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Monday January 22, 2018



McDonald's Reports Solid Earnings

McDonald's Corporation (MCD) reported its fourth quarter and full-year earnings on Monday, January 23. The company's quarterly results exceeded analysts' expectations.

The company reported revenue of $6.03 billion for the quarter, down 5% from $6.34 billion during the same period last year. Full-year revenue was $24.62 billion, down 3% from last year.

"Throughout 2016, we worked diligently to lay the groundwork for our long-term future. We focused on driving changes in our menu, restaurants and technology to deliver an enhanced McDonald's experience for our customers around the world," said Steve Easterbrook, President and CEO of McDonald's. "We applied the necessary rigor and discipline to strengthen the Company and our financial performance."

Net income for the quarter was $1.19 billion, a 1% drop from $1.21 billion in profits during the same quarter last year. For the full year, however, profit was up 3% to $4.69 billion.

McDonald's reported increased comparable restaurant sales of 2.7% globally for the quarter and 3.8% for the full year. Despite global gains, the company's comparable sales in the U.S. dropped 1.3%. The company continues to tweak its menu into 2017 hoping to spark a surge in domestic sales, recently announcing a limited-time run of two new Big Mac sizes along with a promotional giveaway of its iconic special sauce.

McDonald's Corporation (MCD) shares ended the week at $122.86, up 0.9% for the week.

Boeing's Earnings Soar

The Boeing Company (BA) announced its quarterly and full-year earnings on Wednesday, January 25. Despite a small drop in revenue, the aircraft manufacturer saw profits rise.

The company reported revenue of $23.3 billion for the quarter, down slightly from $23.6 billion during the same quarter last year. Boeing's full-year revenue was $94.6 billion, down from $96.1 billion last year.

"With solid fourth quarter operating performance and a sharp strategic focus, we extended our aerospace market leadership in our centennial year and positioned Boeing for continued growth and success in our second century," said Boeing President and CEO Dennis Muilenburg. "We led the industry in commercial airplane deliveries for the fifth consecutive year, achieved healthy sales in our defense, space and services segments, and produced record operating cash flow, which fueled investment in innovation and our people and generated significant returns to shareholders."

Boeing's net earnings for the quarter were $1.6 billion, up 59% from $1.0 billion during the prior year's quarter. For the full year, net earnings were down 5% from the prior year.

Boeing posted stellar quarterly earnings despite an 18% drop in revenue related to military aircraft from a year ago. Boeing delivered 185 commercial airplanes during the quarter, three more than during the fourth quarter of 2015. Operating margins related to commercial airplanes increased to 9.1% from 3.5% one year ago.

The Boeing Company (BA) shares ended the week at $167.70, up 5.5% for the week.

Yahoo! Reports Increased Earnings

Yahoo! Inc. (YHOO) released its fourth quarter and full-year earnings on Monday, January 23. The company's profit and revenue exceeded analysts' expectations for the quarter.

Revenue for the fourth quarter was $1.47 billion, up from $1.27 billion during the same quarter last year. For the full year, Yahoo reported revenue of $5.17 billion, up from $4.97 billion during the prior year.

"I'm very pleased with our Q4 results and incredibly proud of the team's execution on our 2016 strategic plan, particularly given the uniquely eventful past year for Yahoo," said Yahoo CEO Marissa Mayer. "What we have achieved reflects some of the most impressive teamwork, focus, and resilience I've seen throughout my career."

The company reported net earnings of $162 million for the quarter. This is a sharp increase from the net loss of $4.44 billion at this time last year. For the full year, Yahoo reported a net loss of $214 million.

Yahoo! Inc. and telecommunications giant Verizon Communications have been working on a merger since July of last year. The merger hit a snag in December when Yahoo revealed that a 2013 data breach affected more than one billion users. The announcement came just months after Yahoo reported a 2014 data breach affecting over 500 million accounts. Despite these concerns, Yahoo announced this week that it expects the deal to close in the second quarter of this year.

Yahoo! Inc. (YHOO) shares ended the week at $44.42, up 5.9% for the week.

The Dow started the week of 1/23 at 19,795 and closed at 20,094 on 1/27. The S&P 500 started the week at 2,268 and closed at 2,294. The NASDAQ started the week at 5,547 and closed at 5,661 for the week.

Slow GDP Growth Slows Treasury Yields

Treasury yields rose early in the week before leveling off during trading on Friday, January 27. Mixed economic signals on the health of the U.S. economy have sent bond yields on a rollercoaster ride.

The Dow Jones Industrial Average closed at 20,068 on Tuesday, the first time the index has closed above 20,000 in its history. With investors moving toward stocks and away from bonds in recent months, bond prices have fallen, leading to higher yields. Bond prices move inversely to yields, so as prices fall, yields rise.

The Dow's nearly 10% gain since November indicates an overall positive attitude among investors that the U.S. economy will see significant gains going forward. In addition, the Federal Reserve's stated plan to raise interest rates several times in 2017 has pushed bond prices down.

The benchmark 10-year note yield opened the week at 2.44%. The yield peaked on Thursday at 2.56% before pulling back on Friday.

On Friday the U.S. Department of Commerce announced that gross domestic product grew at a slower-than-expected rate of 1.9% for the fourth quarter of 2016. Despite the economy's sluggish performance to close out the year, President Trump has vowed his administration's policies will jumpstart growth to 4%.

"If you look across the broad spectrum—capital expenditures, business confidence, consumer confidence, household building, household formation, wage income, wages going up, unemployment going down, auto sales going up, retail sales going up—[the economy] looks like it is getting stronger, not weaker," said J.P. Morgan Chase & Co. CEO James Dimon.

The 10-year Treasury note yield finished the week of 1/23 at 2.48%, while the 30-year Treasury note yield was 3.06%.

Mortgage Rates Rise

Freddie Mac released its latest primary mortgage market survey (PMMS) on Thursday, January 26. Mortgage rates gained ground for the first time this year.

The 30-year fixed rate mortgage averaged 4.19% this week, up from 4.09% last week. At this time last year, the 30-year fixed rate mortgage averaged 3.79%.

The 15-year fixed rate mortgage averaged 3.40% for the week. This is an increase from last week's average of 3.34%. During the same time last year, the 15-year fixed rate mortgage averaged 3.07%.

"The 10-year Treasury yield increased more than 10 basis points this week. The 30-year mortgage rate moved up as well to 4.19%, a 10 basis point jump," said Freddie Mac Chief Economist Sean Becketti. "This week marks the first increase in the mortgage rate since December 29. The 2.8% decline in existing home sales in December is a reminder of the lack of homes for sale. According to the National Association of Realtors, supply is at its lowest level since 1999, a factor that should support higher house prices regardless of the oscillations of the mortgage rate."

Based on published national averages, the money market account finished the week of 1/23 at 0.6%. The 1-year CD finished at 1.21%.

Published January 27, 2017
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