For the week of Monday, April 9, 2012, through Friday, April 13, 2012
- Standard & Poor’s 500 Index: -1.99%
- Dow Jones Industrial Average: -1.61 %
- NASDAQ Composite: -2.25%
The markets have had an interesting ride, coming off a shortened holiday week. We saw a bit of a selloff from unexpected employment numbers. It is likely that the warmer-than-usual weather in January and February accelerated hiring in those months. The expected growth in March likely already happened. Many think that at this point in the economic recovery the country would see more hiring; however, that is not the case. European woes also weighed on market sentiment, as investors flocked to safety, causing U.S. interest rates to drop.
Year-to-date, the S&P is up around 10%, led by the Technology and Financial sectors. The banks passed their stress tests, and are beginning to hold their own again in the markets. We think, if the housing market were to turn around, the banks will be just fine. Now, we expect solid first-quarter earnings; however, they may struggle later in the year.
- Wholesale Trade:
- Wholesale inventories increased more than the expected 0.5% percent to 0.9% in February.
- With the revised 0.6% inventory build in January, wholesale sales were allowed to increase by 1.2% after no change a month earlier.
- The Inventory-to-sales ratio remained unchanged at 1.17.
- Beige Book:
- The Federal Reserve’s Beige Book showed economic activity grew from the middle February to late March at a moderate pace in all 12 Federal Reserve districts.
- This was noticeably different from the previous Beige Book where only “most districts” reported growth.
- Some districts have concerns that rising gas prices could limit discretionary spending in the near future.
- Producer Price Index:
- Producer prices remained the same in March; however, substantially weaker than expected.
- The year-ago rate of change slid to its weakest level in two years.
- Early stage productions continued to slow.
- Price gains are expected to resume at a moderate pace in the coming months barring a supply shock or substantial uptick in global growth expectations
- International Trade:
- Due to a sharp 2.7% drop in imports, U.S. trade deficits narrowed in February from $52.5 billion to $46 billion.
- China was the main contributor of the decline, reflecting payback for an earlier acceleration in imports ahead of the Lunar New Year.
- Export growth slowed to 0.1% after two solid months of gains.
- The real goods balance, which affects the GDP, showed solid improvement.
- Jobless Claims
- Initial claims unexpectedly jumped last week, when little change was expected.
- This unexpected change comes after several weeks near four-year lows.
- Claims from two weeks ago were revised higher to 367,000 from 357,000.
- Claims rose 13,000 to 380,000 for the week ending April 7.
- Continuing claims declined in the prior week.
- Facebook to buy Instagram:
- On Monday Facebook Inc. purchased Instagram, the iPhone app developed in 2010 for $1 billion in cash and stocks.
- Last week Instragram was valued at $500 million, but with more than 30 million registered users, the app vastly improves Facebook’s mobile offerings and removes a rival for users’ attention.
- The deal is the largest ever for Facebook.
- Alcoa (NYSE: AA)
- Alcoa Inc. reported first-quarter earnings fell 69%, as the company was squeezed by lower aluminum prices and higher cost for energy.
- To contend with sluggish aluminum prices the company plans to cut costs, limit production, and rely more on high-margin end products less vulnerable to metal prices, such as, bolts and wheels for cars and airplanes.
- The aluminum maker posted net income of $94 million, or nine cents a share down from $308 million, or $0.27 a share, last year.
- AA topped analysts’ expectation of a loss of three cents a share, as closing plants and cost reductions benefited the company.
- Sales edged up 0.8% to $6.01 billion.
- Rite Aid Corporation (NYSE: RAD)
- Rite-Aid Corp. benefited from an extra week of sales and a tax benefit that narrowed its fiscal fourth-quarter.
- RAD projected a per-share loss between $0.13 and $0.31 on revenue of $25.4 billion and $25.8 billion, compared to the analyst expectation of $0.25 cents and revenue of $25.74 billion.
- Due to a loyalty program, expanded clinical pharmacy services, and more health and wellness product choices Rite-Aid has continued to post sales growth in recent quarters.
- For the quarter ended March 3, Rite-Aid reported a loss of $161.3 million, or 18 cents a share, from a year-earlier loss of $205.7 million, or 24 cents a share.
- The latest period included $56.3 million in termination and impairment charges, along with a $24.2 million tax benefit, while the prior year included $154.1 million in charges and a small tax expense.
- Rates fell due to an unexpected increase in jobless claims, with the largest at 14 basis points.
- The two-year Treasury fell five basis points to 0.29%, putting it just above the six month average.
- The five-year Treasury fell 12 basis points to 0.88%, near its lowest level in more than a month.
- The 10-year Treasury dipped 14 basis points to 2.04%, just barely holding above the 2% level.
- The 30-year Treasury yield slipped 13 basis points to 3.2%.