The Dow Closes the Week Above 16,000

Markets

For the week of Monday, November 18, 2013 through Friday, November 22, 2013:

• Standard & Poor’s 500 Index: 0.41%
• Dow Jones Industrial Average: 0.71%
• NASDAQ Composite: 0.21%

The Dow Jones Industrial Average broke 16,000 for the first time on Monday, but failed to finish above that mark. However, the Dow still closed at a record level and has risen in six of the last seven sessions. Monday’s gains and late-day dip could be because of Carl Icahn, who told reporters he was “very cautious” on the stock market and could see a “big drop” because earnings at many companies have been juiced by low borrowing costs rather than strong management. The following day, stocks fell before the release of Fed minutes. The tumble continued Wednesday after the Fed’s meeting minutes indicated the central bank might begin winding down bond purchases in the “coming months.”

By Thursday, investors seemed to getting over their worries about the upcoming stimulus tapering, allowing the Dow to close above 16,000. U.S. stocks closed higher again on Friday, sending the S&P 500 above 1,800 for the first time. The Dow also remained above 16,000 for a second straight day. Still, investors’ focus remains on the Fed. The week’s economic data were generally mixed.

Economic Data

• SEMI Book-to-Bill:
  • For October, the book-to-bill ratio for North American semiconductor equipment manufacturers increased to 1.05 versus 0.97 in September.
  • October’s increase puts the ratio at its highest rate since June, reversing more than half of the previous three months’ declines.
• Chain Store Sales Snapshot:
  • The ICSC chain store sales index rose 0.1%.
  • Year-over-year growth was 2.8%. 
• MBA Mortgage Applications Survey:
  • The mortgage applications composite index fell 2.3% for the week.
    • Purchase applications increased 5.8%.
    • However, refinance activity fell 6.5% to offset the purchase gains.
• Retail Sales:
  • Retail sales rose 0.4% in October, improving on September’s flat reading after the final revision.
    • Gasoline station sales weighed on the report.
    • However, less auto sales, sales grew 0.2% and core sales rose 0.3%.
  • Aside from auto dealers, furniture, electronics and appliance, apparel and sporting goods stores and restaurants all increased.
• Existing Home Sales:
  • Completed sales fell 3.2% from September to 5.12 million annualized units for October.
    • Inventory stands at five months, indicating a continued tight market.
  • House price appreciation has increased the median existing-home price by 12.8% from October 2012.
• Federal Open Market Committee Minutes:
  • The October FOMC minutes showed not tapering was an easy decision for policymakers.
  • However, they also believe the outlook on the economy is good enough to begin lightening up on the purchases of assets.
• Consumer Price Index:
  • The consumer price index fell 0.1% in October.
    • Falling gasoline prices offset an increase in the food index.
  • The core CPI rose 0.1%. 
• Producer Price Index:
  • Producer prices fell 0.2% in October.
  • Lowered energy prices offset growth in both food and core finished goods producer prices.
• Jobless Claims:
  • Initial claims for unemployment insurance fell 21,000 to 323,000.
    • New filings were revised up from 339,000 to 344,000.
    • The four-week moving average fell 6,750 to 338,500.
    • Continuing claims increased 66,000 to 2.876 million.

Earnings:

• Best Buy Co., Inc. (NYSE: BBY)
  • Best Buy reported $54 million, or $0.16 a share, compared to last year’s loss of $10 million, or $0.03 a share.
    • Analysts expected $0.13 a share.
  • Revenue came in at $9.36 billion, just below the expectation of $9.37 billion.
  • Same-store sales increased 0.3%.
    • Sales in U.S. stores rose 1.7%.
    • International same-store sales declined 6.4%.
    • Online sales increased 15.1%.
• The Home Depot, Inc. (NYSE: HD)
  • Home Depot reported $1.35 billion, or $0.95 a share, compared to $947 million, or $0.63 a share, year-over-year.
    • Analysts expected $0.89 a share.
  • Revenue rose to $19.47 billion, a 7% increase from last year’s $18.13 billion.
  • Same store sales rose 7.4% overall, and U.S. same-store sales rose 8.2%.
• Lowe’s Companies Inc. (NYSE: LOW)
  • Lowe’s posted lower-than-expected numbers, and did not raise its outlook like analysts had hoped.
    • Lowe’s now expects $2.15 a share; however, analysts expect $2.19 a share.
  • Lowe’s posted earnings of $499 million, or $0.47 a share, compared to $396 million, or $0.35 a share, a year ago.
    • Analysts expected $0.48 a share for the quarter.
  • Sales increased 7.3% to $12.96 billion, beating analysts’ estimates of $12.72 billion.
• Deere & Company (NYSE: DE)
  • Deere’s earnings rose 17% as it raised prices, but Deere predicted a slowdown in the farm economy and smaller profits for next year.
    • Crop prices have been dipping after setting record highs, so farmers have less money in their pockets, which could hurt demand next year.
  • Deere reported $806.8 million, or $2.11 a share, compared to $687.6 million, or $1.75 a share, last year.
    • Revenue fell 3% to $9.451 billion.
    • Analysts expected $1.89 a share on revenue of $8.68 billion.  
• Abercrombie & Fitch Co. (NYSE: ANF)
  • Abercrombie reported a loss of $15.6 million, or $0.20 a share, compared to a profit of $84 million, or $1.02 a share, last year.
    • Gross margin narrowed from 64.3% to 63%.
    • Net sales fell 12% to $1.03 billion, missing analysts’ expectations of $1.07 billion.
  • Same-store sales dropped 14% for the quarter.
    • U.S. same-store sales fell 14%.
    • International same-store sales dropped 15%.
• Target Corp. (NYSE: TGT)
  • Target’s earnings dropped 47%, on costs related to its Canada expansion.
  • Target earned $341 million, or $0.54 a share, compared to $637 million, or $0.96 a share, a year ago.
    • Removing expansion costs and other items, Target earned $0.84 a share.
    • Revenue rose to $17.26 billion.
  • Analysts expected $0.64 a share on revenue of $17.38 billion.

Interest Rates

• The two-year Treasury rate fell two basis points to 0.28%.
• The five-year Treasury rate increased three basis points to 1.37%.
• The 10-year Treasury rate rose nine basis points to 2.79%.
• The 30-year Treasury yield jumped 10 basis points to 3.89%.

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