Dow Closed above 14,000

Markets

For the week of Monday, January 28, 2013, through Friday, February 1, 2013:

• Standard & Poor’s 500 Index: 0.68%
• Dow Jones Industrial Average: 0.82%
• NASDAQ Composite: 0.93%

The markets continued their upward climb and closed the week pushing the Dow Jones Industrial Average above 14,000 for the first time since 2007. On Monday, weakness in materials stocks helped drive the indices lower, as both the Dow and S&P 500 took a step back from the previous Friday when both indices closed at their highest levels since 2007. Strong earnings in energy shares powered stock higher on Tuesday despite sluggish consumer confidence data.

The Federal Reserve announced mid-week that it would keep its bond-buying program steady. The central bank offered a mixed review of the economy. Stocks saw mild losses on Thursday only to close sharply higher on Friday, driving the Dow to levels not seen in nearly six years. Fresh reports on labor, manufacturing and consumer sentiment supported the view the U.S. economic recovery remains on track, despite the fourth quarter’s gross domestic product contraction.

Economic Data

• Durable Goods:
  • New orders for durable manufactured goods were up 4.6% in December.
    • Excluding transportation, new orders grew 1.3%.
  • Total shipments were up 1.3%, though inventories were unchanged.
  • Core capital orders were up 0.2%.
• Chain Store Sales Snapshot:
  • For the fourth week, the ICSC Chain Store Sales Index fell 1%.
  • The combination of higher payroll taxes and low temperatures appears to have limited activity.
    • The index had flat growth in the year ago period.
  • Year-over-year growth fell to 2%, the lowest reading in more than two months.
• Case Shiller Home Price Index:
  • Existing house price appreciation accelerated in the three months ending in November compared to a year ago.
  • The 10-city Composite is up 4.5% from last year, compared with the 3.4% increase originally reported last month.
  • The 20-city Composite is up 5.5% over the same period, an improvement on the 4.3% increase last month.
• Conference Board Consumer Confidence:
  • The Conference Board Index of Consumer Confidence fell to 58.6 in January, well below expectations.
  • After the third straight decline, this month’s 8.1-point drop brings the index to its lowest level in more than a year.
    • Perceptions of both current and future conditions were distinctly negative, likely as a result of concerns over higher taxes.
• MBA Mortgage Applications Survey:
  • The Mortgage Applications Composite Index fell 8.1% after three weeks of positive gains.
    • Both purchase and refinance activity were down.
  • The average interest rate for a 30-year fixed mortgage rose to the highest level in four months.
• Gross Domestic Product:
  • The fourth quarter saw the first drop in Gross Domestic Product (GDP) since the second quarter of 2009.
    • The 0.1% decline was down from the 3.1% gain in the third quarter.
    • The drop was due to lower federal defense spending.
    • State and local spending also fell.
  • Nonresidential fixed investment and consumer spending growth accelerated while inflation remained modest.
  • Disposable income rose, as accelerated dividends and bonus payments benefited customers and increased the saving rate to 4.7%.
• Federal Open Market Committee Meeting:
  • The latest Federal Reserve Open Market Committee made no changes to its monetary policy.
  • The description of the economy remains cautious.
  • The Fed will continue purchasing $85 billion per month in assets, as long as unemployment remains above 6.5% and inflation below 2.5%.
• Personal Income:
  • Personal income rose 2.6% in December, with accelerated dividends and bonus payments.
  • November growth was revised up to 1% on the premise of those accelerated payments.
  • Dividend income rose 4.5% in November and 34.3% in December.
  • Wage income jumped 0.6%, the second consecutive strong gain.
• Jobless Claims:
  • Initial claims for unemployment insurance rose by 38,000 to 368,000.
  • The four-week moving average, moved up slightly to 352,000.
  • Continuing claims rose 22,000 to 3.2 million.

Earnings

• Caterpillar, Inc. (NYSE: CAT)
  • Caterpillar reported earnings of $697 million, or $1.04 per share compared to $1.55 billion, or $2.32 per share a year earlier.
    • Analysts expected a profit of $1.70 per share, and
    • Caterpillar’s fourth-quarter profit was cut in half by a deal in China that went bad and by slower growth around most of the world.
  • Revenue was down 7% to $16.08 billion.
    • Adjusted fourth-quarter profit and revenue were better than analysts expected.
• T. Rowe Price Group, Inc. (NASDAQ: TROW)
  • T. Rowe Price Group, Inc. reported the first quarterly loss since going public in 1986.
  • The financial services holding company reported income increased 23% to $229.9 million, or $0.88 a share, narrowly missing the expected $0.89 per share.
• Tupperware Brands Corporation (NYSE: TUP)
  • Tupperware reported earnings of $74.5 million or $1.34 per share, compared to $87 million or $1.50 a share last year.
    • Sales were $711 million, compared to $676 million year-over-year, and
    • Tupperware announced that it will increase its dividend 72% to $0.62 a share despite the drop in profit.
• Hess Corp. (NYSE: HES)
  • Hess reported net income of $566 million, or $1.66 per share, compared to a loss of $131 million, or $0.39 per share, one year ago.
  • Revenue and non-operating income rose 10% to $9.7 billion.
    • Analysts expected profit of $1.24 per share on $9.28 billion in revenue.
  • For the full year 2012, Hess earned $2.22 billion, or $6.52 per share, up from $1.7 billion, or $5.01 per share, in 2011.
• The Boeing Company (NYSE: BA)
  • Boeing earned $978 million or $1.28 per share down from a profit of $1.39 billion, or $1.84 per share, a year earlier.
    • The report beat the $1.19 per share expected by analysts.
  • Revenue rose 14% to $22.3 billion, matching analysts’ estimates.
• QUALCOMM, Inc. (NASDAQ: QCOM)
  • Revenues reached a record $6 billion, 29% above the year ago quarter and above analysts’ estimate of $5.9 billion.
    • Net profit measured on an adjusted basis came in at $2.2 billion, or $1.26 a share.
  • The earnings per share figure was a quarterly record for the company, and was notably higher than the $1.12 average estimate from analysts.
• United Parcel Service, Inc. (NYSE: UPS)
  • United Parcel Service, Inc. reported fourth-quarter earnings below analysts’ estimates.
  • UPS posted a loss of $1.75 billion, or $1.83 per share, compared to earning $725 million or $0.74 a share one year ago.
    • A $3 billion noncash charge for pension obligations was the reason for the loss, and
    • Factoring this out, the profit was $1.32 per share.
  • Revenue rose 2.9% to $14.57 billion from $14.17 billion.
• Diageo plc (ADR) (NYSE: DEO)
  • The distiller reported net profit rose to $2.43 billion, up 61% from last year.
    • Net sales rose 18% in Latin America, 6% in Asia, but fell in Europe by 2%
    • Performance in southern Europe was particularly weak, with a net decline of 19%.

M&A Activity and More:

• Research in Motion:
  • With the announcement of the Blackberry Z10 and Q10, Research In Motion changed the name of the company to Blackberry.
  • Marketing executives said the company had become confusing, and wanted to have one brand.

Interest Rates

• The two-year Treasury rate gained two basis points to 0.26%.
• The five-year Treasury rate climbed 10 basis points to 0.87%.
• The 10-year Treasury rate rose 13 basis points higher to 1.98%, which is the highest since April of 2012.
• The 30-year Treasury yield also rose 13 basis points to 3.17%, well above the important 3% mark.

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.