Markets Pull Back But Remain Positive

Markets

For the week of Monday, January 7, 2013 through Friday, January 11, 2013:

• Standard & Poor’s 500 Index: 0.38%
• Dow Jones Industrial Average: 0.40%
• NASDAQ Composite: 0.77%

Stocks started the week pulling back, as major indexes cooled their heels after notching their biggest weekly gains in more than a year last week. On Tuesday, stocks were weighed down by telecommunications and industrial shares, as investors awaited the start of the corporate earnings season. The markets bounced back for their first gain in three days, with healthcare, industrials and materials shares leading the charge. On Thursday, stocks climbed, as investors found reasons for optimism in news that claims for unemployment benefits were higher than expected. The markets closed narrowly mixed on Friday, with financials under-performing much of broader market. The dollar index, gold and oil fell.

Economic Data

• Chain Store Sales Snapshot:
  • The ICSC chain store sales index fell 4.2%, as is normal following the Christmas holiday.
  • Year-over-year growth was up 4%, over the 2012 average.
    • Cold weather likely supported sales during the week.
• MBA Mortgage Applications Survey:
  • The mortgage applications composite index rebounded rising by 11.7% last week.
  • Purchases and refinancing were both up, but the advancement was not enough to offset the previous three weeks’ decline.
  • Interest rates rose slightly with the interest rate on a 30-year fixed-rate mortgage, increasing to its highest level in more than two months.
• Jobless Claims:
  • Initial claims for unemployment insurance unexpectedly rose 4,000 to 371,000.
    • This the fifth consecutive week that claims have risen.
  • Continuing claims fell 127,000 to 3.1 million in the final week of December.
  • The insured unemployment rate fell to 2.4%, the lowest it has been since mid-July 2008.
• Wholesale Trade:
  • Wholesale inventories were up 0.6% in November.
  • From October to November the inventories-to-sales ratio moved from 1.21 to 1.19, respectively.

Earnings:

• • Alcoa Inc. (NYSE: AA)
    • Alcoa reported fourth quarter earnings that met analysts’ expectations.
      • The company expects to see higher demand for aluminum this year.
    • Income was $242 million, or $0.21 a share, including one-time gains, such as, selling a hydroelectric project.
      • Excluding one-time items, Alcoa made $0.06 a share on revenue of $5.9 billion, meeting analysts’ expectations.
    • Sales were also higher than the $5.58 billion analysts had predicted.
    • A year ago, the company posted a fourth-quarter loss of $193 million, or $0.18 a share, on revenue of $6 billion, and a loss after special items of $0.03 a share.
  • Apollo Group Inc (NASDAQ: APOL)
    • Apollo Group Inc. reported an 11% decline in earnings.
    • Net income decreased to $133.5 million, or by $1.18 a share, compared to $149.3 million, or $1.14, one year ago.
      • Excluding some items, earnings were $1.22 a share, which topped analysts’ estimate of $0.90.
    • Revenue fell to $1.06 billion, a 10% drop from last year.
      • Analysts expected sales of $1.03 billion.
  • Monsanto Company (NYSE: MON)
    • Monsanto Company reported first-quarter profit nearly tripled, in correlation to its growth in South America,
      • A 27% spike in corn seed sales was the big contributor.
    • The company revised its 2013 earnings guidance, now expecting earnings of $4.30 to $4.40 a share, up from $4.18 to $4.32.
    • Monsanto reported a profit of $339 million, or $0.63 a share, up from $126 million, or $0.23 a share, a year earlier.
    • Net sales rose to $2.94 billion a 21% increase.
      • Analysts expected a profit of $0.37 a share on $2.64 billion in revenue.

Interest Rates

• The two-year Treasury rate dipped two basis points to 0.25%.
• The five-year Treasury rate fell three basis points to 0.79%, still above last year’s 0.75% average.
• The 10-year Treasury rate slipped just one basis point to 1.90%, well above the one-year average.
• The 30-year Treasury yield fell just under three basis points to 3.10%, but remains above the key 3% level.

Disclosures:

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