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Market Insights / Commentary

Big gains before Big Tech earnings

By David Russell

Investors are sitting on big gains as they prepare for Big Tech earnings.

The S&P 500 rose 2.2 percent between Friday, Jan. 19, and Friday, Jan. 26 — its ninth positive showing in the last 10 weeks. The Nasdaq-100 rose almost 3 percent and is likely to be in the spotlight in coming sessions as heavyweights like Apple (AAPL), Amazon.com (AMZN), Alphabet (GOOGL), Facebook (FB) and Microsoft (MSFT) issue results.

Biotech and healthcare led the charge last week, fueled by merger activity and strong earnings. Money also continued to flow into emerging markets like Brazil and China as investors positioned for stronger global growth.

Good news surfaced on the home front, too, as executives and analysts saw December’s tax cuts boosting profits over the long term. Just take drugmaker Abbvie (ABBV), which cited the lower rates amid a blowout quarterly report that launched its stock to new record highs. It ended the week up 18 percent, making it the third-best performer in the S&P 500.

Netflix (NFLX) took top billing in the index with a 24 percent gain. Its trick? Adding almost 2 million more subscribers in the fourth quarter than analysts had expected. The runner-up was industrial supplier Grainger (GWW), powered by improved business performance and tax-cut benefits.

Airlines were the biggest losers after United Continental’s (UAL) growth plans triggered fears of a price war in the industry. Housing fell on weak sales and as investors took profits on the heels of a strong end to last year.

Economic numbers were mostly positive. Jobless claims and durable-goods orders beat expectations but the preliminary reading of fourth-quarter growth missed the mark. Treasury Secretary Steven Mnuchin also flipflopped on the greenback in Davos as President Donald Trump hobnobbed with global business leaders.

The current week gets off to a slow start and builds to a crescendo of activity. This session’s mostly quiet, with personal income and spending as the main items. Tomorrow brings European economic growth and confidence surveys, along with U.S. Consumer Confidence. McDonald’s (MCD), Pfizer (PFE), Advanced Micro Devices (AMD), Electronic Arts (EA) and Juniper Networks (JNPR) issue results.

Things heat up Wednesday with ADP’s private-sector payrolls report, oil inventories and an interest-rate decision from the Federal Reserve. But who cares about those when you have numbers from the likes of FB, MSFT, Qualcomm (QCOM), Boeing (BA), and eBay (EBAY)?

Thursday’s even busier: AAPL, AMZN, GOOGL, Alibaba (BABA), Amgen (AMGN), United Parcel (UPS), Time Warner (TWX) to name a few. And don’t forget about initial jobless claims or Institute for Supply Management’s manufacturing index, either.

Friday’s quieter in sheer volume, but it does feature the Labor Department’s key monthly non-farm payrolls report. Consumer sentiment is also due, plus earnings from Exxon Mobil (XOM), Chevron (CVX) and Merck (MRK).

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