“Sell” Sign for Equity Markets as Gush of Cash Rush into Stocks

By Joyce Yu

Philadelphia, PA–Wall Street opened higher on Friday, fueled by strong earnings reports from companies like chipmaker Intel despite weaker-than-expected U.S. economic growth data.

Bank of America Merrill Lynch points out in its note that a big chunk of cash rushes into the stock market, sending a powerful “sell” signal. This has been a reliable indicator in the past, the bank notes. Investors poured $33.2 billion into stock-based funds through the week ended Wednesday, equivalent to 12% of flows for the entire previous year. Equity funds across all classes took in a net $278 billion for all of 2017

The economy grew 2.3% for the year, the Commerce Department said Friday. That’s well ahead of the 1.5% growth in 2016, but below the 3% target President Trump has set for his first term. For the final three months of the year, the economy grew at a 2.6% annual rate, following a 3.2% growth pace in the third quarter.

This is below market expectation where economists polled by Reuters had forecast the economy growing at a 3.0% pace in the final three months of 2017. A subtraction from GDP growth, import increased at their fastest rate in more than seven years. On the whole, though, the economy remains healthy with solid consumer spending, improved business investment and rising exports helping propel growth last year.

The overall picture looks rosy – U.S. consumer confidence was at its highest since 2000. The labor market was also tight with job additions for 87 consecutive months totaling 2 million jobs. And the stock market boomed to record highs. Consumer spending, which accounts for more than two-thirds of U.S. economic activity, is likely to remain supported by rising household wealth, contributed by rallies in stock markets and higher house prices, tax cuts and firming wage growth.

Separately, Intel’s shares jumped 7% to their highest in almost two decades on strong results. After years-long effort to shift away from a slowing PC business, Intel’s strategy was finally paying off. Of the 118 S&P 500 companies that have reported quarterly earnings through Thursday, 78.8% have topped expectations, versus an average of 72% over the previous four quarters.


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