The market went into a mini RallyPause that lasted until Thursday morning (remember there are no corrections anymore), but the S&P 500 managed to finish up 0.4% at a new record level by the close of trading on Friday, although Russell 2000 declined 1%. The narrative remains the same, with tax reform progressing, the economy reasonably strong, and a government shut-down averted. Another “Goldilocks” employment number released Friday morning seemed to trigger the buying. Payrolls rose 228,000 in November, but average hourly wages only increased 2.5%. Not too hot as to warrant a quicker pace of interest rate hikes, and not too cold as to generate concern over the health of the economy. The Dollar rallied 1%, while the yield on the Ten-Year Treasury inched up 2 basis points to 2.38%.
While the focus is on Goldilocks, let’s not lose sight of the three bears lurking out there. Papa Bear would be rising interest rates. There was a coordinated effort by the global central banks to drive down interest rates in response to the financial crisis. We are in the initial stages of those rates normalizing, which will produce a strong headwind for equity prices, which are trading at elevated multiples because of the lengthy period of very low interest rates. TINA (There Is No Alternative to equities) has been the prevailing principal for investors during this historic bull market. Mama Bear would be the unwinding of over $10 Trillion of assets purchased by those central banks. It’s an unprecedented situation, and the potential impact on global economies is unknown. Baby Bear would be geopolitical risk. I’m not an expert in this area, but it sure seems like there is a lot to worry about.
In short, enjoy the porridge, but don’t fall asleep.
It will be the last busy news week of the year, with the Alabama senate race on Tuesday, the FOMC decision on interest rates and the CPI on Wednesday, and the December flash PMI on Thursday. In addition, it’s possible that reconciliation wraps up with a tax bill on President Trump’s desk by Friday.
Stocks in the News:
Johnson Outdoors, Inc. (JOUT): Strong on-going marketplace momentum of new products in the Company’s core fishing, diving and camp cook brands drove a 13 percent increase in sales as operating profit grew 99% and net income rose 160 percent year-over-year. Significantly higher sales in Fishing and profitable growth in Diving led to improved fourth quarter performance. “Johnson Outdoors had an exceptional year, driven by unprecedented growth across our flagship Minn Kota® and Humminbird® fishing brands as demand for the new Ultrex® electric cable steer trolling motor, Helix® Series fishfinders and new-to-world MEGA™ Imaging sonar technology remained very strong throughout the year. We also benefitted from our work to revitalize innovation in SCUBAPRO with successful introductions of the new Hydros™ buoyancy compensator and G2™ dive computer. Conversely, challenging market conditions constrained growth in Watercraft Recreation and Camping brands this year. Looking ahead to next year, we expect a slower pace of growth in our fishing business and topline growth overall,” said Helen Johnson-Leipold, Chairman and Chief Executive Officer.Johnson Outdoors designs, manufactures, and markets outdoor recreational products.
Blue Bird Corporation (BLBD): Total net sales were $312.7 million for the fourth quarter of fiscal 2017, an increase of $26.3 million, or 9.2%, from prior year period. Bus unit sales were 3,608 units for the quarter compared with 3,308 units for the same period last year. Adjusted EBITDA was $25.1 million, or 8.0% of net sales, for the fourth quarter of fiscal 2017, representing an increase of $0.8 million compared with the fourth quarter of the prior year. “We are pleased with our achievements in fiscal 2017 and are well positioned for profit growth in fiscal 2018,” said Phil Horlock, President and Chief Executive Officer of Blue Bird Corporation. “We maintained our strong leadership position in alternative-fuel-powered buses, built a record number of buses in our plant, achieved our highest bus sales in 15 years and put in place key initiatives to drive profit growth. We are pleased to announce our full-year fiscal 2018 net revenue guidance of $1,000 million – $1,030 million, Adjusted EBITDA guidance of $78 – $82 million and Adjusted Free Cash Flow guidance of $36 – $40 million.” Blue Bird is an American bus manufacturing company. The company operates its business in two segments: Bus and Parts. Its primary business it to manufacture and designs school buses.
Lee Enterprises, Inc. (LEE): Operating revenue for the 13 weeks ended September 24, 2017 totaled $140.2 million, a decrease of 5.4% compared with a year ago. Income attributable to Lee Enterprises, Incorporated for the quarter totaled $3.2 million, compared with income of $0.4 million a year ago. “The company continues to aggressively reduce debt,” said Treasurer and Chief Financial Officer Ron Mayo. “Debt reduction in the September quarter was $20.1 million and totaled $68.8 million for the fiscal year, resulting in reduced interest expense of $6.7 million, or 10.4%, in the past twelve months.” Lee Enterprises is a premier publisher of local news, information and advertising in midsize markets, with 48 daily newspapers and a joint interest in four others, rapidly growing online sites.Tagged: BLBD, Chicago, Chicago Investment Management, Eric Kuby, finance, financial commentary, Fund Fact, Gold, jout, Kuby's Commentary, LEE, Market Commentary, North Star, North Star Financial Services, North Star Investment Management, NSIMC, Oil, Russell 2000, S&P 500, Stocks In the News, VIX, Wealth Management.
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