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Tuesday December 12, 2017



Nike's Earnings Beat Expectations

Nike, Inc. (NKE) released its quarterly earnings on Tuesday, December 20. The sportswear company reported earnings that exceeded pre-release estimates.

Revenue for the quarter was $8.2 billion, up 6% from $7.7 billion during the same quarter last year. This was slightly ahead of Wall Street expectations of $8.1 billion in revenue.

"Nike's ability to attack the opportunities that consistently drive growth over the near and long term is what sets us apart," said Nike Chairman, President and CEO Mark Parker. "With industry-defining innovation platforms, highly anticipated signature basketball styles and more personalized retail experiences on the horizon, we are well-positioned to carry our momentum into the back half of the fiscal year and beyond."

The company reported net income of $842 million, or $0.50 per share. Last year at this time, net income was $785 million, or $0.46 per share.

Although Nike, Inc. remains atop the world of sportswear and sneakers, it has struggled for much of 2016. The company's stock has fallen nearly 17% over the course of this year. Nike is hoping that new product offerings, such as the recently released self-lacing Hyperadapt 1, can increase the company's standing in an increasingly competitive market.

Nike, Inc. (NKE) shares ended the week at $51.90, up 1.9% for the week.

FedEx's Earnings Disappoint

FedEx Corp. (FDX) announced its second quarter results on Tuesday, December 20. The courier delivery service reported that earnings were hampered by higher-than-expected costs to expand ground delivery.

The company reported that revenue for the quarter was $14.9 billion. This number was in line with estimates and higher than the $12.5 billion reported during the same period last year.

"FedEx increased revenues and operating income despite continued low growth rates in the global economy," said FedEx Chairman, President and CEO Frederick W. Smith. "We are in the home stretch of our peak shipping season, and our service levels are high, thanks to the outstanding efforts of our hundreds of thousands of team members around the world."

FedEx reported earnings of $2.80 per share for the quarter. While this was higher than the $2.58 earned during the same period last year, it fell below the $2.91 average estimate.

FedEx CFO Alan Graf attributed the company's disappointing earnings to a 12% drop in operating income, a fall he described as "a bit shocking." Much of the drop is due to FedEx's increased investment in network expansion in order to meet growing e-commerce shipment demand. Following the earnings announcement, FedEx shares fell 2.6%, though they are up nearly 33% for the year.

FedEx Corp. (FDX) shares ended the week at $191.84, down 2.5% for the week.

Darden Reports Strong Sales

Darden Restaurants, Inc. (DRI) announced quarterly earnings on Tuesday, December 20. The company's revenue and earnings benefitted from improved numbers at its Olive Garden restaurants.

Revenue for the quarter was $1.64 billion. This was up 2.1% from $1.61 billion during the same quarter last year.

"We had another strong quarter with same-restaurant sales growth significantly outperforming the casual dining industry benchmarks, especially at Olive Garden," said Darden CEO Gene Lee. "We remain laser-focused on our operating philosophy rooted in food, service and atmosphere and creating memorable experiences for our guests."

The company reported earnings per share of $0.64. This was a jump of 178.3% over last year's earnings per share of $0.23.

Darden, which also operates restaurant brands LongHorn Steakhouse and Yard House, owes much of its successful quarter to a revitalization of its Olive Garden brand. Sales at Olive Garden restaurants accounted for $915 million in revenue for the quarter. Same-restaurant sales at Olive Garden improved 2.6% for the quarter, while overall same-restaurant sales for the company were up 1.7%.

Darden Restaurants, Inc. (DRI) shares ended the week at $74.48, down 1.1% for the week.

The Dow started the week of 12/19 at 19,836 and closed at 19,932 on 12/23. The S&P 500 started the week at 2,259 and closed at 2,264. The NASDAQ started the week at 5,441 and closed at 5,463.

Yields Rise Following GDP Report

The U.S. Commerce Department released its latest report on gross domestic product (GDP) on Thursday, December 22. The report showed growth at an annual rate of 3.5% during the third quarter, revised upward from the previous estimate of 3.2%.

Treasury bond prices fell in response to Thursday's release. Bond yields rise as prices fall. During trading on Thursday, the benchmark 10-year Treasury note yield was at 2.55%

Thursday's GDP report adds to growing signs of optimism regarding the state of the economy. The highlight of the report was strong consumer spending.

"The final U.S. GDP revision was much better than expected," said Naeem Aslam, chief market analyst at ThinkForex. "This certainly provides some ammunition for the Dow to have another go at the 20K mark."

This strong GDP report comes on the heels of November's election surprise and December's Fed rate hike announcement. As investors grow more optimistic about the economy, they tend to shy away from bonds and shift investments to riskier assets, such as equities.

"The path of least resistance certainly seems to be higher yields," said Manulife Asset Management senior fixed-income trader, Mike Lorizio.

The 10-year Treasury note yield finished the week of 12/19 at 2.54%. The 30-year Treasury note finished at 3.12%.

Mortgage Rates Continue Rise

Freddie Mac released its latest Primary Mortgage Market Survey (PMMS) on Thursday, December 22. Mortgage rates have now risen for eight consecutive weeks, reaching their highest point in two years.

This week the 30-year fixed rate mortgage averaged 4.30%. This is up from last week's average of 4.16%. During this time last year, the 30-year fixed rate mortgage averaged 3.96%

The 15-year fixed rate mortgage averaged 3.52% this week, up from 3.37% last week. Last year at this time, the 15-year fixed rate mortgage averaged 3.22%.

"A week after the only rate hike of 2016, the mortgage industry digested the Fed's decision and this week's survey reflects that response," said Sean Becketti, Chief Economist at Freddie Mac. "Following Yellen's speech last Wednesday, the 10-year Treasury yield rose approximately 10 basis points. The 30-year mortgage rate rose 14 basis points to 4.30%, reaching highs we have not seen since April 2014."

Based on published national averages, the money market account finished the week of 12/12 at 0.53%. The 1-year CD finished at 1.17%.

Published December 23, 2016
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