Thanksgiving Day Ahead

Always an ideal time to reflect on the niceties of the past year, market investors have had so much to be thankful for. From a continuing Tech rally to the awakening of a slumbering Energy giant and even stronger-than-expected Retail earnings of late, we’ve seen the Dow Jones rise 25%, the Nasdaq up 29% and the S&P 500 19% higher than a year ago — all currently at all-time record highs. Even bitcoin has ratcheted up enormous gains in 2017. Wherever an investor turns, it seems, there has been an opportunity to make money.

Many analysts rightfully predicted a market rally following the surprise electoral victory of President Trump in November 2016, with promises of rolled-back regulatory measures allowing corporations to increase profit margins, and of course the sweeping tax reform proposals, which have had new life breathed into them as of yesterday; several analysts now see positive signs out of Congress that a large corporate tax cut is indeed coming. And with global marketplaces recovering from myriad difficulties — from Europe to China and finally higher oil prices from the Middle East — headwinds to market growth are at historically low levels.

Once Janet Yellen steps down from her post as Fed Chair, and replaced by Jay Powell, we also look to see interest rate hikes resume. Most analysts expect another quarter-point rise to a 1.25-1.5% range, with 2018 bringing another as early as March. It may even be possible to see rates hit 2% at some point within calendar 2018, which would be a boon for banks and insurance companies, and may increase mortgage activity ahead of concerns housing contracts might start getting expensive.

Finally, although many expected market growth, no one thought a nascent Trump presidency would have fostered such low volatility on the bourses this year. Yet here we are, and with 4% unemployment and 3% growth in GDP, we look to be continuing this strength moving into 2018, as well. Santa has good cause to rally early this year!

Jobless Claims, Durable Goods Orders

Because the markets will be closed tomorrow for the Thanksgiving holiday, Initial Jobless Claims for last week have been released a day early. A total of 239K claims (down 13K from an upwardly revised 252K the previous week) illustrates the labor market remaining healthy and steady. Continuing claims rose a bit to 1.904 million, but remain beneath the psychologically significant 2 million claims, which we have not seen now for many months. More to be thankful for!

The latest Durable Goods Orders report, however, came in weaker than expected. The headline number of -1.2% missed the +0.3% estimate, though last month’s total was revised upward from 1.8% to 2.2% on higher shipments. Ex-Defense for the most recent month was -0.8% and Capital Goods Orders -0.5% (disappointing the +0.5% estimate). Yet ex-Transportation was +0.4% and the decline in Defense spending is really just a seasonal reality. So nothing to get too upset about here. Durable Goods reads often display a level of volatility above other economic metrics.

Deere & Co. (DE) Beats Estimates

Agriculture machinery major Deere & Co. (NYSE:DE) shares are up more than 4.5% in today’s pre-market, following a fiscal Q4 earnings beat by 11 cents to $1.57 per share. Revenues in the quarter also topped expectations, reporting $7.09 billion compared to the Zacks consensus $6.91 billion. The Zacks Rank #2 (Buy) company also expects net sales in 2018 to increase 19% year over year, on favorable foreign currency effect. This is at least the fifth straight positive earnings surprise for Deere.