Blue Chip Earnings and the FED Drive Stocks to 2-Month Highs

Stocks closed on Wednesday at their best levels since early December, powered by strong corporate earnings and an accommodative policy statement from the Federal Open Markets Committee (FOMC) that was even more dovish than many had hoped for.

The Dow Jones Industrial Average (^DJI) hit its high for the year and closed up 434.90 points, or 1.77% to 25,014.86. It’s the first time the Dow climbed above 25,000 in 2019.

Corporate Earnings Front

Apple Inc. (AAPL) rallied over +5%, despite declining revenue, and while we are on the topic of tech titans, Facebook (FB) is +10% in very early pre-opening trading. They easily beat consensus in their earnings report after the close Tuesday, as they delivered their best quarterly earnings to date.   

Even if you don’t care about AAPL or FB, every growth manager on the planet does. These are two of the charter members of FANG that helped drive stock market gains; outsized at times, for much if the last 3 to 5 years. 

While both have been hit with declines of better than -30% during the last 6 months, it’s a certainty that Growth Managers have been focused on earnings and guidance from these 2 bellwethers to see is momentum in FANG world can change in 2019.

In the Industrial Space

Boeing Company (BA) rallied +6% in the wake of strong earnings to close within a whisker of its all time high four months ago.

Yes, BA is very exposed to the Global economy. Yes, BA does tremendous business with China. But unlike AAPL, whose revenues in China were -25%, BA does not make a product that Chinese “entrepreneurs” can easily replicate, and sell in the local market at close to a 75% discount.

Overlay this with BA having rallied +150% from the beginning of 2017 to its early October 2018, and the stock chart could be easily mistaken for a Social Media Unicorn. Having recently survived a 25% correction to $294 during the fear mongered panic selloff in December, BA has now rallied back to within 1.25% of making a fresh all time high.

It’s been just over a week since International Business Machines (IBM) reported. That’s nearly ancient history in a world of full throttled earnings, economic data, and multifaceted news. But their fourth-quarter (Q4) report cannot be overlooked.

Sparing the details and positive guidance, the only thing that really matters is the stock rallied +8% on last Wednesday following the late Tuesday earnings report, and has added a +2% since then. The price move is significant because IBM stock has been a serial disappointer following earnings THE LAST 5 years.

Coming into this report, the stock had declined 16 of the last 20 quarters following earnings. This time, a week later it’s +10%.

Stay tuned.

The FED Hits a Double

Look for a more in depth write up on the FED and why it matters so much in the next day or 2.

The highly anticipated January FOMC was loudly cheered by financial markets as their policy statement hit a market friendly dovish tone that went well beyond the expectations of most professional FED watchers.  

Not only did the FED signal that they are unlikely to raise rates more than once, and very possibly not at all, more significantly they highlighted a flexibility  toward their balance sheet reduction schedule that was clearly a market friendly positive shift from their policy statement 6 weeks ago.that contributed to December debacle for stocks.  

Basically, and in the interest of brevity, Financial markets could not have asked for more from the FED.  Even Goldilocks was impressed.