For the week of Monday, August 6, 2012 through Friday, August 10, 2012:
- Standard & Poor’s 500 Index: 1.07%
- Dow Jones Industrial Average: 0.85%
- NASDAQ Composite: 1.78%
The blue-chip benchmark snapped a nine-week string of Monday declines, when the Dow Jones Industrial Average rose on a Monday for the first time since May 21st. The Standard & Poor’s 500 Index flirted with 1400 for the first time in three months, as worries about Europe’s sovereign-debt crisis receded, and yields on Spanish and Italian bonds fell. On Tuesday, the S&P 500 index topped 1400 for the first time in three months after a Federal Reserve official called for additional central-bank stimulus. On Wednesday, investors nudged stocks a touch higher again, sending the Dow to a new three-month high. The day’s gains helped bring the four-day run for the Dow to about 300 points, and sent the blue-chip measure to its highest level since May. The Dow is now about 100 points from a December 2007 high and 7% off its all-time high.
Stocks continued to rally Thursday and Friday despite waning optimism over the ECB to tackle the region’s debt crisis. A better-than-expected jobless claims report and hopes over further action from China’s central bank helped keep the upward movement going. The markets’ indices ended the week up nearly 1.3%.
Economic Data
- Productivity and Costs:
- Nonfarm business productivity rose 1.6% in the second quarter, as output growth outpaced the increase in hours worked.
- The reading vastly outperformed consensus expectations.
- Revisions to 2011 data show stronger productivity growth than reported, explaining why hiring in large numbers has not happened during the recovery.
- International Trade:
- The U.S. trade deficit narrowed to -$42.9 billion in June from -$48 billion in May.
- This is the third straight month the deficit has narrowed.
- Despite a steep fall in petroleum prices, nominal exports managed a 0.9% gain.
- Nominal imports fell 1.5%.
- Most of the narrowing in the real goods balance, from -$47.7 billion to -$44.2 billion, came from a smaller nonpetroleum deficit.
- The U.S. trade deficit narrowed to -$42.9 billion in June from -$48 billion in May.
- Wholesale Trade:
- Wholesale inventories fell 0.2% in June, which was below the forecast of a 0.3% inventory build and May’s 0.3% gain.
- Merchant wholesalers’ sales declined 1.4% from May.
Earnings
- The Walt Disney Co. (NYSE: DIS)
- Walt Disney’s profit beat analyst estimates in the third quarter, but revenue came up short.
- Revenue rose to $11.09 billion up 4%, but still short of the $11.32 billion expected by analysts.
- Disney’s movie studio was behind much of the revenue miss, although the Marvel superhero epic “The Avengers” helped boost profit in the segment.
- Net income rose 24% to $1.83 billion, or $1.01 per share, beating analysts’ estimates of $0.93 per share.
- The company’s results represent the largest quarterly earnings in the company’s 89-year history.
- Walt Disney’s profit beat analyst estimates in the third quarter, but revenue came up short.
- Ralph Lauren Corporation (NYSE: RL)
- Citing the weak global economy, Ralph Lauren Corp. lowered its revenue forecast, despite that its first-quarter net income rose 5%.
- Net income for the quarter was $193.4 million, or $2.03 per share compared to $184.1 million, or $1.90 per share, a year ago.
- Analyst expected net income of $1.78 per share.
- Revenue rose 4% to $1.59 billion, while analysts expected $1.58 billion.
- Analysts had expected revenue to rise almost 4% in the July-September quarter.
- For the full year, the company still expects revenue to rise by a mid-single digit percentage, in line with analysts’ forecast.
- Citing the weak global economy, Ralph Lauren Corp. lowered its revenue forecast, despite that its first-quarter net income rose 5%.
- Macy’s Inc. (NYSE: M)
- Macy’s Inc.’s fiscal second-quarter profit surged 16%, with the department-store operator seeing revenue, and particularly online sales, rise.
- Same-store sales grew 3%, helped by a 36% rise in online sales.
- Its localized product offerings and exclusive brands have resonated with customers.
- The retailer raised its full-year earnings guidance to $3.30 to $3.35 a share.
- Macy’s reported a profit of $279 million, or $0.67 a share, up from $241 million, or $0.55 a share, a year earlier.
- Analysts predicted earnings of $0.64 a share.
- Macy’s revenue was up 3% to $6.12 billion last week, in line with analyst estimates.
- Macy’s Inc.’s fiscal second-quarter profit surged 16%, with the department-store operator seeing revenue, and particularly online sales, rise.
Interest Rates
- Treasury yields rose during the latest week, as investors felt confident enough to move back into stocks.
- The two-year Treasury rate rose six basis points to yield 0.28%, back in line with the six-month average.
- The five-year Treasury rate rose 13 basis points to 0.74%.
- The 10-year Treasury rate jumped 23 basis points to 1.71%, well above June’s historical lows.
- The 30-year Treasury yield also rose 23 basis points to 2.78%, still below its six-month average yield.