Markets up Despite Politics Stateside and Abroad

Markets

For the week of Monday, February 25, 2013 through Friday, March 1, 2013:

• Standard & Poor’s 500 Index: 0.17%
• Dow Jones Industrial Average: 0.64%
• NASDAQ Composite: 0.25%

Europe’s woes made headlines, as Italy’s election results sparked fears of political instability. Stateside, our political leaders showed no signs they would prevent the automatic spending cuts on Friday. The Federal Reserve indicated it may end its bond-buying program earlier than planned. All three resulted in the worst day for stocks in nearly four months.

European stock markets tumbled Tuesday on the outcome of Italy’s elections. In the United States, the Dow Jones Industrial Average had one of its best days this year. By Wednesday, the Dow bounced back from Monday’s selloff. By Thursday, investors pulled back after a sharp two-day rally on news that economic growth was weaker than expected. Stocks closed slightly higher on Friday on better-than-expected manufacturing reports and consumer sentiment data, despite the sequestration that was scheduled to kick in before midnight Friday

Economic Data

• Case-Shiller Home Price Index:
  • The Case-Shiller Home Price Index continues to improve.On a year ago basis:
    • The 10-city composite is up 5.9%, and
    • The 20-city composite is up 6.8%.
  • On seasonally and non-seasonally adjusted basis, both composites are up.
    • Non-seasonally adjusted both composites are up 0.2%.
    • Seasonally adjusted, both composites are both up 0.9%.
• New Home Sales:
  • New home sales continued to rise, soaring to 437,000 annualized units in January.
    • The gain is a 15.6% increase from an already upwardly revised December pace.
  • January’s sales were the best seen since the summer of 2008.
    • The month-to-month gain was the largest in about 20 years.
  • Inventories fell to 4.1 months supply.
  • The median new house price was up 2% year-over-year.
• MBA Mortgage Applications Survey:
  • For the third week, mortgage applications fell, declining by 3.8% for the week.
  • Refinance and purchase activity both fell, 3.3% and 5.2%, respectively.
  • However, mortgage interest rates held firm.
• Durable Goods:
  • New orders for durable manufactured goods fell 5.2% in January.
    • This was down sharply from December’s 3.7% increase.
  • Excluding transportation, new orders grew 1.9%.
  • Total shipments were down 1.2%, while inventories grew 0.2%.
  • The details of the report were mixed.
    • Core capital goods orders were up 6.3%, while shipments dipped 1%.
• Jobless Claims:
  • Initial claims for unemployment insurance fell 22,000 last week to 344,000.
  • Weather and national holidays have caused the claims to be somewhat volatile in the past few weeks.
    • Overall the trend is heading downward.
    • The four week moving average fell 6,750 to 355,500.
  • Continuing claims fell 91,000 to 3.1 million.
• Gross Domestic Product:
  • Fourth quarter real GDP was revised up, with a 0.1% increase for the quarter.
    • The increase is still down from the 3.1% growth in the third quarter.
  • Fallen inventories and federal defense spending were the main contributors to the decline.
  • Exports were down, while nonresidential fixed investments, imports and consumer spending growth grew.
  • Inflation remained modest, while disposable income surged.
    • Consumers likely benefited from accelerated dividends and bonus payments.
    • These drove the saving rate up to 4.6%.

Earnings:

• Lowe’s Companies, Inc. (NYSE:LOW)
  • Lowe’s reported net income of $288 million, or $0.26 per share, compared to $322 million, or $0.26 per share, a year ago.
    • The quarter one year ago included an extra week, which accounts for the 11% drop.
  • Analysts expected $0.23 per share for the quarter.
  • Revenue also fell 5% to $11.05 billion from $11.63 billion, surpassing analysts’ expectation of $10.85 billion.
• The Home Depot, Inc. (NYSE: HD)
  • Home Depot, Inc. reported strong earnings of $1.02 billion, or $0.68 per share compared with $774 million, or $0.50 cents per share, a year ago.
    • Analysts predicted earnings of $0.64 per share.
  • Home Depot announced it will boost the quarterly dividend by 34%, and repurchase $17 billion of its common stock.
  • Revenue rose 14% to $18.25 billion from $16.01 billion, compared to analyst estimate of $17.72 billion.
• Priceline.com Inc. (NASDAQ: PCLN)
  • Priceline.com reported profit was up 26% at $349 million, or $6.77 a share compared to the analysts’ estimate of $6.53 a share.
  • Revenue was up 20% to $1.19 billion.
  • International bookings contributed 83% of total bookings after a 40% increase to $5.49 billion for the quarter.
• J.C. Penney Company, Inc. (NYSE: JCP)
  • J.C. Penney posted a loss of $552 million, or $2.51 per share loss, compared to the $87 million or $0.41 a share lost one year ago.
  • While investors expected a loss of $0.18 a share, J.C. Penney said excluding restructuring and other charges the loss was actually $1.95 a share.
  • Sales were down 28.4% to $3.88 billion, well below analysts’ estimates of $4.08 billion.
• Target Corporation (NYSE: TGT)
  • Target reported earnings fell to $961 million, or $1.47 per share, compared to $981 million, or $1.45 per share, a year earlier.
    • Revenue was up 7% to $22.73 billion from $21.29 billion.
    • Revenue at stores open at least a year was up 0.4%.
  • For the year, Target earned $3 billion, or $4.52 per share, compared to $2.93 billion, or $4.28 per share, one year ago.
    • Adjusted earnings were $4.76 per share.
    • Annual revenue increased 5% to $71.96 billion from $68.47 billion.
• Kohl’s Corporation (NYSE: KSS)
  • Kohl’s Corporation reported fourth-quarter profit fell to $378 million, or $1.66 a share.
    • This is compared to $455 million, or $1.81, a year earlier.
  • Analysts expected the retailer to earn $1.64 a share.
  • Sales rose 5.4% to $6.34 billion.

M&A Activity and More:

• Chairman of Barnes & Noble Planning Offer for Its Stores:
  • Barnes & Noble chairman, Leonard S. Riggio, has put forth a bid to purchase the retail portion of the company.
  • Riggio has spent most of his career building Barnes & Noble into the one of the biggest bookstore chains in the nation.
  • Shares rose to $15.06 on the news, which values the company at $901.1 million.
    It is unclear from the information released how much Riggio will offer for the company.

Interest Rates

• The two-year Treasury rate fell one basis point to 0.24%.
• The five-year Treasury rate slid eight basis points to 0.76%.
• The 10-year Treasury rate dropped more than 10 basis points to 1.88%, falling back below the 2% level.
• The 30-year Treasury yield fell nine basis points; however, it is still above the all-important 3% mark.

Disclosures

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