Stocks ended the week with an uptick thanks to congress getting a step closer to agreements regarding budgets and tax reform. At the close the Dow gained 165 points at 23,328 on heavy volume. For the week the Dow is up roughly 440 points or 1.9%. Both IBD and BTS indicators are positive and fund flows into equity ETF’s are on the rise. Mutual fund cash levels are still above normal and earnings continue to be positive although there seems to be some sector rotation occurring. Banks are doing well as are material stocks while competition is affecting airline stocks.
Prices of building material are on the rise as hurricane rebuilding efforts are piling demand on top of an already strong housing market and Canadian lumber tarrifs. According to an article in Bloomberg, OSB (oriented strand board) is now above $500 per thousand board feet for the first time since 2010 while framing lumber is at its highest level since 2012. Now a contractor will say ouch twice. Once when he hits his finger with a hammer and the other when he goes to the lumber store. This is also driving the cost of backyard chicken coops which is important because owning a chicken is the “must have” new pet.
It’s been a tough year for General Electric and today the company reported its Q3 earnings numbers and the pain is expected to continue for some time after GE cut its forward guidance. GE stock fell hard in premarket trading then rallied and held steady but it is already down over 23% this year and gurus are not happy with the company saying that cash flow is impaired and the dividend is at risk. While revenue came in 14% higher, bottom line profits fell 4% and badly missing estimates. The new CEO and CFO have their hands full as hedge funds are lining up to demand consessions like getting a seat on the board. The company is also facing a pension shortfall which needs to be addressed.