of 4.9% and earnings growth of 3.5%. If 5% sales growth holds, it will be the highest revenue growth since Q1 2012.
  • Assuming earnings stay in positive territory; this will be the first time since Q4 2014/Q1 2015 that we have seen consecutive positive quarterly earnings. The forward 12mo P/E ratio and EPS currently stand at 17.3x and $133.34 respectively.
  • While the S&P 500 has rallied 8.1% since the election, the biggest winners have been Japan, Italy, and Germany on a local currency basis. Adjusting for the strengthening dollar, the U.S. is only behind Canada (9.2%) and Sweden (9.4%). Good start to the year for U.S. investors.
  • At 159 trading days since we’ve had a 5% decline in the equity market, this is the longest such streak since the beginning of the bull market – in fact, this streak has not been surpassed since February 2007.
  • At 84 trading days since we’ve had a 1% decline in the equity market, this is the longest such streak since 2006 and before that you have to go back to 1995. Things have been calm…
  • OPEC announced 90% compliance with the November 30 agreement on production cuts. Oil markets didn’t really respond, likely because the U.S. has increased production from approximately 8.5mbpd to 9.0mbpd since July of 2016.
  • Crude oil inventories saw a much larger than expected increase last week. It was the second largest weekly build of stockpiles going all the way back to 1983.
  • February 7th marked the 25th anniversary of the signing of the Maastricht Treaty which led to the European common currency zone. Ironically, the IMF published a report recommending more debt relief to beleaguered Greek economy on the same day.
  • While ECB taper is probably the biggest influence in European markets, the political landscape continues to garner attention. France’s establishment candidate became embroiled in scandal last week, providing a boost to the right leaning anti-Eurozone National Front candidate, Marine Le Pen. French bond spreads gapped out accordingly.

Your Weekly Economic Updates:

  • It was an extremely light week with only eight economic announcements. Three beat expectations, four missed, and one hit.
  • Last week’s jobless claims number of 234k was the second lowest current cycle and the 101st consecutive week below 300k – the longest such streak since 1970.
  • The Fed Senior Loan Officers Outlook survey provided a rather unimpressive outlook for credit in the first quarter. Demand declined and standards tightened for consumer and commercial real estate loans. C&I loans are also reflecting lower demand which typically signals lower forward looking growth sentiment.