The R&D Market Pulse Index for the week ending February 16, 2018 closed at 4,149.12. The Index was up 5.72 percent (or 224.52 basis points) from the week ending February 9, 2018. Twenty-three R&D Index companies posted a gain for the week from 0.95 percent (Astra Zeneca) to 12.14 (Cisco). Two R&D Index companies posted losses for the week from -0.27 percent (Toyota) to -0.89 percent (General Motors).
For the week ending 2/16/18, the DJIA was up 4.25 percent (it’s largest gain in two years) compared to the R&D Index’s 5.72 percent gain. For the previous week ending 2/9/18, the DJIA was down -5.21 percent (it’s largest loss in two years) compared to the R&D Index’s 5.50 percent loss for that week. For 2018, the DJIA is now up 2.0 percent and the R&D Index is up 1.9 percent. Both indices have now gained back approximately half of the losses from their January peaks.
The U.S. producer-price index (PPI) rose 0.4 percent in January from December 2017, according to a 2/15/18 report from the Dept. of Labor. From January 2017 to January 2018, the PPI has risen 2.7 percent. The more reliable consumer-price index (CPI) revealed prices rising 0.5 percent in January 2018 according to a DoL report released last Wednesday. These measures of inflation could cause the Federal Reserve to consider more short-term interest rate increases in 2018. Analysts now expect four (0.25 percent) rate increases to be made starting in March 20-21, and again in June, September and December reaching a 2.25 percent to 2.50 percent range by the end of the year. The Fed announced last week that industrial production fell 0.1% in January from December, its first drop since last summer. Industrial production was led by a rise in utility production (cold weather), offset by flat manufacturing output and a drop in mining production.
R&D Index member Amazon is reported to be considering expanding its small medical products business into a major supplier for hospitals and outpatient clinics through its Amazon Business division. The company is said to be building technology to serve healthcare customers and looking to sell hospitals on a marketplace concept that differs from conventional hospital purchasing concepts. Prompt delivery and stocking of critical products may be a sticking point for Amazon Business. Hospitals currently tightly safeguard their supply chain to ensure on-time arrival of goods. Amazon currently is expected to invest $22.4 billion in R&D in 2018, an increase of nearly 17 percent over the $19.2 billion it spent in 2017.
The Trump Administration released its FY2019 budget last week and immediately encountered criticism from economists over several budget assumptions. The new budget claimed that the U.S. economy would grow by an average of 3 percent per year over the next ten years, while independent economists expect that growth to be more in the 2 percent range, resulting in an additional budget deficit of $1 trillion starting next year. The budget includes a 15 percent increase in Defense (and Defense R&D) spending and significant cuts in USDA, DOE, DOI and DOT agencies. The budget is obviously the administration’s proposed spending plans, which will involve congressional debate over the rest of the year. The only agency somewhat immune to these deliberations is the DOD, which generally has bipartisan support and often is approved before the beginning of the new fiscal year (October 1, 2018), while other agencies generally run through the end of the calendar year before being approved—especially in an election year such as 2018.
R&D Index Week Ending February 16, 2018
| Ticker | Exchange | 2017 R&D billions$ | 02/09/18 | 02/16/18 | 2/16/18 to 2/9/18 | 2/16/18 to 1/1/17 | ||
| 1 | Amazon | AMZN | NASDAQ | 17,774 | 1,339.60 | 1,448.69 | 8.14% | 93.19% |
| 2 | Alphabet/Google | GOOGL | NASDAQ | 15,845 | 1,046.27 | 1,095.50 | 4.71% | 38.24% |
| 3 | Microsoft | MSFT | NASDAQ | 13,987 | 88.18 | 92.00 | 4.33% | 48.05% |
| 4 | Intel | INTC | NASDAQ | 13,499 | 43.95 | 45.56 | 3.66% | 25.61% |
| 5 | Apple | AAPL | NASDAQ | 11,506 | 156.41 | 172.43 | 10.24% | 48.88% |
| 6 | Volkswagen AG | VLKAY | OTC | 11,260 | 41.44 | 42.54 | 2.65% | 48.33% |
| 7 | Roche Pharm | RHHBY | OTC | 10,174 | 28.98 | 30.30 | 4.55% | 1.75% |
| 8 | Toyota | TM | NYSE | 9,170 | 136.57 | 136.20 | -0.27% | 16.21% |
| 9 | Johnson & Johnson | JNJ | NYSE | 9,060 | 129.53 | 133.15 | 2.79% | 15.57% |
| 10 | Novartis | NVS | NYSE | 7,870 | 83.25 | 86.91 | 4.40% | 19.32% |
| 11 | General Motors | GM | NYSE | 7,468 | 41.46 | 41.09 | -0.89% | 17.94% |
| 12 | Pfizer | PFE | NYSE | 7,288 | 34.16 | 36.26 | 6.15% | 11.64% |
| 13 | Bristol-Myers Squibb | BMY | NYSE | 6,942 | 62.80 | 68.96 | 9.81% | 18.00% |
| 14 | Cisco | CSCO | NASDAQ | 6,827 | 39.53 | 44.33 | 12.14% | 46.69% |
| 15 | Qualcomm | QCOM | NASDAQ | 6,723 | 63.99 | 64.85 | 1.34% | -0.54% |
| 16 | Oracle | ORCL | NYSE | 6,702 | 47.73 | 50.71 | 6.24% | 31.89% |
| 17 | Honda | HMC | NYSE | 6,519 | 34.61 | 35.64 | 2.98% | 22.10% |
| 18 | Astra Zeneca PLC | AZN | NYSE | 6,363 | 33.61 | 33.93 | 0.95% | 24.19% |
| 19 | Merck & Co. | MRK | NYSE | 5,759 | 54.87 | 56.29 | 2.59% | -4.38% |
| 20 | Daimler | DDAIY | OTC | 5,084 | 86.55 | 90.29 | 4.32% | 27.67% |
| 21 | Bayer AG | BAYN | XETRA | 4,880 | 29.90 | 30.73 | 2.78% | 13.69% |
| 22 | Sanofi SA | SNY | NYSE | 4,755 | 38.98 | 39.91 | 2.39% | -1.31% |
| 23 | IBM | IBM | NYSE | 4,628 | 149.51 | 156.18 | 4.46% | -5.91% |
| 24 | GlaxoSmithKline | GSK | NYSE | 4,508 | 36.49 | 37.70 | 3.32% | -2.10% |
| 25 | Eli Lilly Co | LLY | NYSE | 4,489 | 76.23 | 78.97 | 3.59% | 7.37% |
| Total | 209,080 | 3,924.60 | 4,149.12 | 5.72% | 42.51% | |||
| Biopharmaceutical | 608.80 | 633.11 | 3.99% | 10.21% | ||||
| Automotive | 340.63 | 345.76 | 1.51% | 23.21% | ||||
| ICT | 1,635.57 | 1,721.56 | 5.26% |
31.76% |
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About the R&D Index
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.
