The R&D Index for the week ending March 9, 2018 closed at 4,342.21 for the 25 companies in the R&D Index. The Index was up 4.52% (or 187.78 basis points) from the week ending March 2, 2018. Twenty R&D Index companies posted a gain for the week from 0.87% (Volkswagen AG) to 7.07% (Google). Five R&D Index companies posted losses for the week from -0.35% (Novartis) to -2.64% (Qualcomm).
While the R&D Index gained 4.5%, the DJIA gained 3.3% last week, much of it (55%) on Friday’s Labor Dept. report on non-farm payroll increase in February of 313,000 jobs, the largest one-month gain since 1983. Unemployment remained at 4.1% for the fifth consecutive month. The construction sector was particularly active in February, adding 61,000 new jobs, its largest one-month gain in 11 years. It is now growing at twice the rate of the general economy’s workforce. Economists have noted that the U.S. economy is still well short of full employment. Despite the 4.1% unemployment rate, broader definitions of employment— including those who no longer look for jobs—are still elevated at more than 8%.
President Trump’s 25% tariff on steel imports and 10% tariff on aluminum took center stage last week as trading partners threatened reprisals and the stock market increased its volatility again. Trump exempted Canada and Mexico on Thursday and indicated that Australia may also be exempted. Trump also indicated last week that there would be broader tariff regimens in the future. A report from the Commerce Dept. on Wednesday stated that the U.S. trade deficit rose to $56.6 billion in January from $53.9 in December, its highest level since October 2008. The trade deficit is expected to rise further in 2018 as the federal tax cut is likely to increase purchases of goods from outside the U.S. Exports are also likely to increase, but will likely be smaller than the imports.
It was noted by the Wall Street Journal last week that fund managers have recently cut their exposure to technology stocks to the lowest level in 15 months. Hedge funds also reduced their technology holdings in 4Q 2017. That the new tax structure has made technology stocks look less exceptional than other stocks is cited as the reasoning for this change, along with the long-run up in the value of technology stocks over the past several years, making them vulnerable to stock corrections (reduction of 10% or more from a recent high). Tech stocks such as those in the R&D Index, however, continue to rise and act as drivers for the broader market.
|R&D Index Week Ending March 9, 2018||
|Ticker||Exchange||2017 R&D billions||03/2/18||03/09/18||3/9/18 to 3/2/18||3/9/18 to 1/1/17|
|9||Johnson & Johnson||JNJ||NYSE||9,060||128.82||133.80||3.87%||16.14%|
|18||Astra Zeneca PLC||AZN||NYSE||6,363||33.16||33.79||1.90%||23.68%|
|19||Merck & Co.||MRK||NYSE||5,759||54.36||55.14||1.43%||-6.34%|
|25||Eli Lilly Co||LLY||NYSE||4,489||77.23||79.61||3.08%||8.24%|
R&D Magazine’s R&D Index is a weekly stock market summary of the top international companies involved in research and development. The top 25 industrial spenders of R&D in 2017 were selected based on the latest listings from Schonfeld & Associates’ June 2017 R&D Ratios & Budgets. These 25 companies include pharmaceutical (11 companies), automotive (5), ICT (8) and conglomerate (1) organizations who invested a cumulative total of more than $209 billion in R&D in 2017, or approximately 10% of all the R&D spent in the world by government, industries and academia combined, according to R&D Magazine’s 2017 Global R&D Funding Forecast. The stock prices used in the R&D Index are tabulated from NASDAQ, NYSE, XETRA and OTC common stock prices (in U.S. dollars) for the companies selected at the close of stock trading business on the Friday preceding the publication of the R&D Index in R&D Magazine’s R&D Daily eNewsletter.
The companies used in the R&D Index include Amazon, Alphabet/Google, Microsoft, Intel, Apple, Volkswagen AG, Roche Pharma, Toyota, Johnson & Johnson, Novartis, General Motors, Pfizer, Bristol-Myers Squibb, Cisco, Qualcomm, Oracle, Honda Motor Company, Astra Zeneca plc, Merck & Company, Daimler, Bayer AG, Sanofi SA, IBM, GlaxoSmithKline and Eli Lilly Co. Stock prices are based on those stocks traded on the U.S. exchanges. R&D Index trends (in the stock prices) are just one indicator of the amount of capital available to these high-technology companies to invest in R&D and should not be implied to indicate the absolute value of R&D investments made by these organizations. The companies chosen for the R&D Index have very large sophisticated internal and global R&D organizations with each company investing between $4.5 and $17 billion annually on their R&D efforts.