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25th January 2016

After last weeks gains the S&P 500 fell 1.56% on Monday led by energy stocks, as crude again fell below $30, with Exxon Mobil Corp and Chevron Corp losing over 3%.

Halliburton also closed down 3% despite reporting resilient results boosted by strong cost control.  The company reported a GAAP loss of $28 million but when special items are excluded the picture is much better. Adding back asset impairment and merger costs the adjusted earnings figure of $270 million or $0.31 per share compares well to $0.30 in December 2014 and smashed earnings forecasts of $0.21.

Elsewhere there were still some strong performances such as McDonalds which rose 2.9% to $121.81 before falling back to close up 0.68% at $119.21.  McDonalds reported strong results that smashed expectations after CEO Steve Easterbrook took over last year and introduced all-day breakfast at its US restaurants.  EPS of $1.31 increased from $1.13 last year and smashed consensus forecasts of $1.23.  Sales at US restaurants open over 13 months rose 5.7% - well over the 2.7% growth analysts had expected.  Globally same store sales increase 5%.

 Wynn Restorts were also up 5.5% following a release on insider buying by CEO Steve Wynn who bought $31.86 million of stock at an average price of $55.62 on Friday.  Known for its luxorious resorts in Las Vegas and China, the stock has been beaten down from its March 2014 peak of $245 due to concerns about the slowdown in China as well as a crackdown on Junkets.  However Wynn has a long and successful track record in the Casino business and with the stock price at such low levels the CEO has decided they are worth buying again.

 

23rd January 2016

The market suffered further losses after the long holiday weekend before recovering again on Thursday and Friday as a consensus developed that the turmoil in China would have only a limited impact on the US economy and concerns about a recession were allayed by the strength of the American consumer with household debt levels considerably lower than in 2008. 

The turmoil is being increasingly seen as a correction from elevated valuations as the earnings recession, experienced in Q2 and Q3, is now expected to continue into Q4 but not result in a broad based economic recession.  Earnings expectations for 2016 have been revised down marginally but are expected to recover again next year.  Goldman Sachs has reduced its 2016 outlook by almost 3% but still expects EPS growth of 11% in 2016 and 8% in 2017.