Sustained volatility is the phrase that best sums up the US market’s performance in the month of January. Investors braced for the worst after a tepid December 2018, and while the market continued to slow down, it was largely positive thanks to various reported corporate earnings that helped investors gain confidence.

On January 2, the financial data and software company, FactSet reported that analysts projected S&P 500 earnings for 2019 to show 7.9% growth, down from more than 10% in October 2018 when originally reported. By mid-January, the market began to turn for the better with bank and corporate earnings beginning to come in. By January 15, 88% of S&P 500 companies had posted stronger-than-expected positive results. By the end of the month, the S&P 500 had reached 7.9% growth making it the best start for the index since 1987. In addition, the Dow Jones Industrial Average posted a 7.2% gain, its best January performance since 1989.

However, things were not all positive with the 35-day US government shutdown, which occurred between December 22 and January 25. The shutdown caused significant damage to the economy. On January 28, the Congressional Budget Office reported that the shutdown reduced the US GDP by $3 billion in the fourth quarter of 2018, and potentially could cause a reduction of $8 billion in the first quarter of 2019. The $3 billion figure is an estimate of the value of government work that was not performed during the shutdown. The shutdown also caused various US economic data reports to be delayed or postponed, such as the fourth quarter 2018 GDP report and December 2018 consumer spending report.

While the US government shutdown was in the forefront in the media, the US and China trade issue was progressing throughout the month. The latest development occurred on January 29 when both countries began two days of high-level talks. The tariffs the US placed on Chinese goods have started to see an effect on both countries’ economies. On January 28, the Congressional Budget Office predicted that the tariffs placed on steel, aluminum and Chinese goods could cut the US’ GDP by at least 0.1% on average through 2029. It also predicted US GDP growth would slow to 2.0% this year, 1.7% in 2020 and 1.6% in 2021. Both parties are expected to conclude trade discussions on March 1.

The labor market proved to be an economic sector that stayed strong throughout the month despite increasing concerns. For example, on January 4, the Bureau of Labor Statistics’ labor market figure rose 3.9% from a 49-year low of 3.7%. In addition, the agency reported that the US gained 312,000 new jobs in December 2018 to bring total employment gains in 2018 to a three-year high of 2.64 million.

Another contributing factor to investors’ confidence was the Federal Reserve’s announcement on January 29 that it would pause on raising short-term interest rates, keeping the rates between the range of 2.25%–2.5%. The Fed confirmed that two rating hikes were still scheduled, yet those dates have not been announced. The Fed’s reasoning for the interest rate pause is that it wants to observe how the US will operate with a strong labor market and consistent consumer spending, as well as the effects of slowing global growth, the continuing US-China trade dispute and the partial US government shutdown.

Like the equity markets, oil prices began in a slump and recovered throughout the month, soothing any worries investors had months prior. US crude oil prices were still 30% below October 2018’s multi-year highs, however, they maintained an average of $50/barrel levels throughout the month. On January 2, the crude oil market was at its worst-performing quarter since 2014. By mid-January, oil prices starting to rebound and held steady throughout the month. This was evident on January 10, with reports stating oil prices here having a nine consecutive day winning streak, which was the longest streak since January 2010. This was unusual especially with the slowing of China’s economy, Venezuela’s political crisis, tense relations between the US and Iran and lagging demand of US shale gas.

Lastly, another positive yet cautious sign of investors’ confidence in the US market was the widening gap between the 2-year and 10-year Treasury Yield Curve Spread, a positive indicator of US economic performance.

For January, the Dow Jones Industrial Average, S&P 500, and NASDAQ all had gains, rising 7.2%, 7.9%, and 9.7%, respectively.

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Laboratory Instruments and Products Stock Index

The Index advanced 11.9% for the beginning of the year to 417.82. The Index’s performance was mixed with most companies trading higher this month. The top-performing company for the month was Nanostring Technologies, which jumped 50%.  The worst performing company for the month was BioNano Genomics, declining 18.3%.

Starting with this issue IBO has added BioNano Genomics, a life sciences instrumentation company, and Twist Bioscience, a manufacturer of synthetic DNA in the biotechnology industry, to the Index. In addition, Enzo Biochem and Harvard Bioscience have been removed.

In other news, Waters, on January 23, reported fourth quarter 2018 and full-year 2018 financials. The company forecasted first quarter and full-year adjusted EPS to be $1.65–$1.75 and $9.20–$9.45, respectively.

Illumina was one of the few companies in the Index to experience a moderate loss, decreasing 6.7%. On January 29, Illumina reported its fourth quarter 2018 and full-year 2018 financial results. The company forecasted its full-year adjusted EPS to be $6.50–$6.60. The adjusted EPS range is a significant increase from the reported full-year 2018 adjusted EPS of $5.72. The company attributed this prediction to an expectation of a one-time tax benefit in relation to its Helix investment in 2018, which will result in an approximately 17% increase. Illumina did not provide an adjusted EPS guidance for the first quarter. In ratings news, on January 7, Morgan Stanley gave Illumina an “equal weight” rating and lowered its analyst price target from $320 to $288, a 6.8% downside from the January 7 price of $309.09. In addition, on January 25, Deutsche Bank downgraded Illumina from a “buy” rating to a “hold” rating with an analyst price target of $296.53, a 0.5% downside from the January 25 price of $298.15.

PerkinElmer also reported its fourth quarter 2018 and full-year 2018 financial results on January 29. The company posted a fourth quarter 2018 adjusted EPS of $1.16, an increase of $0.02 of its guidance and a double-digit increase of 21.6%. PerkinElmer credited the EPS growth to its quarterly organic revenue growth which increased 7% to $756.3 million (See Bottom Line). For the first quarter, the company forecasted an adjusted EPS of $0.66, and for the full-year, the company forecasted an adjusted EPS of $4.00–$4.05.

On January 30, Thermo Fisher Scientific provided a full-year adjusted EPS guidance of $12–$12.20, resulting in 8%–10% growth. The guidance was adjusted to reflect a negative foreign exchange, which it predicted to occur mostly in the first half of the year.

In ratings news, on January 2, Becton, Dickinson (BD) had its price target lowered by both CitiGroup and Morgan Stanley. CitiGroup lowered the price from $279 to $256. Despite the lower price target, CitiGroup did give BD a “buy” rating, and the price target of $256 is a 16.0% increase from its January 1 price of $220.61. Morgan Stanley lowered the company’s price target from $265 to $240 and gave BD an “equal weight” rating on the stock. The $240 price target is an 8.8% increase of the January 1 price of $220.61. On January 3, Pacific Biosciences was downgraded by Cowen from an “outperform” rating to a “market perform” rating.

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Diversified Laboratory

In January, the Index declined 7.7% to 230.06 solely due to a significant decrease in the market capitalization value of the Index. Despite the decline, all the companies experienced monthly gains. Corning was the only company in the Index to experience a double-digit increase in share price. Roper Technologies experienced the smallest gains, increasing only 6.3%.

On January 23, Teledyne Technologies reported its fourth quarter 2018 and fiscal full-year 2018 earnings. The company provided first quarter GAAP EPS guidance of $1.87–$1.92. The company also gave full-year GAAP EPS guidance of $9.25–$9.35.

On January 29, Corning reported its fourth quarter 2018 and full-year 2018 earnings. Fourth quarter 2018 adjusted EPS and full-year 2018 adjusted EPS increased 28% and 11%, respectively, due to the continued success of the company’s expansion project investments. The company did not provide an adjusted EPS forecast for the first quarter or year end.

For 2018, Danaher’s fiscal full-year EPS rose in the double digits for the fifth year in a row due to solid 6% core revenue growth and a strong 17.1% operating margin growth. The company’s revenue performance was attributed to new products and the prioritization of certain business initiatives. On January 29, Danaher announced its first quarter and full-year guidance. The company forecasted first quarter adjusted EPS of $1–$1.03 and forecasted full-year EPS guidance of $4.75–$4.85, with an expectation of core revenue growth increasing 4%.

On January 31, Xylem announced its fiscal full-year adjusted EPS guidance is expected to be $3.20–$3.40. On the same day, Xylem declared a $0.24 dividend, a 14.3% increase.

In ratings news, RBC Capital upgraded Honeywell with an “outperform” rating and a $148 analyst price target, a 2.3% increase from the January 3 price of $144.71.  In addition, on the same date, Credit Suisse Group also upgraded Honeywell with an “outperform” rating yet gave the company a $132.06 analyst price target, an 8.7% decrease from the January 3 price. Despite this lower price target, Credit Suisse noted that Honeywell was one of the top industrial stock picks for the year, highlighting its strong balance sheet and its ability to generate above-average free cash flow. The company’s shares rose 3.3% following RBC Capital’s and Credit Suisse’s announcements that day. On January 10, Illinois Tool Works was downgraded by JP Morgan Chase from a “neutral” rating to an “underweight” rating. The analyst price target was $120, an 8.5% decrease from the January 10 price of $131.09.

International Stocks

For the month, the Asia Pacific markets were mostly positive except for Japan’s Nikkei, which had a 3.79% decline. Hong Kong’s Hang Seng and the Asia Dow expanded 11.5% and 8.8%, respectively.

Starting with this issue, IBO has begun covering Expedeon, a manufacturer of tools for biological research, diagnostics and drug discovery.

Prices for most of the Pacific region companies in the IBO Stock Table increased this month except for Yunnan Energy, which declined 9.4%. The rest of the companies increased in the double digits, with JEOL, HORIBA, and GL Sciences recording the fastest expansions, rising 19.1%, 18.7%, and 17.1%, respectively.

In other news, Hitachi High-Technologies reported its fiscal third quarter 2019 results on January 31. The company forecasted its full-year 2019 EPS of ¥327.21 ($2.90 at ¥112 = $1).

European equity markets were positive in January. Italy’s FTSE MIB and France’s CAC 40 Index expanded 8.30% and 8.27%, respectively. London’s FTSE 100 experienced the smallest amount of gains with a 4.13% increase.

Prices for the European stocks in the IBO Stock Table were mixed as well, with most companies showing gains in January. Abcam had the biggest gains this month with a 21.7% increase, followed by Sartorius that rose 21.4%. In contrast, Horizon Discovery was the biggest loser declining 12.0%.  On January 8 and 29, Abcam and Horizon Discovery made pre-trading announcements respectively (See Life Science Consumables).

On January 15, Oxford Instruments authorized the listing of 150,000 shares which will be traded on the London Stock Exchange starting on January 17. The shares were listed by Oxford Instrument for the purpose of its Performance Share Plan, an employee benefit that would allow its employees to earn stock in the company if or when a specific financial target is reached. The stocks were priced at 5 pence a share.

On January 29, Sartorius announced its full-year results, posting a 21.9% increase in basic EPS to €2.56 ($3.28).

In ratings news, on January 10, JP Morgan Chase restated Abcam’s “neutral” rating in a research report. On January 16, JP Morgan Chase raised Spectris’ price target from 2,900 pence ($37.89) to 2,965 pence ($38.74) and gave the company an “overweight” rating. In addition, on January 21, Halma’s “sell” rating was reaffirmed by UBS Group.

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