Live Markets U.s.: Transports ready to rev up?

US Xpress Enterprises

16/01/2020 18:45

* Major indexes hit record highs; small caps outperform
    * All S&P sectors positive; tech leads
    * Oil jumps, dollar edges up, gold dips; U.S. 10-year yield
~1.81%

    Jan 16 - Welcome to the home for real-time coverage of U.S.
equity markets brought to you by Reuters stocks reporters and
anchored today by Caroline Valetkevitch. Reach her on Messenger
to share your thoughts on market moves:
Caroline.valetkevitch.thomsonreuters.com@reuters.net
    
    TRANSPORTS READY TO REV UP? (1338 EST/1838 GMT)
    Fourth-quarter earnings reports for transportation companies
are set to pick up steam, with railroad CSX Corp  CSX.O 
reporting after the bell on Thursday and a report from peer
Kansas City Southern  KSU.N  due Friday along with one from J B
Hunt Transport Services  JBHT.O .
    BofA Global Research analysts said earlier this week they
expect transport volumes to accelerate toward the second half of
2020, "providing share price opportunity in early '20."
    "Historically, transport stocks tend to move 3-6 months in
advance of volume turns," the BofA analysts said in a report
that included upgrades of Union Pacific  UNP.N , Canadian
Pacific  CP.TO , Werner Enterprises  WERN.O  and US Xpress
Enterprises  USX.N .
    Similarly, Raymond James analysts in a note on Thursday said
the 2020 outlook "is increasingly encouraging as the broader
transport complex could be ripe for a backend-weighted earnings
growth acceleration," while noting they expect "some near-term
choppiness."
    The Dow Jones Transportation Average  .DJT  underperformed
in 2019, rising abut 19% against a 22% rise for the Dow
industrials  .DJI  and a nearly 29% rise for the S&P 500  .SPX .
    
    (Lewis Krauskopf)
    *****
     
    AFTER SHARP GAINS, S&P 500 "RUNNING ON FUMES": BOFA (1225
EST/1725 GMT)
    The S&P 500  .SPX  is "running on fumes" after a recent
sharp runup in stocks that has put the index's forward
price-to-earnings ratio at an 18-year high, or 18.4 times,
according to Savita Subramanian, head of U.S. equity and
quantitative strategy at Bank of America Merrill Lynch.
    In a note Thursday, she wrote that the P/E to growth ratio
sits at 1.8 times, which is a record high, based on the bank's
data going back to 1986.
    The S&P 500 dividend payout ratio explained 64% of the
index's higher P/E multiple over the last 10 years, she wrote.
But "at the current payout ratio of 42% versus the long-term
average of about 45%, payouts aren't likely to get much higher
from here, and thus further P/E expansion on cash return is less
likely."
    Indeed, given the strong run since November and with the
bank forecasting 2020 earnings growth of 8%, the market could
see some multiple compression, wrote Subramanian, who noted that
BofA has a 3,300 year-end target on the S&P 500. 
    In early trading Thursday, the index crossed the 3,300
level, extending its run of record highs.
    
    (Caroline Valetkevitch)
    *****
    
    DATA DELUGE: RETAIL SALES, PHILLY FED AND MORE (1130
EST/1630 GMT)
    A flood of data released on Thursday offered a buffet of
mostly positive economic news, suggesting solid consumer
spending, a robust labor market and a manufacturing rebound.
    Retail sales  USRSL=ECI  posted a third consecutive increase
in December, according to the U.S. Commerce Department, rising
0.3% from the previous month and 5.8% year-on-year.  urn:newsml:reuters.com:*:nL1N29K1T5
    The growth was inline with analyst expectations and
strengthens the view that the consumer helped the economy
maintain a moderate pace of growth through the end of the year. 
 
    The Labor Department's jobless claims data  USJOB=ECI  also
supported the 'moderate growth' view, as the number of Americans
applying for unemployment benefits dropped by 10,000 last week
to 204,000, a bigger drop than expected. 
 
    The Philadelphia Federal Reserve released its Business Index
for January  USPFDB=ECI , which showed mid-Atlantic
manufacturing rebounding in a big way, jumping to a reading of
17 from December's meager 2.4.
    This is good news for U.S. manufacturing, a sector that just
posted its 5th straight month of contraction, according to the
most recent ISM purchasing managers index (PMI).
    Still, some analysts aren't ready to pop the champagne cork.
    "Manufacturing will grow at a subdued pace in 2020,
constrained by slower external and domestic growth as well as
ongoing uncertainty on the trade policy front despite the
Phase-one trade deal," said Oren Klachkin, lead U.S. economist
at Oxford Economics.
 
    U.S. import prices in December  USIMP=ECI  posted their
first year-on-year increase in nine-months, according to the
Labor Department, inching closer to the U.S. Federal Reserve's
2% annual inflation target. 
 
    There was less to get excited about in the U.S. Commerce
Department's November business inventories data  USBINV=ECI ,
which suffered their biggest decline in 2-1/2 years.
 
    And finally, the National Association of Home Builders
(NAHB) Housing Market index  USNAHB=ECI  dropped one point, to a
still-high 75 from 76, in line with analyst expectations.
 
    All-in-all, the mostly upbeat data, combined with generally
positive earnings and the freshly inked Phase 1 U.S.-China trade
deal, attracted buyers to equity markets. All three major U.S.
stock indexes were firmly in the black.
     
    (Stephen Culp)
    *****
    
    Q4 EARNINGS SEASON: IT'S REALLY ALL ABOUT 2020 (1035
EST/1535 GMT)
    With fourth quarter earnings season kicking off this week,
LPL Financial Research is out with a note saying what really
matters is whether the optimistic growth outlook reflected in
consensus earnings estimates for 2020 remains intact after
companies issue guidance.  urn:newsml:reuters.com:*:nL1N29F1RK
    LPL is looking for just a marginal increase in Q4 S&P 500
year-over-year earnings per share, noting that the market has
become accustomed to meager earnings growth. LPL says that if Q4
results are anywhere around expectations, 2019 will be a year
with S&P 500  .SPX  returns of more than 30% and no corporate
earnings growth to speak of. Therefore, expanding stock
valuations drove the market's gains last year, a trend LPL does
not expect to continue.
    "We expect earnings growth to drive stock market gains in
2020," said LPL Financial Chief Investment Strategist John
Lynch. "With valuations elevated, corporate America will
probably have to do the heavy lifting to get stocks much above
current levels."
    LPL's estimate of $175 per share in S&P 500 EPS for 2020
represents a 6–7% increase from their $165 forecast for 2019.
LPL believes that if capital investment picks and wage growth
remains stable, their 2020 number is attainable.
    Trade progress may help. LPL says that while negotiations on
the next phase will be tougher and could even stall, businesses
may welcome the additional clarity that de-escalation provides,
something that clearly weighed on corporate profits last year.
    
    (Terence Gabriel)
    *****

    
    MORGAN STANLEY RESULTS HELP LIFT S&P 500 OVER 3,300 (0943
EST/1443 GMT)
    Another day, another big round number for the major indexes.
    A day after the Dow  .DJI  closed above 29,000 for the first
time ever, the S&P 500  .SPX  opened Thursday's session by
breaching the 3,300 level.
    Morgan Stanley  MS.N  capped a busy week of bank earnings by
lifting its performance goals, sending the shares up over 6%.
 urn:newsml:reuters.com:*:nL4N29L352
    The newly signed U.S.-China trade agreement was also fresh
in investors' minds, as the indexes all moved solidly higher.
    All 11 S&P 500 sectors were in positive territory in the
early going, led by tech  .SPLRCT .
    Here is the opening snapshot:
 
 
    (Lewis Krauskopf)
    *****    
    
    
    S&P 500: BRIMMING WITH CONFIDENCE (0915 EST/1415 GMT)
    It's now been 65 straight trading days since the S&P 500
 .SPX  last gained, or lost, more than 1%. That's its longest
such streak since a 74-day run from late-June to early-October
2018. Volatility certainly picked up back then as the SPX then
suffered a year-end market swoon.
    Indeed, amid the recent calm, the market's confidence in a
steady rise is becoming even more entrenched. Of note, the 5-Day
Moving Average (DMA) of the CBOE Equity Put/Call (P/C) ratio has
fallen to its lowest level in ten years. (Click on chart below)
    As a contrarian measure of sentiment, this suggests great
complacency and, therefore, the market may be especially ripe
for a downside reversal.  urn:newsml:reuters.com:*:nL1N29J0BV
    The 5-DMA of the P/C ratio has fallen to 0.468, or its
lowest reading since April, 2010. At that time, the SPX topped
later that month and suffered a 17% slide into early July.
    Meanwhile, despite the market's steady gains, traders have
been going for the fast money.  urn:newsml:reuters.com:*:nL1N29K0KR And this with the
Dow Industrials  .DJI  now flirting with a 20-year resistance
line at about 29,150.  urn:newsml:reuters.com:*:nL1N29I0CQ
    
 
 
    (Terence Gabriel)
    *****
    

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
SPXPC01162020    https://tmsnrt.rs/30pol76
opening snapshot    https://tmsnrt.rs/2uUR48m
Retail sales Image    https://tmsnrt.rs/2surO7Y
jobless claims Image    https://tmsnrt.rs/30pFgGV
Philly Fed Image    https://tmsnrt.rs/2syYDkg
Inflation Image    https://tmsnrt.rs/2RrI4Ps
Business inventories Image    https://tmsnrt.rs/2RkJCe8
NAHB Image    https://tmsnrt.rs/2FVMWr2
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>