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Tuesday December 18, 2018



FedEx Adjusts Earnings Outlook

FedEx Corp. (FDX) released its quarterly earnings report on Tuesday, December 19. The company reported increased profits and revenue.

The company reported revenue of $16.3 billion for the second quarter. During the same quarter last year, FedEx reported revenue of $14.9 billion.

"Strategic execution by the FedEx team and a stronger global economy drove improved financial results, and we are well positioned for profitable, long-term growth," said FedEx Chairman and CEO Frederick W. Smith. "We are on track for another record holiday-shipping season, and customer-service levels have been outstanding."

Net income for the quarter was $775 million, or $2.84 per share. This is up from $700 million, or $2.59 per share during the same time last year.

The global delivery giant increased its fiscal 2018 earnings outlook to $13.30. FedEx shares rose after the earnings report was released, based on the new rosier outlook for 2018. The company also stated that it expects increased earnings per share of $4.40 to $5.50 as a result of the recently passed the Tax Cuts and Jobs Act. FedEx is on track for a record-breaking holiday season.

FedEx Corp. (FDX) shares ended the week at $250.02, up 2.9% for the week.

Bed Bath & Beyond Reports Earnings

Bed Bath & Beyond Inc. (BBBY) released its latest quarterly earnings report on Wednesday, December 20. The home goods retail chain's profits fell short of the prior year's earnings.

The company reported revenue of $2.95 billion for the third quarter, down from $2.96 billion during the same quarter last year. Bed Bath & Beyond's comparable in-store sales declined slightly, while digital sales had continued growth.

"We have made considerable progress in our ability to align the organizational resources to accelerate our strategic priorities," stated Bed Bath & Beyond CEO Steven Temares during the company's conference call. He went on to state, "Each of the initiatives we are working on has its own framework and structure built around cross-functional coordination to expedite results, to further our mission and to drive greater efficiencies to achieve operational excellence."

Net income for the quarter was $61.3 million, or $0.44 per share. This is down from $126.4 million or $0.86 per share at this time last year.

Bed Bath & Beyond shares fell after its earnings release revealed that overall comparable sales decreased by 0.3%, despite strong growth in online sales. Bed Bath & Beyond recently acquired an online interior design firm. The company has added interior decorating services online for its buybuy BABY brand. Bed Bath & Beyond will continue to integrate the new interior decorating both online and in stores in 2018.

Bed Bath & Beyond Inc. (BBBY) stock ended the week at $22.43, down 1.5% for the week.

Nike Posts Earnings Beat

Nike, Inc. (NKE) reported its latest quarterly earnings on Thursday, December 21. The athletic wear company's revenue beat Wall Street expectation.

Revenue for the second quarter was $8.55 billion, up 5% from $8.18 billion during the prior year's quarter. This was above the $8.4 billion analysts expected.

"This quarter, led by our Consumer Direct Offense, we accelerated international growth and built underlying momentum in our domestic business," said Nike Chairman, President and CEO Mark Parker. "For the back half of the fiscal year, NIKE's innovation line-up is as strong as it's ever been and we'll continue to actively shape retail through new differentiated experiences."

Nike reported net income of $767 million, down 9% from $842 million during the same quarter last year. On an earnings per share basis, profit fell to $0.47 compared to $0.51 a year ago.

The Beaverton, Oregon-based company experienced a dip in profits for the quarter despite growing global sales. The company's international sales in Europe, the Middle East and Africa saw an increase of 19% this quarter, while domestic sales declined 5%. Nike announced it will be moving its New York flagship Niketown store location just a few blocks from its current location in 2019. The new location will have a members-only floor with exclusive products. The Niketown store location will also provide "Nike Experts" to offer one-on-one consultations with customers as part of Nike's Consumer Direct Offense strategy.

Nike, Inc. (NKE) shares ended the week at $63.29, down 2.5% for the week.

The Dow started the week of 12/18 at 24,740 and closed at 24,754 on 12/22. The S&P 500 started the week at 2,686 and closed at 2,683. The NASDAQ started the week at 6,980 and closed at 6,960.

Treasury Yields Rise After Tax Bill Passage

Strong economic data released early in the week lifted Treasury yields. Yields continued this upward trend following the passage of Congress' Tax Cuts and Jobs Act.

In the early hours of Wednesday, the Senate passed the Tax Cuts and Jobs Act in a vote of 51-48 after revising three provisions to comply with Senate rules. The House held a second vote on the revised final version of the bill and it passed with a vote of 224-201. The 10-year Treasury yield hit its highest mark since March, briefly touching 2.50% after the votes were cast.

"Now that the GOP has effectively reached the finish line and 10-year yields remain [under] 2.50%, anyone attempting to spin a bearish narrative for Treasuries should be pondering what's next," said Ian Lyngen and Aaron Kohli, fixed-income strategists at BMO Capital Markets.

On Thursday, Congress prevented a government shutdown with the passage of a temporary spending bill, which will allow the government to continue running until January 19. Both the tax bill and short-term spending bill were signed into law on Friday. The 10-year Treasury bond yields held steady in the high 2.4% range after the signing of the bills.

Early in the week, the National Association of Home Builders released data showing that housing starts in November increased by 3.3%. The date also indicated the housing market index for December was 74, reflecting an 18-year high. The National Association of Realtors also released data this week showing existing home sales increased 5.6% in November. The 10-year Treasury yield was lifted by the solid housing data.

"The HMI measure of home buyer traffic rose eight points, showing that demand for housing is on the rise," said Robert Dietz, Chief Economist at the National Association of Home Builders. "With low unemployment rates, favorable demographics and a tight supply of existing home inventory, we can expect continued upward movement of the single-family construction sector next year."

The 10-year Treasury note yield finished the week of 12/18 at 2.49%, while the 30-year Treasury note yield was 2.83%.

Mortgage Rates Move Higher

Freddie Mac released its latest Primary Mortgage Market Survey on Thursday, December 21. The report showed that the 15 and 30-year mortgage rate averages were up this week.

The 30-year fixed rate mortgage averaged 3.94% this week, this is a slight increase 3.93% from last week. During the same time last year, the 30-year fixed rate mortgage averaged 4.30%.

This week, the 15-year fixed rate mortgage averaged 3.38%, up from 3.36% last week. Last year at this time, the 15-year fixed rate mortgage averaged 3.52%.

"The U.S. average 30-year fixed mortgage rate increased 1 basis point to 3.94% in this week's survey," said Len Kiefer Deputy Chief Economist at Freddie Mac. "The majority of our survey was completed prior to the surge in long-term interest rates that followed the passage of the tax bill. If those rate increases stick, we'll likely see higher mortgage rates in next week's survey. But even with yesterday's increase, the 10-year Treasury yield is down from a year ago, and 30-year fixed mortgage rates are 36 basis points below the level we saw in our survey last year at this time."

Based on published national averages, the money market account finished the week of 12/18 at 0.85%. The 1-year CD finished at 1.71%.

Published December 22, 2017
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