The R&D Index for the week ending May 11, 2018 closed at 4,275.13 for the 25 companies in the R&D Index. The Index was up 2.61% (or 108.84 basis points) from the week ending April 27, 2018. Twenty-one R&D Index companies gained value last week from 0.03% (Bayer AG) to 5.26% (Google/Alphabet). Four R&D Index companies lost value last week from -0.32% (Volkswagen AG) to -2.14% (Sanofi SA). All three R&D Index industrial categories (biopharma, automotive and ICT) gained substantial values last week. The biopharma Index was particularly relieved, gaining 1.8% for the week, when President Trump’s initiatives for cutting high drug prices turned out to be more modest than first expected. Shares of biopharma stocks, such as R&D Index member Merck & Co., actually rose following Trump’s announcement. Many of the 50 initiatives announced involved future actions, not immediate changes.
A record number of U.S. industrial companies are buying back their stocks, according to S&P 500 data. S&P companies bought back $158 billion of their stocks in 1Q 2018, the most amount since 1998. These actions are mostly responsible from the new tax laws, which have freed up cash, and the government’s encouragement to return foreign-held monies. Those companies repurchasing their stock have generally out performed their stock indices, rising an average of 5.1% in 2018.
China-U.S. trade talks are scheduled this week in Washington to find ways to relieve the trade-war tensions. Preliminary discussions over the past two weeks have concluded that China’s plan to buy more American goods to relieve these tensions is now on the table. The trade actions seen so far have included China’s inspection-based delays in releasing fruit imports from the U.S., now being held in Chinese ports, and similar actions for American-made (Ford) automobiles. A discussion sticking point is Washington’s demands that the current trade balance (approximately $375 billion in 2017) be reduced by $200 billion by the end of 2020.
A steady rise in global oil prices over the past year has resulted in current oil prices reaching $70/barrel for the first time since 2014. A number of geopolitical events are involved in this trend, including President Trump’s withdrawal from the 2015 Iran agreement to limit nuclear weapons work. The pricing rise has led to an increase in hiring of U.S.-based shale oil workers and equipment and production now exceeds 10 million barrels/day, its highest level ever. The rising prices also are reflected in the rising stock values of U.S. oil companies and a return to their previous levels of R&D investments.
|R&D Index Week Ending May 11, 2018|
|Ticker||Exchange||2017 R&D billions$||05/04/18||05/11/18||5/11/18 to 5/4/18||5/11/18 to 12/29/17|
|Johnson & Johnson||JNJ||NYSE||9,060||124.19||127.24||2.46%||-8.93%|
|Astra Zeneca PLC||AZN||NYSE||6,363||35.58||36.40||2.30%||4.90%|
|Merck & Co.||MRK||NYSE||5,759||57.75||59.69||3.36%||0.75%|
|Eli Lilly Co||LLY||NYSE||4,489||78.40||82.45||5.17%||-2.38%|