Enthusiasm over holiday shopping reports and progress on tax reform helped drive the major indexes to new highs through Thursdays close. Those gains were erased Friday morning, as reports of a guilty plea from President Trump’s former advisor Michael Flynn, as well as a trillion-dollar hiccup in the tax reform plan, threw cold water on the rally. An afternoon rally restored most of the gains (“Flynn is old news”, and “something will get done with taxes”), leaving the S&P 500 ahead by 1.53% by the weekly closing bell. The Dollar Index and the yield on the Ten-Year Treasury were both essentially unchanged, while the St. Louis Fed Financial Stress Index reached -1.67, its lowest level on record. Constructed from 18 data series, the St. Louis Fed Financial Stress Index tracks the degree of stress in the financial market. The average of the index is 0. A value above zero indicates increased financial stress while a value below zero signals market conditions that are less stressful than average. The Index went above zero in August 2007, 12 months before the market declined, and has stayed negative during this 8-year market rally. Whereas we find the chart below comforting, it also highlights how quickly things can change for the worse once there is a disruption.
Stocks will have a good start, as investors celebrate the Senate’s passage of the tax bill Saturday morning. Washington will continue to dominate the news, with the tax reconciliation process under way on Monday, as well as work on a temporary resolution to avoid a shutdown as the government spending authority expires on Friday. The November Nonfarm Payroll report will be out of Friday, with the consensus calling for the unemployment rate to remain at 4.1%, reflecting an overall strong economy.
Stocks in the News:
Perry Ellis International Inc.(PERY): Total revenue for the fiscal third quarter was $199 million, a 2.5% increase, and net income was $3.2 million, or $0.21 per diluted share, compared to a net loss of $5.2 million, or $0.34 per diluted share, in the prior year period. The Company’s financial position continues to be strong. Cash and investments at the end of the third quarter of fiscal 2018 totaled $52 million and the Company’s net debt to total capitalization stood at 10.5% at the end of the third quarter of fiscal 2018 as compared to 17.9% at the end of the third quarter of fiscal 2017. Oscar Feldenkreis, Chief Executive Officer and President, commented, “Our powerful portfolio of global brands combined with the disciplined execution of our growth strategies by our team led to another strong quarter at Perry Ellis International, continuing our positive momentum from the first half of the year. The third quarter was highlighted by strength across key financial metrics with increased revenues, expansion in gross margin and expense leverage, which drove a 165% increase in adjusted pre-tax income versus the prior year. On the topline, we saw strength across our core brands including Perry Ellis, Original Penguin, Nike swim, Golf, as well as Rafaella. Perry Ellis is a designer, manufacturer and distributor of men’s and women’s apparel, accessories and fragrances in the United States under its own brand names or via licensed brands including Original Penguin and Perry Ellis.
American Software Inc. (AMSWA): Total revenues for the quarter ended October 31, 2017 were $26.3 million, an increase of 1% over the comparable period last year. GAAP net earnings for the quarter ended October 31, 2017 increased 502% to $2.5 million or $0.08 per fully diluted share compared to $0.4 million or $0.01 per fully diluted share for the same period last year. “We are pleased with our second quarter fiscal year 2018 results which reflect our continued progress on our strategic plan to transition from a perpetual licensing to a software-as-a-service (SaaS) engagement model for our Logility Voyager Solutions, Demand Solutions and NGC Andromeda platforms,” said Allan Dow, president of American Software. “Consistent with the previous two quarters, the trend towards SaaS subscriptions as a preferred engagement method for new customers is accelerating and is positively highlighted by our 210% growth in SaaS subscription revenue. American Software develops enterprise management and supply chain related software and services. Its solutions consist of global sourcing, workflow management, customer service applications, and ERP solutions.
The Wendy’s Co. (WEN): Wendy’s announced that it is partnering exclusively with DoorDash, the technology company that connects customers with the best local businesses through door-to-door delivery. With delivery from Wendy’s serving 48 major markets nationwide and growing, Wendy’s lovers can get their fix just about anywhere, anytime. Wendy’s and DoorDash piloted a partnership earlier this year in Columbus, Ohio, and Dallas across 135 restaurants, which resulted in highly rated customer satisfaction scores. While Wendy’s staples – the Baconator and Frosty – proved to be popular menu items during the test, fans will be able to choose from a variety of menu items. Between shopping on-line, streaming video, and food delivery of burgers and shakes, soon the average American will never get up off the couch. Perhaps that’s the reason for the strength in both technology and health care stocks. Wendy’s operates, develops and franchises quick-service restaurants. It offers hamburger, sandwiches and filet of chicken breast sandwiches, chicken nuggets, chili, french fries, baked potatoes, salads, soft drinks, Frosty desserts and kids meals.Tagged: AMSWA, Chicago, Chicago Investment Management, Eric Kuby, finance, financial commentary, Fund Fact, Gold, Kuby's Commentary, Market Commentary, North Star, North Star Financial Services, North Star Investment Management, NSIMC, Oil, PERY, Russell 2000, S&P 500, Stocks In the News, VIX, Wealth Management, WEN.
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