For the week of Monday, December 5, 2011 through Friday, December 9, 2011
- Standard & Poor’s 500 Index: 0.88%
- Dow Jones Industrial Average: 1.37%
- NASDAQ Composite: 0.76%
Despite continued high volatility in the markets, the U.S. indices finished the week in positive territory. European politicians have been working tirelessly to solve the debt crisis, and it seems like they are making progress. France and Germany offered all 27 European Union nations an ultimatum: participate, or they will proceed without those that do not share the common currency. The major obstacles this week were European Central Bank President Mario Draghi insisting that the ECB will not initiate aggressive bond purchases, and Standard & Poor’s placing 15 eurozone members on a negative credit watch.
Economic data released this week in the United States shows that the employment picture is still a concern. The unemployment rate dropped, but this was due to discouraged workers leaving the labor force rather than hiring. Revisions were released to the data from September and October. The ISM Services Index weakened slightly in November. However, the decline is out of line with other service data. Wholesale inventories rose in the month of October, exceeding expectations. We will have to see how it all plays out during the holiday season.
European Financial Crisis
- Politicians are pushing for an agreement that should give the European Union a measure of control over national budgets of struggling nations.
- France and Germany issued an ultimatum to all 27 EU members warning that the 17 member eurozone will push ahead with an agreement, with or without all nations.
- Part of the agreement is a commitment that private investors will not be forced to accept voluntary losses on sovereign debt.
- The deal is expected to be hammered out late Thursday and Friday.
- Pressuring the EU, the S&P placed 15 eurozone members on negative credit watch.
- This could change following any deal reached to avoid a crisis.
Jobless Claims
- Initial claims fell to 381,000 from 404,000, which was a much larger decrease than expected.
- Claims from two weeks ago were revised higher to 404,000 from 402,000.
- This is the lowest level since February and well under the 400,000 level.
- Continuing unemployment claims also fell for the previous week.
- Revisions to previous month’s payroll data show some significant gains, as payrolls rose by 120,000 employees in November.
- October numbers were revised up to 100,000.
- The big change was to September with a considerable increase of 52,000 to 210,000.
- Unfortunately, the drop in the unemployment rate is due to workers leaving the labor force, with labor force participation dropping 0.2%.
- As more jobs become available, the unemployment rate is likely to rise, as more people re-enter the labor market.
Earnings
- Darden Restaurants, Inc. (NYSE: DRI)
- Darden Restaurants revised its fiscal outlook for 2012 as the company tries to battle rising costs.
- Expected growth of 2012 earnings per share from continuing operations was revised down to 4% to 7% from 12% to 15%.
- Earnings per share should fall in a range of $3.55 to $3.65 for the year versus analysts’ expectations of $3.77.
- Full-year revenue is expected to increase between 6% and 7%, down from the prior estimate between 6.5% and 7.5%.
- Sales should fall in a range of $7.95-$8.02 billion.
- Shares fell 12.4% on the news.
- Costco Wholesale Corp. (NASDAQ: COST)
- Fighting higher costs, Costo still managed to grow profit 2.6% after growing sales 12.5%.
- Earnings rose to $320 million, or $0.73 per share, versus last year’s $312 million, or $0.71 per share.
- Sales rose to $21.18 billion, falling short of an expected $21.29 billion.
- Same-store-sales rose 10%.
- Excluding strengthening foreign currencies and higher gasoline prices, same-store-sales rose 7%.
- Shares fell 2% on the news.
Interest Rates
- The two-year Treasury dipped just under two basis points to 0.23%.
- The five-year Treasury slid one basis point to 0.90%, trading between 0.75% and 1% since October.
- The 10-year Treasury inched up one basis point to 2.05% remaining just above 2%.
- The 30- year Treasury yield rose five basis points to 3.07%, holding above the 3% level.
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.
