Your Wednesday Market Blip 10/18/17

Your Wednesday Market Blip 10/18/17

The Dow leaped over the 23,000 mark thanks to long forgotten IBM which came off the bench and delivered a home run earnings report. At the close the Dow was up 160 points on heavy trading volume to close at 23,167. Traders on Wall Street popped the Champaign (or is it Red Bull?) and sang “Happy Days are here again”!

IBM reported earnings after the bell yesterday and while revenue was flat the company beat earnings estimate and had forward guidance that was surprisingly upbeat. This forward guidance trigged investors to jump on the stock like hungry bulldogs on the back of a meat wagon. Both revenue and earnings were flat but gurus liked Big Blue’s movement into “strategic imperatives” like AI, business analytics, cloud computing, cybersecurity and mobile platforms. Shares gapped higher by 9% helping to send the Dow over the 23,000 mark.

Yesterday I wrote about troubles in the municipal bond markets and today there was a report put out by S&P Global Ratings which tracks state debt levels and breaks out regular debt and pension liabilities. The states with the highest unfunded pensions as a percentage of state GDP are New Jersey (41.8%), Connecticut (31.1%), Hawaii (26.1%) and Illinois (25.7%) while the states with the lowest unfunded percentage of GDP are Nebraska, North and South Dakota and Idaho all at about 1%. Washington has pension deficit to GDP of 5.9% but changes to the pension system over the past several decade has started to address this problem plus The Evergreen State has population inflow whereas New Jersey and Connecticut have population shrinkage. These issues weigh on municipal bond ratings and defaults in states with big pension liabilities promise to bring volatility to muni bond markets.