The R&D Index: Market Watch for the week ending March 17, 2017 closed at 1,645.28 for the 25 companies in the R&D Index. The Index was up 0.08% (or 1.33 basis points) over the week ending March 10, 2017. Eleven R&D Index companies gained value last week from 0.09% (Bayer AG) to 6.98% (Oracle). Fourteen R&D Index companies lost value last week from -0.03% (Honda) to -3.48% (Bristol-Myers Squibb).
For the second time in the past three months, the Federal Reserve raised short-term interest rates last Wednesday from 0.75% to 1.00%. They also noted that two more rate increases could be expected this year with an end of the year rate of approximately 1.50%. It also was noted that the inflation rate was already approaching the Fed’s target of 2.0%. The Fed noted, however, that 2.0% was not a ceiling and inflation could go slightly higher for a short period of time without any negative effects.
The Trump administration also released its FY2017 government spending proposal last Thursday with significant cuts in most agency budgets ranging from 10% to 20%. If approved by Congress, these cuts could see substantial reductions in the government’s investments in R&D. Reductions (from FY2016 budgets) were proposed for the NIH (-19.8%), DOE (-11%), DOC/NIST (-10%), the EPA (-30%), the USGS (-10%) and NASA (-1%). Congressional comments to these proposals followed mostly party lines with Democrats taking issue with specific cuts for science agencies and Republicans mostly embracing the cuts as a means to reduce the size of government. The administration was looking to cut about funding from the non-defense discretionary budget and shift it over to the defense budget.
The NIH’s budget reduction is particularly painful for the U.S. R&D community in that most of its funding is focused on supplying grants for life science research or supporting its research centers. NIH R&D funding has been mostly static for more than 10 years, which when accounting for inflation has seen a real-dollar reduction of more than 20% alone. Adding the FY2017 proposal into this relationship, would reduce NIH R&D by more than 40% from what was invested 10 years ago in real dollar spending values.
R&D Index member Apple announced—in China only—that it plans to open two new R&D centers in China—Shanghai and Suzhou—adding to its existing R&D centers in Beijing and Shenzhen (announced earlier). These efforts are in response to its 17% drop in Chinese sales over the past year to $48.5 billion, much of it to China’s Huawei Technologies, Oppo and Vivo, each of whom ship more products that does Apple. The new R&D centers are expected to boost Apple’s annual R&D investments in China to more than $500 million—it’s total global R&D investment in 2017 is expected to exceed $9 billion. Apple stock rose 0.55% last week to close at nearly $140. If Trump’s tax repatriation succeeds this year, analysts expect Apple stock could reach $175—Apple currently has invested more than $204 billion in offshore profits.
| R&D Index Week Ending March 17, 2017 |
| Ticker | Exchange | 2015 R&D billions$ | 03/10/17 | 03/17/17 | 3/17/17 to 3/10/17 | 3/17/17 to 1/1/16 | ||
| 1 | Microsoft | MSFT | NASDAQ | 12,448 | 64.93 | 64.87 | -0.09% | 16.93% |
| 2 | Intel | INTC | NASDAQ | 12,128 | 35.91 | 35.27 | -1.78% | 2.38% |
| 3 | Roche Pharm | RHHBY | OTC | 10,242 | 32.04 | 31.72 | -1.00% | -7.98% |
| 4 | Toyota | TM | NYSE | 9,112 | 112.66 | 112.21 | -0.40% | -8.80% |
| 5 | Johnson & Johnson | JNJ | NYSE | 9,046 | 126.21 | 128.06 | 1.47% | 24.67% |
| 6 | Novartis | NVS | NYSE | 8,935 | 75.60 | 75.55 | -0.07% | -12.23% |
| 7 | Apple | AAPL | NASDAQ | 8,397 | 139.14 | 139.91 | 0.55% | 32.92% |
| 8 | Pfizer | PFE | NYSE | 7,690 | 34.11 | 34.32 | 0.62% | 5.96% |
| 9 | General Motors | GM | NYSE | 7,500 | 36.83 | 36.33 | -1.36% | 6.82% |
| 10 | Merck & Co. | MRK | NYSE | 6,704 | 65.60 | 63.90 | -2.59% | 20.98% |
| 11 | Ford Motor | F | NYSE | 6,700 | 12.53 | 12.48 | -0.40% | -11.43% |
| 12 | Cisco | CSCO | NASDAQ | 6,411 | 34.26 | 34.23 | -0.09% | 26.03% |
| 13 | Oracle | ORCL | NYSE | 6,042 | 42.68 | 45.66 | 6.98% | 24.99% |
| 14 | Astra Zeneca PLC | AZN | NYSE | 5,997 | 29.55 | 30.69 | 3.86% | -9.60% |
| 15 | Honda | HMC | NYSE | 5,990 | 31.05 | 31.04 | -0.03% | -2.79% |
| 16 | Bristol-Myers Squibb | BMY | NYSE | 5,920 | 58.32 | 56.29 | -3.48% | -18.18% |
| 17 | Qualcomm | QCOM | NASDAQ | 5,833 | 58.64 | 57.55 | -1.86% | 15.15% |
| 18 | Sanofi SA | SNY | NYSE | 5,519 | 43.91 | 44.30 | 0.89% | 3.87% |
| 19 | Eli Lilly Co | LLY | NYSE | 5,331 | 84.36 | 83.96 | -0.47% | -0.33% |
| 20 | GlaxoSmithKline | GSK | NYSE | 5,250 | 41.37 | 42.27 | 2.18% | 4.76% |
| 21 | IBM | IBM | NYSE | 5,247 | 177.83 | 175.65 | -1.23% | 27.67% |
| 22 | Daimler | DDAIY | OTC | 5,169 | 70.00 | 71.16 | 1.66% | -8.65% |
| 23 | Siemens | SIE | XETRA | 4,929 | 123.05 | 124.35 | 1.06% | 38.35% |
| 24 | Bayer AG | BAYN | XETRA | 4,649 | 106.75 | 106.85 | 0.09% | -8.05% |
| 25 | Ericsson | ERIC | NASDAQ | 4,124 | 6.62 | 6.66 | 0.60% | -30.70% |
| Total | 175,313 | 1643.95 | 1645.28 | 0.08% | 8.13% | |||
| Biopharmaceutical | 697.82 | 697.91 | 0.01% | 0.47% | ||||
| Automotive | 263.07 | 263.22 | 0.06% | -6.32% | ||||
| ICT | 553.39 | 553.14 | -0.05% | 23.90% | ||||
