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While you were sleeping: Boeing rallies on seating joint venture

Thursday 18th January 2018

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Wall Street climbed amid broad optimism about the outlook for corporate earnings, even as shares of Goldman Sachs and Bank of America slid following their latest results. 

More than three-quarters of the 36 S&P 500 companies that have reported so far have topped earnings estimates, according to Thomson Reuters I/B/E/S.

In 1.19pm trading in New York, the Dow Jones Industrial Average rallied 0.9 percent, while the Nasdaq Composite Index climbed 0.8 percent. In 1.04pm trading, the Standard & Poor’s 500 Index advanced 0.8 percent. Wall Street is trading near record highs. 

“A lot of the move that we’ve been seeing has been just the beginning,” John Stoltzfus, chief market strategist at Oppenheimer & Co, told Bloomberg. “It’s hard to quantify, but we see some evidence of bull market bears as well as skeptics of this bull market finally beginning to capitulate. And when that capitulation starts, it’s a process.”

The Dow moved higher, as gains in shares of Boeing and those of Intel, recently up 3.2 percent and 2.9 percent respectively, outweighed declines in shares of General Electric and those of Goldman Sachs, recently down 4.2 percent and 2.4 percent respectively.

Investors appeared unimpressed by the latest results of both Goldman Sachs and those of Bank of America, the latter’s shares down 1.1 percent recently. 

“You saw a lot of earnings estimates increase coming into earnings season, certainly after tax cuts,” Marcelle Daher, co-head of North American asset allocation at John Hancock Financial Services in Boston. “So one has to wonder if a lot of that optimism has been baked in.”

“As you continue to see muted trading, and particularly a flattening of yield curve that tends to depress net interest margin, the bank stocks could be reacting to that,” Daher noted. 

Others pointed to the tax overhaul. 

“We’re all really trying to figure out the real impact of tax reform on some of the major sectors,” Jamie Cox, a managing partner for Harris Financial Group in Richmond, Virginia, told Bloomberg. “Financials in particular have been in the news because you’ve seen some weird things with some of their deferred tax assets being reported in earnings.”

“I think a lot of people misunderstood and don’t understand how the deferred tax assets work, and so they’re seeing these massive charges that the banks are taking as a result of tax reform and they can’t see too clearly into the future about how much the impact on tax reform is going to have on their bottom line three quarters from now,” according to Cox.

Boeing shares rose after it and Adient said they agreed to form a joint venture that will develop, manufacture, and sell a portfolio of seating products to airlines and aircraft leasing companies. 

The seats will be available for installation on new airplanes and as retrofit configurations for aircraft produced by Boeing and other commercial airplane manufacturers, the companies said in a joint statement. 

"Seats have been a persistent challenge for our customers, the industry and Boeing, and we are taking action to help address constraints in the market," Kevin Schemm, senior vice president of Supply Chain Management, Finance & Business Operations at Boeing, said in the statement.

Shares of Adient dropped, trading 5.9 percent weaker as of 1.20pm in New York.

In Europe, the UK’s FTSE 100 index fell 0.4 percent, Germany’s DAX Index also slid 0.4 percent, while France’s CAC40 Index shed 0.5 percent.

Shares of France’s Carrefour declined after world’s No. 2 retailer downgraded its 2017 operating profit forecast for the second time in six months as its annual sales growth eased.

Carrefour said it now predicts 2017 recurring operating income at about 2.00 billion euros (US$2.45 billion), a drop of 15 percent at current exchange rates.

Like-for-like sales rose 1.6 percent in 2017, down from a 3 percent pace of growth in 2016, the company said in a statement. 

The downgrade reflects strong commercial pressure, particularly in France, as well as an increase in distribution costs in Carrefour’s main markets, an increase in depreciation after a period of significant investments, and a more difficult situation in Argentina, the company said.

Shares of Carrefour, which is set to present a “transformation plan” on January 23, closed 1.8 percent weaker in Paris. 


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