American stocks rebounded from a tumble that followed Standard & Poor’s warning about U.S. debt this week. The Standard & Poor’s 500 Index made another run at 1340 but remained in 1300-1340 range—where it has been in since early February. Strong earnings indicate the economy is still recovering, albeit at a slower than expected rate because of inflationary pressures and a smaller-than-expected gross domestic product reading. It is also no surprise that gasoline prices are still rising. Most companies in the S&P 500 have met or beaten expectations. The housing and job markets are still lagging. With the end of the Fed’s Quantitative Easing II program in sight, we are anticipating a rise in interest rates and are looking for the economy to continue growing through the year.
Real Estate
- New home sales are up 11% over February; however, prices are down 5% from last year.
- Case-Shiller 10-city composite is down 2.6% and the 20-city composite is down 3.3%, and
- Atlanta, Detroit and Chicago were among the worst markets and have hit their lowest price level since the beginning of the recession.
Economic News
- First Quarter Real GDP grew at an annualized rate of 1.75%, just missing the 2% estimate.
- Consumer spending and construction spending were weaker than expected because of the severe winter;
- Imports were stronger as a result of higher oil prices, lowering growth rate, and
- For the rest of the year, GDP is expected to grow at stronger rate.
- Gas prices are high.
- High oil price is driving gas prices higher, and
- Consumers spending more on fuel and less on discretionary items, which negatively affects GDP.
- Durable goods orders were up 2.5 % in March.
- Japan’s debt outlook was lowered by S&P from stable to negative.
- Japan was downgraded in January on budget deficit concerns from AA to AA-.
- Federal Reserve
- Interest rates fell despite a falling dollar, and
- Despite the S&P’s negative long-term outlook for U.S. debt, investors headed for the safety of U.S. treasurys.
Earnings
- Kimberly-Clark (NYSE: KMB) announced they would be raising prices as a result of material costs for the third time since March.
- KMB missed estimates by $.08 a share, and
- Sales grew in emerging markets of Latin America and Asia.
- The Coca-Cola Company (NYSE: KO) missed estimates by $.01 per share because of Japan’s earthquake and tsunami.
- More than 10% of their operating profit comes from Japan, and
- Global Sales were up 6%, with China up 14% and Mexico up 11%.
- United Parcel Service, Inc. (NYSE: UPS) beat estimates with a first-quarter profit of $1.4 billion and a global revenue increase of 7.3%
- Most of the gains were from international deliveries signaling strong global growth.
- The Boeing Company (NYSE: BA) beat expectations with a profit of $586 million.
- The first 787 Dreamliner is expected to be delivered in the third quarter.
- Aflac Inc.’s (NYSE: AFL) profit was down 38% in the first quarter because of investment losses, but after adjustments, they beat expectations.
- Exxon Mobil Corp.’s (NYSE: XOM) profit rose 69% because of higher crude oil prices, higher earnings in chemicals and its refining businesses.
- PepsiCo Inc. (NYSE: PEP) faced higher costs that weighed income down 20%.Next week, we have 14 holdings in the Traditional Recommended Portfolio reporting.
- Beverage and snack sales helped drive revenue higher, and
- Pepsi met analyst expectations for earnings per share.
Mergers & Acquisitions Activity
- Johnson & Johnson (NYSE: JNJ) is acquiring Swiss medical device company Synthes for $21.3 billion.
- This would give JNJ a rather hefty 28% market share in orthopedic devices
- Exelon Corporation (NYSE: EXC), the third largest operator of nuclear power plants, is looking to buy Constellation Energy Group, Inc. (NYSE: CEG) for $7.9 billion in stock.
- The deal needs approval from regulators in several states.
Disclosures
This article is meant to provide valuable background information on particular investments, NOT a recommendation to buy. The investments referenced within this article may currently be traded by Henssler Financial. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The contents are intended for general information purposes only. Information provided should not be the sole basis in making any decisions and is not intended to replace the advice of a qualified professional, such as a tax consultant, insurance adviser or attorney. Although this material is designed to provide accurate and authoritative information with respect to the subject matter, it may not apply in all situations. Readers are urged to consult with their adviser concerning specific situations and questions. This is not to be construed as an offer to buy or sell any financial instruments. It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future profitability or expectations. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing. Henssler is not licensed to offer or sell insurance products, and this overview is not to be construed as an offer to purchase any insurance products.
