Advertisement

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%

 

Advertisement
Advertisement