The markets were down this week through the close on Thursday, Nov. 18, 2010. The Standard & Poor’s 500 Index was down 0.21%, the Dow Jones Industrial Average was down 0.10%, and the NASDAQ was down 0.15%; however, the Russell 2000 was up slightly at 0.22%.
A number of things weighed on the markets this week. The Materials sector was down 1.19% as commodities were hit hard. Internationally, there is fear of a slowdown in China’s economic growth and talk amongst European finance ministers about an approximately $135 billion rescue package for Ireland. Domestically, investors are upset with the Federal Reserve’s $600 billion quantitative easing program as treasury sales have slowed.
Interest rates continued their climb this week with the two-year Treasury coming in relatively flat, yielding 0.50%. The five-year Treasury yields jumped to 1.50%, which is up nearly a half-percent from its November 4th all-time low. The 10-year Treasury yields bound up to 2.91% and the 30-year Treasury yields rose to 4.31%.
In economic news, retail sales soared 1.2% in October, easily surpassing consensus estimates calling for a 0.7% increase. The Producer Price Index rose 0.4% because of higher energy prices. Industrial production remained unchanged from September, but manufacturing increased 0.5%, which was its largest gain since July.
We were also pleased with the earnings announced this week. Lowe’s Companies (NYSE: LOW) reported profits rose 17% after it reduced discounts and increased sales of more profitable private-label products. Net income climbed to $404 million or $0.29 a share. Competing home improvement retailer Home Depot, Inc. (NYSE: HD) reported income rose to $834 million, or $0.51 a share, beating analysts’ expectations. Same-store sales rose 1.5% for Home Depot, while Lowe’s same-store sales increased only 0.2%
Wal-Mart Stores Inc. (NYSE: WMT) reported profits rose 9.3% as demand from countries such as Mexico, Brazil, China and Canada helped to offset lower sales in the United States. Wal-Mart’s net income rose to $3.44 billion, or $0.95 a share. Competing general merchandise retailer Target Corporation (NYSE: TGT) also posted a higher quarterly profit. Target’s earnings rose to $545 million or $0.74 a share.
The big news of the week was the initial public offering of Government Motors—General Motors (NYSE: GM). At $33 a share, the offering raised $15.8 billion, far more than initially expected. The value would rise to nearly $23 billion when the sale of preferred shares is taken into account. GM’s underwriters exercised an overallotment option that made it the largest global IPO in history by amount of money raised. The shares opened for trading in their debut at $35 per share, but have settled back to around $34.
We are surprised, however, with the strong earnings and economic news that the market is down. We fully believe there is time for a “Santa Claus” rally with the shopping season officially commencing next week.
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.
