For the week of Monday, January 9, 2012 through Friday, January 13, 2012
- Standard & Poor’s 500 Index: 0.88%
- Dow Jones Industrial Average: 0.50%
- NASDAQ Composite: 1.36%
We have started the year on positive footing with the markets rallying in the first two weeks of trading. We feel that markets will continue to rise; however, there are a few obstacles in the way. The unemployment rate in the United States is still extremely high, despite job gains in the past few months. Jobless claims may rise in the next few weeks as seasonal workers are no longer needed. As consumers feel better about the economy, they should loosen their purse strings and increase spending. An industry that has gained recently is home building. We believe that it is still too early to take a position on whether the housing market has bottomed considering the large inventory of homes on the market and in the foreclosure pipeline. However, a rise in new home construction would spur the economy and drastically reduce the unemployment rate.
The data from the Federal Reserve’s Beige Book confirms the consumer sentiment data and reduced unemployment rate with economic activity picking up in most districts. Interest rates have fallen for the year. Some are near record low’s set last year. We expect rates are likely to rise this year. Still on the horizon is the European Debt Crisis which remains to be completely solved. However there were strong sovereign debt auctions this week that pushed Spanish and Italian yields down. Germany issued bonds this week with a negative yield as investors flocked to Europe’s safe haven security. Europe can take steps to mitigate the situation, but the challenge will be for Eurozone members to agree to some of the necessary measures.
Economic News
- Employment Situation
- Employment numbers published last Friday show the labor market finished 2011 by gaining strength.
- In December, private payrolls grew 212,000 and 200,000 jobs were added in the month.
The unemployment rate fell to 8.5% from 8.7%, the lowest since February 2009. - The workweek lengthened 0.1 hour to 34.4 and average hourly earnings rose slightly by 0.2%.
- Wholesale Trade
- Wholesale inventories for November rose 0.1% which was less than expected and fell short of October’s 1.2% increase.
- High consumer demand was the leading factor keeping inventories low.
- The potential benefit is that the manufacturing sector could get a boost as inventories are rebulit.
- Jobless Claims
- Initial Jobless claims rose this week to 399,000 from 375,000.
- Claims for the previous week were revised higher to 375,000 from 372,000.
- Continuing claims for unemployment also rose last week.
- The results should come as no surprise as seasonal workers hired to help with the holiday crunch leave the workforce.
- Beige Book
- The Federal Reserve’s Beige Book covering the end of November through late December showed economic growth in most regions.
- Manufacturing output grew in most areas because of automobiles and agriculture.
- Consumer spending strengthened in all districts during the holiday shopping season.
- Jewelry and electronics were the products with the strongest demand.
- University of Michigan Consumer Sentiment Survey
- The results of the Consumer sentiment survey showed a jump larger than expected.
- Consumer Sentiment rose from 69.9 to 74.0.
- This is the highest reading in eight months and the largest gain since the spring.
Earnings News
- Alcoa (NYSE: AA)
- Aluminum maker Alcoa kicked off earnings season after reporting revenue of $5.99 billion, a 6% increase, and a $0.03 per share loss.
- The loss comes from restructuring charges related to shutting down some of its aluminum smelting operations.
- Analysts expected the loss on revenue of $5.7 billion.
- Tiffany & Co. (NYSE: TIF)
- Tiffany & Co. revised earnings lower for the fiscal year ending January 31, 2012.
- The revision comes after sales increased only 7% through the holiday season versus 11% last year.
- Profit fell short of analyst expectations of $3.77 per share, coming in at $3.65 for the year.
- Lennar Corporation (NYSE: LEN)
- The world’s largest homebuilder reported earnings on Wednesday, and believes the U.S. housing market is bottoming.
- Revenue for the fourth quarter rose, but income fell 5%.
- Net Income was $30.3 million down from $32 million last year.
Interest Rates
- The two-year Treasury dipped three basis points to 0.23%, stuck in a range since August of 0.15%-0.30%
- The five-year Treasury fell six basis points to 0.82%,
- The 10-year Treasury dropped nine basis points to 1.90% and has been unable to rise above 2.0% in 2012.
- The 30-year Treasury also slid nine basis points dropping below 3.0% to 2.97%.
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.
