The Dow closed the day up a tad with a 37 point gain on heavy volume to close at 20,090. IBD has markets in rally mode and today released its latest economic optimism reading in the US showing a continuation of an uptrend which began last August. Optimism rose 0.8% to a reading of 56.4 which is the highest level since 2004.
China reported that its foreign exchange reserves have fallen below the $3 Trillion level for the first time since 2011. Last year the yuan fell 6.6% against the US dollar as individuals and companies in China have moved money out of the country to buy US and European companies and real-estate. While China has been selling its US Treasuries at a record pace to support the yuan its efforts face headwinds as money continues to move offshore. According to IMF projections the outflow is likely to continue despite efforts by the Chinese gubment to impose capital controls. The worry is that should China’s reserves fall below $2.7 trillion it will be harder for them to support the yuan potentially leading to an accelerated decline in its value.
General Motors (GM) reported earnings today with revenue up 11% beating estimates while the company’s 4th quarter profits fell 8% also coming in better than street estimates. The company backed a strong full-year EPS outlook however concern about thinning margins caused a rush to the exits and shares fell about 5%. GM’s cash flow is good and CEO Mary Barra said the company will pay a bonus to US hourly employees up to $12,000 while also buying back stock off the market. She is also looking forward to a busy 2017-18 thanks to policy changes, Brexit issues, new crossover rollouts and advancements in both autonomous and electric cars.