Market Outlook – July 19, 2018

U.S. Stocks Receive Mid-Week Boost


U.S. stocks finished mostly higher on mid-week after Federal Reserve Chairman Jerome Powell concluded his two-day congressional testimonies. The central bank chief appeared before the Senate Banking Committee on Tuesday and the House Financial Services Committee on Wednesday.

The Dow Jones Industrial Average advanced by 79.40 points (+0.3%) to close at 25,199.29. According to Factset data, the blue-chip index posted another positive session to mark its longest winning period since the eight-day period ended on May 14.

The S&P 500 index rose 6.07 points (+0.2%) on the strength of the financials (+1.5%) and industrials (+1.1%) sectors. Although the Nasdaq Composite Index closed less than a point lower, the tech-heavy index nearly posted a second straight record and its fourth in July.

Fed Chair Sees the U.S. Economy to Remain Strong


Investors welcomed the cautious approach of the Fed Chairman amid uncertainty over the trade policies. The central bank would continue to gradually raise interest rates so as not to introduce volatility in the marketplace.

Powell painted a positive picture about the U.S. economy. However, he acknowledged the difficulty to predict the ultimate outcome of current discussions over the trade policy. The Fed chief was making reference to the tariffs adopted by the Trump administration against China and other trading partners.

Prime Day 2018 is the Biggest in History for Amazon


Shares of Inc. (AMZN) shed -0.1% on Wednesday even if the e-commerce boasted that its Prime Day this year was its biggest sales event ever. AMZN closed at a record-high of $1,843.93 a day before.

The company’s press release late Tuesday said that small and medium-sized businesses had sold more than $1 billion since the 36-hour sale started on Monday.

About 100 million products were sold during the event which they claim as the “biggest in history.” But the actual revenue figures have yet to be released. The research firm Coresight Research predict the sales of Amazon’s Prime Day 2018 would hit at least $3.4 billion.

IBM’s New Businesses Delivers Revenue


For the last five years, International Business Machines Corp.’s (IBM) year-over-year revenue was declining. On Wednesday, the company reported second-quarter profit and revenue to register its third consecutive quarter of revenue growth. The Q2 numbers beat analyst expectations.

The growth in revenue came from its higher-margin businesses including cybersecurity and cloud computing. The company began focusing on an array of new technologies since CEO Ginni Rometty took over. IBM is trying to offset the weakness in its legacy business of selling hardware and software.

The newer businesses are spread across its various divisions. They have been bundled and called as their “strategic imperatives”. Revenue from these businesses grew 15% to $10.1 billion in the second quarter. It accounts for more than half of IBM’s total revenue.

Berkshire Lifts Cap on Buyback Policy


Berkshire Hathaway Inc. (BRKA) announced a change in its buyback policy on Tuesday. The cap at which the company would be able to purchase shares has been lifted. However, if ever the company buy back shares, it would be after their second quarter earnings report on Friday August 3 at the earliest.

Berkshire shares A and B climbed more than 5% on Wednesday, which is the best showing in seven years. There wouldn’t be any problem buying back shares or in case Buffett goes elephant hunting. Berkshire’s treasure chest is loaded with more than $108 billion in cash and short-term Treasury holdings.

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