On Friday, the U.S. and global markets ended an upbeat week on a higher note with the bulk of Friday’s action taking place during the opening hour. The S&P 500 gained 0.4%, ending the week higher by 3.3% while the NASDAQ outperformed, rising 0.6% causing its weekly gain to end at 3.6%.
Many analysts noted that stock markets have been largely uneventful throughout most of 2015, except for massive drops in August. However, they showed through last week's terrorist attacks in Paris a remarkable characteristic – resilience. The markets had plenty of reasons to decline even before the attacks added a new layer of geopolitical risk to the financial landscape, but they didn't.
The Dow Jones Industrial Average rose aggressively Monday and registered strong gains this week, as did other major indices, a marked difference from the aftereffects of many earlier issues. Even European stocks were up.
The Dow's gain of 91.06 points on Friday to 17,823.81 ended a 3.4% rise for the week that put the index at break-even for the year. The S&P 500 gained 7.93 to 2,089.17, a 3.3% gain for the week and 1.5% for the year. The tech-oriented NASDAQ rose 31.28 points to 5,104.92, a 3.6% weekly gain that left it up 7.8% for the year.
Even the midweek indication that Federal Reserve officials were closer than many analysts thought to raising a key interest rate next month seemed to rally stocks, not depress them as such news had done in the past.
The Organization for Economic Cooperation and Development recently cut its estimate of global growth for the second time in three months. The organization now expects growth of 2.9% this year and 3.3% next year, the latter down from a previous estimate of 3.6%. The main worry is emerging markets, starting with China, as the country recently reported that exports were down 3.6% from a year earlier and signaled that both inflation and industrial production were decelerating. The global problems have seeped back into the U.S. economy, pushing down earnings estimates for the S&P 500 by two percentage points over the last five weeks.
Moreover, analysts are saying that the recent spending by the American consumer, which has underpinned U.S. economic growth, may be running out of steam. Goldman Sachs is forecasting that consumer spending growth will slow to 2.5% to 2.75% next year from the current 3% to 3.5% pace, mostly because the income-bolstering effects of lower gas prices is bound to taper off. Once a looming worry, the possible rise in a key Federal Reserve rate doesn't seem to be hurting markets as it used to.
Also there was the release Wednesday of the minutes of the last Federal Reserve meeting, which showed that policymakers were more inclined than previously thought to raise the rate next month for the first time since June 2006. The Dow responded that day with a gain of nearly 248 points, or 1.4%. The market's resilience is no accident, analysts have said. Stocks have been boosted by solid fundamental support that starts with the U.S. recovery, which, despite pauses, remains on track.
As well, a notable University of Michigan study released Thursday included a forecast for economic growth of 2.6% next year, which would be the fastest pace since 2006, and 2.9% the following year.
On the week, the Dow Jones Industrial Average increased 91.06 points to close at 17,823.81, a rise of 0.51% while the S&P 500 increased 7.93 points to close at 2,089.17. The NASDAQ was up 31.28 points to close at 5,104.92, a rise of 0.62%.
On Friday, Nike’s stock jumped on plans for a rise in dividends for its shareholders. Nike released higher dividends on Thursday when it announced that its board approved a 14% dividend increase, a 2-for-1 stock split and authorized a stock buyback of up to $12 billion over four years. Shares of the athletic footwear and apparel firm increased rose almost 5% in morning trading on Friday.
Nike’s CEO and President Mark Parker noted that the company sees even greater potential for Nike as they continue to unlock new markets, new experiences and new products. The Beaverton, Oregon-based company said the new four-year buyback plan will begin once the previous $8 billion buyback plan is completed around the end of fiscal 2016.
Last week, the company said it wants to reach $50 billion in annual revenue within five years. The company reported $30.6 billion in revenue in fiscal 2015 and its revenue has grown 10 percent per year for the last two years. Nike shares rose $6.01, or 4.8 percent, to $131.79 in morning trading Friday. Its shares have risen 37 percent so far this year.
Stock splits enable the companies to attract retail investors. As share prices rise, it becomes difficult for these small investors to buy shares. Stock split leads to a reduction in price and hence, makes it affordable.
Further, the company raised its quarterly cash dividend on both class A and class B shares by 14% to 32 cents per share, on a pre-split basis. The dividend is payable on Jan 4, 2016 to shareholders as of Dec 9, 2015. This marks the company’s 14th consecutive yearly dividend hike, bringing Nike’s annualized dividend rate to $1.28.
Nike, being a leader in the sporting goods industry, has demonstrated time and again its commitment to enhancing shareholder value, helped by its strong financial position. Over the last 14 years, the company has distributed over $23 billion in the form of dividends and share repurchases to improve shareholder returns.
The company also announced this week that it plans to increase its online sales six times over. Nike said during its investor day that it forecasts a 500% jump in online sales in just five years – but what really makes this exciting is the impact it could have on income.
At its investor day on October 14th, Nike announced that it now forecasts reaching $50 billion in annual total sales by 2020, which would be a 63% increase over fiscal year 2015 sales. One way the company plans to reach such a revenue growth goal is a massive increase in online sales during that time, jumping online sales from about 4% of total sales in 2015 to 14% of sales in 2020. This growth will be through innovations driving e-commerce growth. For instance, Nike wants to put point-of-sale tablets in its stores so that when an item isn't available in store, a clerk can still help the customer to quickly purchase the item online to be shipped to the customer's home.
Nike has also been busy upgrading its mobile shopping experience. Mobile now accounts for more traffic than desktop for Nike, and Nike is taking advantage of that growth with new apps and a better all-around mobile experience.
Nike drove fiscal 2015 online sales to nearly $1.2 billion, a 55% increase over fiscal 2014. However, this is only the start, as Nike forecasts that it will increase those sales six-fold in the next five years to reach $7 billion by 2020. Improvements to Nike.com, the mobile shopping experience, and the addition of point of sale e-commerce tablets in stores, will play a big part in helping Nike to increase online sales, but another major factor will be continuing to roll out Nike.com in other countries where other Nike brand stores or reliable third-party sellers may not be available.
On the week, Nike’s stock reached a weekly high of $132.80 on Friday after it traded at a weekly low of $120.65 on Tuesday.
In the week ahead, U.S. markets will entertain a short week due to the Thanksgiving holiday on Thursday. On Monday, November 23rd, existing home sales will be released in the U.S. Then, on Tuesday, November 24th a range of economic data will be released in the U.S. including Gross Domestic Product (GDP) data, consumer confidence and corporate profits. If GDP is on the rise, this could provide a strong indication that the stability of the U.S. economy is strong, resulting in a boost for U.S. indices such as the S&P 500 and Dow Jones Industrial Average. Then, on Wednesday, November 25th, in advance of Thanksgiving, U.S. jobless claims, new home sales and consumer sentiment figures will be released. If new home sales are on the rise, this again will provide an indication of a strong U.S. market, helping to boost U.S. construction stocks as well as indices such as the Dow Jones Industrial Average. U.S. markets will be closed on Thursday, November 26th due to the Thanksgiving holiday period but they will reopen on Friday, November 27th, where everyone’s eyes will be watching the retail sector to see how successful the annual Black Friday festivities are this year. Black Friday is a hotbed for deals in advance of the Christmas holiday period so it’s bound to be full of action for retail stocks such as Amazon.com, Abercrombie & Fitch as well as Nike.
This was a relatively positive week in the markets despite many analysts fearing that it would have a difficult start following the Paris terrorist attacks on Friday November 13th. U.S. and many global markets, including those in Europe, advanced and generated growth throughout the week. As we head into the final full week of November, there’s a range of economic data on schedule even with the holiday weekend coming up. Happy Thanksgiving from all of us at EZTrader and here’s to a profitable trading week ahead!
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