U.S. stocks are tacking onto a strong weekly rally with healthcare issues leading the way, aided by upbeat Alzheimer's treatment trial results from Biogen, while domestic consumer sentiment jumped and China posted another favorable economic report. European equities extended a winning streak to five sessions, bolstered by yesterday's changes to the European Central Bank's asset purchase program.
Crude oil is extending a rebound, while Treasury yields and the U.S. dollar are continuing to climb. Gold is lower. Restoration Hardware (NYSE:RH) issued disappointing guidance and Dow member Coca-Cola (NYSE:KO) announced a CEO successor.
At 12:53 p.m. ET, the Dow Jones Industrial Average, the S&P 500 Index and the Nasdaq Composite are advancing 0.4%. WTI crude oil is increasing $0.59 to $51.43 per barrel and Brent crude oil is gaining $0.29 to $54.18 per barrel, while wholesale gasoline is flat at $1.51 per gallon. Elsewhere, gold is trading $10.68 lower to $1,160.09 per ounce, and the dollar index—a comparison of the U.S. dollar to six major world currencies—is up 0.6% at 101.67.
Restoration Hardware Holdings Inc. ($33) reported 3Q earnings-per-share (EPS) ex-items of $0.20, above the $0.16 FactSet estimate, as revenues rose 3.0% year-over-year (y/y) to $549 million, topping the expected $528 million. 3Q same-store sales declined 6.0% y/y, versus the projected 12.8% drop. The company said November results were below expectations, largely attributed to consumer softness related to the U.S. election and its Fall Source Books getting into homes later than planned. As such, RH issued 4Q EPS and revenue guidance that came in short of estimates, while it lowered its full-year outlook, pointing out that its strategic investments and changes to its business model are temporarily depressing financial results in the short term. Shares are falling sharply.
Broadcom Ltd (NASDAQ:AVGO) ($179) posted fiscal 4Q EPS ex-items of $3.47, north of the forecasted $3.38, with revenues rising 125% y/y to $4.2 billion, in the wake of the acquisition of Broadcom Corp by Avago Technologies, versus the estimated $4.1 billion. The semiconductor device supplier issued 1Q revenue guidance that topped expectations, while announcing that it will pay out a quarterly dividend of $1.02 per share, double its previous payout. AVGO is trading solidly higher.
Dow member Coca-Cola Co. ($42) announced that President and Chief Operating Officer James Quincey will succeed Muhtar Kent as Chief Executive Officer, effective May 1, 2017. Shares are nicely higher.
Biogen Inc (NASDAQ:BIIB) ($300) is gaining solid ground after announcing favorable results from an early trial of its experimental Alzheimer's treatment.
Consumer sentiment jumps
The preliminary University of Michigan Consumer Sentiment Index (chart) this month rose to 98.0—the highest since January 2015—from the prior month's 93.8 level, and compared to the Bloomberg expectations of an increase to 94.5. The current economic conditions and outlook components of the survey both improved solidly month-over-month (m/m). The 1-year inflation estimate dipped from 2.4% to 2.3%, and 5-10 year inflation outlook slipped to 2.5% from 2.6%.
Wholesale inventories (chart) declined 0.4% m/m in October, matching the decline in September and forecasts. Sales jumped 1.4% m/m, versus the expected 0.7% increase and the inventory-to-sales ratio—the amount of time it would take to deplete inventories at the current sales pace—fell to 1.30 months from September's 1.32 months level.
Treasuries are lower in afternoon action, with the yield on the 2-year note rising 2 basis points (bps) to 1.13%, while the yields on the 10-year note and the 30-year bond are gaining 6 bps to 2.47% and 3.16%, respectively.
Europe extends winning streak
European equities swept the week with five-straight winning sessions, as the markets continued to warm up to yesterday's monetary policy decision from the European Central Bank (ECB). The ECB extended its asset purchase program by nine-months and opened up the types of securities it was able to buy, though it reduced the amount that it will purchase on a monthly basis from April to December 2017. ECB President Mario Draghi also went out of his way to insist that this move was not a taper and emphasized that the program could be increased in size and/or duration, if the economic outlook deteriorated.
Most sectors gained ground, led by healthcare issues, but financials were bogged down by resurfacing pressure on the Italian banking sector, which had rebounded along with Italy's markets from the political uncertainty that was bolstered by the failed Italian referendum over the weekend, the first step of several that could pave the way for an Italian exit from the European Union (EU).
German exports rose by a smaller amount than expected in October, though they rebounded from September's drop, while the U.K. trade deficit narrowed much more than expected in October. The euro saw pressure and the British pound was little changed versus the U.S. dollar, while bond yields in the region were mixed.
The U.K. FTSE 100 Index and Spain's IBEX 35 Index were up 0.3%, France's CAC 40 Index gained 0.6%, Germany's DAX Index rose 0.2%, and Switzerland's Swiss Market Index rallied 1.8%, while Italy's FTSE MIB Index dropped 0.7%.