Michael Haddad Updated Sept. 28, 2018 4:15 p.m. ET
Wait and see. Stocks rose slightly on Friday, gauging the impact of Fed’s rate hikes, Elon Musk’s potential exit from Tesla, the approaching midterm elections and how the Brett Kavanaugh hearing will further stir things up in the political scene. In today’s Intraday Update, we…
•…see if stocks can prevent a late-day slide;
•…explain why you shouldn’t worry too much about corporate leverage
•…observe HCP’s upgrade.
Leverage Is High, But Not For Everyone
The three major indexes are all slightly higher. The Dow Jones Industrial Averagegained 64.22 points, or 0.24%, to 26,504.15, the S&P 500climbed 0.12%, to 2917.57, and the Nasdaq Compositeadded 0.09%, to 8049.17, early Friday afternoon.
For the previous two days, both the Dow and the S&P 500 have slipped late in the day. We’ll see if the market can hold onto its intraday gains today until the end.
There have been some concerns about the ballooning U.S. corporate debt. The net debt-to-equity ratio for non-financial S&P 500 companies —weighted by market cap—climbed to around 60% by the end of 2017, sharply up from about 50% in 2016. This means the companies hold $60 in debt for every $100 of shareholder equity.
This worry about indebtedness might be a “misconception,” however, according to Sean Darby of Jefferies. While the debt level is important, investors should also watch the companies’ ability to pay it back. The net debt-to-Ebitda ratio, which estimates the number of years it would take a company to pay back its debt, is a good measure for that.
While the net debt-to-equity ratio