Markets
For the week of Monday, April 8, 2013, through Friday, April 12, 2013:
- Standard & Poor’s 500 Index: 2.34%
- Dow Jones Industrial Average: 2.11%
- NASDAQ Composite: 2.85%
On Monday, investors waited for the unofficial kickoff of earnings season by pushing the markets into the black. Blue-chip stocks have seen volatility in the final minutes of trading every day this month. Stocks pushed higher Tuesday, as investors continued to pour money into equities. The benchmark indices had alternated between daily advances and losses the past 13 sessions. This is the longest such zigzagging stretch on record. Stocks continued their rally on Wednesday, with the technology sector making the biggest gains. However, on Thursday, investors reversed their tune on tech-giant Microsoft Corp., after a downgrade from Goldman Sachs. The markets pushed further into record territory, despite a lagging tech sector. Stocks closed slightly lower on Friday, easing from record highs reached earlier in the week. Investors were likely influenced by weak retail sales and consumer sentiment data. Treasuries rose on safe-haven buying fueled by the weak economic reports.
Economic Data
- Employment Situation:
- Payroll employment gains decelerated sharply in March.
- 88,000 jobs were added in the month.
- Analysts had expected closer to 200,000 jobs added.
- January’s and February’s jobs added were revised up to 148,000 and 268,000 respectively.
- Job gains were slow in goods producing industries and retail trade.
- Government payrolls declined.
The unemployment rate fell to 7.6%.
- Chain Store Sales Snapshot:
- The Chain Store Sales Index rose 0.7%, causing year-over-year growth to increase to 2.1%.
- Falling gas prices continue to be a positive.
- The Easter holiday is still having a small negative affect.
- Cold weather also held activity down.
- Wholesale Trade:
- Wholesale inventories declined by 0.3%, missing the expectations for a 0.5% gain.
- The inventory-to-sales ratio declined to 1.19.
- MBA Mortgage Applications Survey:
- The Mortgage Applications Composite Index rose 4.5%, offsetting last week’s 4% decline.
- The purchase applications slipped 1.3%.
- The refinance index rose 6.3%.
- Mortgage rates have dipped, providing a small boost to refinancing.
- The Mortgage Applications Composite Index rose 4.5%, offsetting last week’s 4% decline.
- Federal Open Market Committee Minutes:
- Support for tapering asset purchases was one of the biggest issues addressed in the March 19-20 meeting.
- A few participants feel that the costs of asset purchases outweigh the benefits.
- However, most feel repurchases support economic growth.
- There is still no consensus on how to tie forward guidance to its asset purchases.
- Discussions included the risks to financial stability from the Fed’s monetary policy stance.
- Participants noted that investors in certain financial markets were taking on additional risk, warranting “vigilance” on the part of regulators.
- Support for tapering asset purchases was one of the biggest issues addressed in the March 19-20 meeting.
- Jobless Claims:
- Initial claims for unemployment insurance fell 42,000 to 346,000.
- The four week moving average rose 3,000 to 358,000.
- Continuing claims fell 12,000 to 3.1 million.
Earnings:
- Alcoa (NYSE: AA)
- Alcoa Inc. beat analysts’ estimates with their first quarter earnings, citing demand from airplane and car manufacturers increased.
- Net income was $149 million, or $0.13 per share, compared to $94 million, or $0.09 a year earlier.
- As Alcoa has shifted its production to more valued-added aluminum parts for industry, profit in the engineered products and solutions unit has seen a 10% increase in profit.
- Bed Bath & Beyond Inc. (NASDAQ: BBBY)
- Bed Bath & Beyond reported fourth-quarter net income increased nearly 7%, meeting analysts’ expectations.
- It earned $373.9 million, or $1.68 per share, compared to $351 million, or $1.48 per share, last year.
- Revenue increased from $2.73 billion to $3.4 billion helped by the company’s recent acquisitions.
- With revenue from the recent acquisitions removed, the increase was still 2.5%, exceeding forecasts of 2.2%.
- CarMax, Inc. (NYSE: KMX)
- Carmax reported a 12% increase in earnings to $0.46 per share and revenue that surpassed analysts’ estimates.
- Sales were up 14% to $2.8 billion, above estimates of $2.7 billion.
- Used car sales at stores open at least a year were up 6% for the quarter, and 5% for the year.
- Wholesale vehicle sales grew 7% in the fourth quarter.
- Constellation Brands, Inc. (NYSE: STZ)
- For the quarter, Constellation Brands reported net income was $90 million, or $0.47 per share, compared to $82 million, or $0.43 a year ago.
- Revenue was up 11% to $696 million, compared to the year ago period, beating estimates of $666.6 million.
- The world’s largest wine producer bought the remaining 50% of Crown Imports in a deal valued at $4.75 billion
- This includes the price of the interest, the brewery and brand rights.
- For the quarter, Constellation Brands reported net income was $90 million, or $0.47 per share, compared to $82 million, or $0.43 a year ago.
- Family Dollar Stores, Inc. (NYSE: FDO)
- Family Dollar Stores, Inc. adjusted their forecast down for the year, citing they expect shoppers to curb discretionary spending.
- Family Dollar expects around $3.93 a share, compared to their January forecast of approximately $4.20 a share.
- Demand for apparel, home decor and other non-essential items remain less than anticipated.
- For the fiscal second quarter, sales by stores open more than 13 months rose 2.9%.
- Family Dollar Stores, Inc. adjusted their forecast down for the year, citing they expect shoppers to curb discretionary spending.
Interest Rates
- The two-year Treasury rate held steady at 0.23%.
- The five-year Treasury rate rose three basis points to 0.73%, still below the 2013 average of 0.80%.
- The 10-year Treasury rate also gained three basis points to 1.79%, now above the one-year average.
- The 30-year Treasury yield stayed the same at 2.99%, just below the key 3%.