STOCKS RALLY TO START 2017 AS OIL CLIMBS
- The Dow Jones Industrial Average jumped 150 points, or 0.8%, to 19911 shortly after the opening bell.
- The Dow rose 13.4% in 2016 – its best performance in three years.
- The S&P 500 climbed 9.5% in 2016, its biggest gain since 2014.
- With corporate earnings rebounding, U.S. economic growth accelerating and investors betting the new administration will implement business friendly policies like tax cuts and fiscal stimulus, many analysts and investors expect the gains to continue.
US FINANCIAL MARKET
- Continued rebound in corporate profits should prop up share prices regardless of Washington policies.
- Analysts are estimating a 3.2% growth rate in the fourth quarter of 2016.
- Earnings for companies in the S&P 500 grew 3.1% in the third quarter from a year earlier.
- Corporate earnings are projected to grow by double digits through 2017.
- Analysts expect earnings to grow 11% in the first quarter, 11% in the second quarter, 9.1% in the third quarter and 14% in the fourth.
- U.S. companies are preparing to invest again after years on the sidelines, and rising interest rates are unlikely to impede them.
- Despite years of near-zero interest rates that made borrowing cheap, many big U.S. corporations have been hoarding cash or plowing money into safer pursuits in the wake of the recession.
- Business investment dropped sharply during the financial crisis, falling more than 17% for S&P 500 companies in the 12 months after Lehman Brothers’ September 2008 collapse. But even as the economy recovered, total expenditures took three years to regain the pre-crisis level.
- President-elect Donald Trump took aim at GM on Tuesday, saying the company needs to be taxed for certain versions of the Chevrolet Cruze small car that it imports from Mexico to U.S. dealers.
- In a statement, GM said it builds only the hatchback version of the Cruze “for global markets in Mexico, with a small number sold in the U.S.”
- Demand for small and midsize passenger cars has collapsed amid a sustained run of cheap fuel, pushing buyers to gravitate toward sport utilities, crossover wagons and pickups.
- Last year turned out to be a disappointing one for new drug approvals with the U.S. FDA clearing just 22 new medicines for sale, the lowest number since 2010 and sharply down on 2015’s tally of 45.
- Across the Atlantic, the European Medicines Agency recommended 81 new prescription products against a 2015 total of 93. Unlike the FDA, the EMA includes generic drugs in its list.
US ECONOMY & POLITICS
- The Commerce Department said on Tuesday that construction spending increased 0.9 percent to $1.18 trillion, the highest level since April 2006. It was boosted by gains in both private and public sector investment.
- Spending on private construction projects jumped 1.0 percent in November to its highest level since July 2006 as single-family home building, as well as home renovations, increased.
- Investment in private nonresidential structures — which include factories, hospitals and roads — rose 0.9 percent after tumbling 1.5 percent the prior month.
- Public construction spending gained 0.8 percent in November to the highest level since March.
- Growth in U.S. factory activity accelerated in December to its strongest pace in two years, a sign of momentum in a key sector of the economy headed into 2017.
- The Institute for Supply Management on Tuesday said its purchasing managers index (PMI) rose to 54.7 in December from 53.2 in November, hitting its highest level since December 2014.
- A reading over 50 indicates expansion in the manufacturing sector, while a reading below 50 suggests contraction.
- Former U.S. Treasury Secretary Lawrence Summers said investors are being far too sanguine about the risks associated with Donald Trump’s incoming administration.
- The Harvard professor, a Democrat who was Treasury chief under Bill Clinton, cited the possibility of protectionist measures by the U.S. as well as changes to foreign policy and domestic social policy as issues that are creating “extraordinary uncertainty.”
- “The Navarro-Ross paper is well beyond voodoo economics,” Summers said of the September report on Trump’s growth plans.
- “The logic of it, the arguments made, are so far out of the mainstream of any kind of responsible economic thinking that they are the economic equivalent of creationism.
EUROPE & WORLD
- The purchasing managers index for the British manufacturing sector rose to 56.1 in December, the highest reading since June 2014.
- China’s economic growth could slow to 6.5 percent this year from about 6.7 percent in 2016, a government-run think tank said on Tuesday.
- Industrial output could grow 5.9 percent this year, down from an estimated 6.1 percent in 2016, it said.
- Consumer prices rose 1.7 percent from a year ago, recording the biggest jump on record.
- The cost of Brent crude surged 12.6 percent in December, recording the biggest monthly increase since April.
- Economists forecast gross domestic product will expand just 1.7 percent this year.
- That’d be the slowest since the 1.4 percent achieved in 2013.
TODAY in HISTORY
Martin Luther excommunicated by Pope Leo X (1521)
Construction of the Brooklyn Bridge began (1870)
Congressional proceedings were televised for the first time (1947)
Alaska became the 49th state in the United States (1959)
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