Market Rallies on Tech and Jobs Report

Markets

For the week of Monday, April 29, 2013 through Friday, May 3, 2013:

• Standard & Poor’s 500 Index: 2.06%
• Dow Jones Industrial Average: 1.79%
• NASDAQ Composite: 3.07%

Stocks started the week with a rally in tech stocks, which pushed the markets higher. However, even as stocks rallied, investors still clamored for the 10-year Treasury note, which pushed the yield down to 1.667%. This was its lowest level this year. On Tuesday, stocks overcame a morning slide to help the S&P 500 Index inch toward a record high.  Apple Inc., (NASDAQ: AAPL) led a rally for tech stocks. The rebound came on April’s final day, marking the fifth consecutive month of gains for the Dow Jones Industrial Average.

By mid-week, U.S. stocks fell on disappointing economic data. Investors found little comfort in the Fed’s decision to keep its easy-money policies in place. Sentiment changed directions on Thursday as stocks rose on signs the job market is still healing despite weakness in the broader economy. An interest rate cut by the European Central Bank to shore up the eurozone economy, boosted investors’ appetite for risky assets. Stocks closed considerably higher Friday, sending the S&P 500 well above the 1600 mark, fueled by a better-than-expected April Jobs Report.

Economic Data

• Personal Income:
  • Personal income rose 0.2% in March.
    • Income was up 2.6% in December, down 3.7% in January, and rebounded 1.1% in February.
  • Wage income rose 0.2% for March.
  • Interest income decreased for the third month after three months of growth.
  • Nominal consumer spending rose 0.2%, but that was lifted by utility spending, as the month was far colder than normal.
    • Overall prices fell 0.1%.
    • Core prices were unchanged.
    • Real spending rose 0.3%.
    • Spending growth was led by services, utilities in particular, while spending on Goods was weak.
  • The saving rate remained unchanged at 2.7%, its second lowest reading since 2007.
• Case-Shiller Home Price Index:
  • The 10-city composite increased 8.6% year-over-year, compared to the 7.3% increase reported last month.
    • The 20-city composite is up 9.3% compared to last year, an improvement on the 8.1% increase last month.
  • The 10-city index is up 0.4% and the 20-city index is up 0.3% on a not seasonally adjusted basis.
    • Gains in both the 10- and 20-city indices are up 1.2% on a seasonally adjusted basis.
• Conference Board Consumer Confidence:
  • The Conference Board Index of Consumer Confidence rose well above consensus expectations in April to 68.1.
    • The 6.2-point gain offset last month’s 6.1-point decline.
    • Both subcomponents rebounded, but more so in the expectations component.
      • This suggests consumers became less concerned with the looming impact of sequestration.
• MBA Mortgage Applications Survey:
  • The mortgage applications composite index rose 1.8%.
  • The refinance index increased 2.8%, and the purchase index fell 1.4%.
  • Mortgage interest rates fell, with the average interest rate for a 30-year fixed mortgage reaching its lowest point this year.
• Institute for Supply Management Manufacturing Index:
  • For the second month, manufacturing conditions weakened as the ISM Manufacturing Index fell from 51.3 to 50.7.
    • The index is below the first quarter average of 52.9.
  • New orders edged higher, as they have every April since 2007.
  • Production increased while inventories remained below 50.
  • The employment index fell 4 points to 50.2.
• FOMC Meeting:
  • The Federal Open Market Committee kept its targets, policy rates, and monthly asset purchases unchanged.
  • The FOMC stated that the fiscal policy is constraining economic growth, and did not alter the assessment on inflation.
• Jobless Claims:
  • Initial unemployment claims fell 18,000 this week to 324,000.
  • This was the lowest level since the recession began in late 2007.
  • The four-week moving average fell 16,000 to 342,250.
  • Continuing claims rose 12,000 to 3.02 million.

Earnings

• Invesco Ltd (NYSE: IVZ)
  • Invesco reported a profit increase of 14.6%.
    • Gains from the stock market boosted assets under managment by $31.4 billion during the quarter.
    • Investors added $19.2 billion during the quarter, including $8.4 billion to active accounts and $6.4 billion to index accounts.
  • Invesco reported earnings of $222.2 million, or $0.49 a share, up from $193.9 million, or $0.43 a share, one year ago.
    • Excluding adjustments, Invesco earned $0.52 a share, this beat analysts’ estimates of $0.47.
  • Invesco’s assets under management total $729.3 billion, an 8.4% rise year-over-year.
• AGL Resources Inc. (NYSE: GAS)
  • Colder weather boosted AGL Resources’ earnings by 18%.
  • AGL reported earnings of $154 million, or $1.31 a share, up from $130 million, or $1.11 a share, a year ago.
  • Operating revenue increased to $1.71 billion.
    • The company beat analysts’ expectations of $1.31 a share, and revenue of $1.46 billion.
• Pfizer Inc. (NYSE: PFE)
  • Pfizer’s income rose 53% despite growing generic drug competition as the company benefited from a gain related to a joint venture with China.
  • Pfizer’s reported earnings missed analysts’ estimates with net income of $2.75 billion, or $0.38 a share, down from $1.79 billion, or $0.28 a share, last year.
  • Quarterly sales also missed expectation at $13.5 billion, down from $14.89 billion last year.
    • Analysts expected $13.99 billion.
    • Unfavorable exchange rates cut 1%, or $0.04 a share from revenue.
• Merck & Co. Inc. (NYSE: MRK)
  • Merck posted lower quarterly results, cut its 2013 forecast by $0.15 a share, but announced a share buyback of up to $15 billion.
  • With generic competition of its top-selling drug, Singulair, entering the market last August, sales plunged 75% in the quarter, to $337 million from $1.34 billion.
    • Merck’s reported profit fell 8.3% and revenue fell by 9%.
    • Net income was $1.59 billion, or $0.52 a share, down from $1.74 billion, or $0.56 a share, last year.
    • Revenue totaled $10.67 billion, down from $11.73 billion, and below analysts’ estimates of $11.11 billion.
• The Clorox Company (NYSE: CLX)
  • Clorox reported earnings of $134 million, or $1.00 a share, versus $134 million, or $1.02 a share, year-over-year.
  • Negative impacts from charcoal volume, cold weather and currency exchange lowered results.
  • Currency exchange lowered shares $0.05 a share.
    • Excluding these factors, sales grew 3% in the quarter.
• Kellogg Company (NYSE: K)
  • Kellogg’s reported profit of $311 million, or $0.85 a share, compared to $351 million, or $0.98 a share, last year.
    • Revenue rose from $3.44 billion last year to $3.86 billion.
    • Analysts predicted $1.02 a share, on revenue of $3.93 billion.
• MasterCard Incorporated (NYSE: MA)
  • MasterCard’s reported results that beat analysts’ estimates as quarterly profit and revenue rose.
    • Profit was $766 million, or $6.23 a share, beating analyst estimate of $6.18.
    • Sales rose to $1.9 billion, which was less than the $1.93 billion expected.
• Visa Inc. (NYSE: V)
  • Visa reported net income of $1.27 billion, or $1.92 a share, compared to $1.29 billion, or $1.91 a share, a year ago.
    • Revenue was $2.96 billion compared to $2.58 billion a year earlier.
    • Analysts expected $1.81 per share, on revenue of $2.85 billion.
  • Visa reported service revenue rose 10% to $1.4 billion, and data processing revenue increased 25% to $1.2 billion.
  • International transaction grew 13% to $831 million.
• IntercontinentalExchange (NYSE: ICE)
  • ICE reported an 8% drop in profit due in part to purchasing the NYSE Euronext for $8.2 billion.
  • ICE reported net income fell to $135.4 million, or $1.85 a share, from $147.9 million, or $2.02 a share, last year.
    • Excluding one-time items relating to the NYSE deal, adjusted earnings were $2.03, which beat analysts’ estimates.
  • Revenue fell 4% to $351.9 million.

Interest Rates

• The two-year Treasury rate was down two and a half basis points to 0.20%, a 2013 low.
• The five-year Treasury rate fell six basis points to 0.65%, also a 2013 low.
• The 10-year Treasury rate fell seven basis points to 1.64%, another 2013 low.
• The 30-year Treasury yield also dropped six basis points to 2.84%.

Disclosures

This article is meant to provide valuable background information on particular investments, NOT a recommendation to buy. The investments referenced within this article may currently be traded by Henssler Financial. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The contents are intended for general information purposes only. Information provided should not be the sole basis in making any decisions and is not intended to replace the advice of a qualified professional, such as a tax consultant, insurance adviser or attorney. Although this material is designed to provide accurate and authoritative information with respect to the subject matter, it may not apply in all situations. Readers are urged to consult with their adviser concerning specific situations and questions. This is not to be construed as an offer to buy or sell any financial instruments. It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future profitability or expectations. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing. Henssler is not licensed to offer or sell insurance products, and this overview is not to be construed as an offer to purchase any insurance products.