Unchanged Economic Outlook Made for a Mixed Week

Markets

For the week of Monday, October 28, 2013, through Friday, November 1, 2013:

• Standard & Poor’s 500 Index: 0.13%
• Dow Jones Industrial Average: 0.29%
• NASDAQ Composite: -0.52%

The markets began the week with little change, despite the S&P 500 index reaching a record high for a second straight day. Tuesday brought a new high for the Dow Jones Industrial Average thanks to decent corporate earnings. The Dow rose 0.72% to close at 15680.35, topping its Sept 18^th record close. The S&P also set a new high.

However, by mid week, stocks fell after the Fed left its assessment of the economy relatively unchanged, despite the recent government shutdown.  This may have led to speculation that the central bank could begin scaling back stimulus efforts at year-end. The markets’ tumble continued through Thursday, as investors weighed mixed corporate earnings reports. Major stock market indices closed higher Friday, but overall, the week ended on a mixed note. The release of stronger-than-expected manufacturing data rekindled speculation the Federal Reserve could start tapering its stimulus program sometime soon.

Economic Data

• Industrial Production:
  • Industrial production increased 0.6% in September.
  • Manufacturing output fell 0.1%.
  • Motor vehicle and parts production rose 2.0%.
  • Utilities production increased 4.4%.
  • Mining output rose 0.2%.
• Chain Store Sales:
  • The ICSC chain store sales index fell 0.4%.
  • Year-over-year growth reached 2.2%.
• Retail Sales:
  • Retail sales fell 0.1% in September after the August increase of 0.2%.
  • Auto sales contributed most to the decline.
  • Year-over-year growth reached its weakest point since 2010 at 3.2%.
• Case-Shiller Home Prices:
  • Existing-home prices accelerated on a year-ago basis for the three months ending in August.
    • The 10-city composite is up 12.8%.
    • The 20-city composite is also up 12.8%.
  • Not seasonally adjusted month-to-month:
    • The 10-city composite is up 1.3%
    • The 20-city composite is up 1.3%.
  • Seasonally adjusted month-to-month:
    • The 10-city composite is up 0.9%
    • The 20-city composite is up 0.9%.
• Conference Board Consumer Confidence:
  • Consumer confidence fell nine points to 71.2.
    • This was the lowest reading since September 2012.
    • The low reading was likely due to the government issues in Washington during the first weeks of October.
• Federal Open Market Committee Meeting:
  • The Fed made no changes to its interest rate or balance sheet policies in October.
  • With the current economic readings, we don’t expect the Fed to make any changes until March 2014.
• MBA Mortgage Applications Survey:
  • A 6.4% increase in the mortgage applications composite index can be attributed to lower interest rates.
    • The purchase index rose 2.3%.
    • The refinance index increased 8.7%.
• Jobless Claims:
  • Initial claims for unemployment insurance fell 10,000 to 340,000.
  • The four-week moving average rose 8,000 to 356,250.
  • Continuing claims rose 31,000 to 2.88 million.

Earnings:

• Apple Inc. (NASDAQ: AAPL)
  • Apple’s earnings fell 9%, as more people bought lower-priced iPhones and iPads.
  • The results included early sales of the latest iPhones released late last month.
    • The average price that Apple fetched for its iPhones declined to extend a recent trend that has trimmed its profit margin and depressed its stock price.
    • This marks the third consecutive quarter Apple’s earnings have dropped from the previous year.
  • Apple earned $7.5 billion, or $8.26 a share, compared to $8.2 billion, or $8.67 a share, year-over-year.
    • Analyst expected $7.92 a share.
  • Revenue increased 4% to $37.5 billion, beating analysts’ estimates.
• AFLAC Inc. (NYSE: AFL)
  • Net income was down 31% to $702 million, or $1.50 a share, compared to $1.02 billion, or $2.16 a share, a year ago.
  • Revenue fell 14% to $5.89 billion, compared to $6.85 billion last year. 
  • Analysts expected $1.48 a share on revenue of $5.9 billion.
• Pfizer Inc. (NYSE: PFE)
  • Pfizer’s earnings dropped, but the competition continues to grow and patents expire on many key products.
  • Pfizer’s net income was $2.59 billion, or $0.39 a share, compared to $3.21 billion, or $0.43 a share last year. 
  • Revenue fell 2% to $12.64 billion from $12.95 billion last year.
    • Analysts expected $12.69 billion in revenue.
• General Motors Company (NYSE: GM)
  • GM’s earnings fell 53%; however, without the write off of one-time items, the automaker beat analysts’ expectations.
  • GM earned $698 million, or $0.45 a share, compared to $1.48 billion, or $0.89 a share, last year.
    • Excluding $900 million in one-time items, GM made $1.7 billion, or $0.96 a share, to top analysts’ estimates.
    • Analysts expected $0.94 a share on revenue of $39.2 billion.
  • Revenue rose 4% to $39 billion.

Interest Rates

• The two-year Treasury rates rose one basis point to 0.31%.
• The five-year Treasury rate was flat at 1.28%.
• The 10-year Treasury rate remained at 2.51%.
• The 30-year Treasury yield increased one basis point to 3.62%.

Disclosures

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