Stocks continue to march higher as the Dow gained 102 points to close at 25,385 on heavier volume. Both the NASDAQ and S&P 500 hit highs along with the Dow.
The BTS indicators recently went positive because buy side strength in high yield bonds has increased as of late. The BTS indicator is a positive signal for the markets as well. “Dan the Man” at BTS cautioned however that inflation readings in 2018 might come in higher than expected which could inject more volatility into both stocks and bonds. On a similar note, Brian Wesbury, Chief economist at First Trust and honorary member of the Westport Mafia also noted that after several decades of falling and low interest rates, government bonds are priced with a market equivalent PE of over 40 which could spell trouble to holders of long gubment paper if inflation ticks up higher than expected. Stay tuned as this might be the big story in 2018.
Target Stores common was higher after CEO Brian “Corny” Cornell said that holiday sales were stronger than expected which resulted in the company increasing its estimate for fourth quarter earnings by 25% and its full year estimate by 5%. Brian said same store sales were up 3.4% versus expectations of being flat. For this year the company also plans to remodel 325 stores and build 30 small-format stores which bucks the trend of retailers like Sears and JC Penny which are closing stores.
Shares of Boeing continue to lead the Dow higher. The company today announced it had delivered a record 753 airplanes in 2017 which is one more than its record high from 2015. Boeing also said 737 orders were up 35% in 2017 and the aircraft back log represented 7 years’ worth of production. I wonder if Elon Musk is looking at this with wistful envy since Tesla has lots of orders for the model 3 and new semi-truck but lacks the current ability to produce them. Maybe Elon could learn from Boeing.