For the week of Monday, October 24, 2011 through Friday, October 28, 2011
- Standard & Poor’s 500 Index: 3.78%
- Dow Jones Industrial Average: 3.58%
- NASDAQ Composite: 3.78%
As October comes to an end, the markets have gained significantly this month. All major U.S. indices are now positive for the year. The forces driving the market this week have been the third quarter U.S. Gross Domestic Product growth, companies reporting solid earnings, and the positive news from Europe concerning the sovereign debt crisis. The Europeans have decided to lever the European Financial Stability Facility to €1 trillion and write down Greek debt held by banks 50%. European markets all rose on the news. In the United States, several companies have posted strong growth numbers for the third quarter, helping drive the markets higher. GDP data released this week showed the economy grew at 2.5% in the third quarter. This was expected, but the positive number eases fears of a coming recession. The struggling housing market may soon receive a lift from a government program designed to allow homeowners’, who are underwater on their mortgage, to refinance their debt. More information will come as the terms are released. All in all, it was a great week for the market. Next week, many more companies will release earnings reports. We expect the current growth trend to continue, and it is likely the market will continue its current course.
Economic Data
- Case-Shiller Home Price Index
- For the quarter ending in August, home prices improved slightly.
- The 10-city composite fell 3.5% from last year after falling 3.7% last month.
- The 20-city composite fell 3.8% over the same dates, improving on last month’s drop of 4.1%.
- Atlanta’s housing market posted the worst numbers of the 20-city index, falling 6.3% from last year.
- For the quarter ending in August, home prices improved slightly.
- New Home Sales
- Sales of new homes rose 5.7% for the month of September to a seasonally adjusted annual rate of 313,000.
- This was a stronger move than analysts had expected, but 0.9% lower than September last year.
- August sales were revised lower by 1.0%.
- Inventory remained flat, and supply remains at 6.2 months.
- The median new home price has fallen 10% year-over-year.
- Durable Goods
- For September, following a slight decline of 0.1% in August, new orders for durable goods fell 0.8%.
- Transportation represented the majority of the decrease.
- New orders rose 1.7%, excluding transportation.
- Inventories rose 0.1%.
- Total shipments fell 0.7%.
- Core capital orders increased 2.4%
- For September, following a slight decline of 0.1% in August, new orders for durable goods fell 0.8%.
- Gross Domestic Product
- For the third quarter of 2011, GDP grew at a 2.5% annualized rate meeting estimates.
- This is far better than growth in the first half of the year, which was under 1.0%.
- Fears of a recession have been moderately reduced, but the economy remains susceptible to external factors.
- Jobless Claims
- Initial claims fell again this week to 402,000 from 404,000.
- Claims from two weeks ago were revised higher from 403,000 to 404,000.
- The employment market continues to struggle, but hopefully should benefit from seasonal workers hired leading up to the holiday season.
Corporate News/Earnings:
- 3M Company (NYSE: MMM)
- 3M’s profit fell to $1.09 billion, or $1.54 per share from $1.12 billion.
- Analysts expected sales of $7.78 billion and earnings of $1.61 per share.
- 3M lowered its sales growth outlook from earlier estimates, shares fell 6.25% on the news.
- United Parcel Service, Inc. (NYSE: UPS)
- UPS earned $1.04 billion, or $1.06 per share, up from $991 million or $0.99 per share last year.
- Revenue rose to $13.17 billion, an 8% increase as a result of freight unit sales increase of 5%:
- U.S. domestic package revenue up 7%, and
- International package revenue up 14%, despite a 47% slowdown in volume of shipments from China.
- The Boeing Company (NYSE: BA)
- Boeing’s earnings took off up 31% to $1.1 billion, beating last year’s $837 million and expectations of $1.10 per share.
- The beat was due to improved production performance.
- Boeing raised profit outlook for the year, and shares rose 4.5% on the report.
- AFLAC Incorporated (NYSE: AFL)
- Benefiting from a strong yen, AFLAC reported an 8% increase in net income.
- AFLAC increased its dividend to $0.33 from $0.30.
- AFLAC Japan’s revenue grew 5%, but as a result of exchange rates, increased total revenue by 16%.
- Procter & Gamble (NYSE: PG)
- Higher costs hurt PG’s bottom line, with earnings falling 2% from $3.08 billion to $3.02 billion.
- EPS held to estimates at $1.03, $0.01 higher than a year ago.
- Sales rose 9% to $21.9 billion from $20.12 billion, beating expectations.
- PG expects to start passing higher input costs through to consumers.
- Shares rose on the news.
- Exxon-Mobil Corp. (NYSE:XOM)
- Higher oil prices helped grow Exxon’s profit by 41% despite lower production.
- Revenue increased 32% to 125.3 billion, while Exxon’s earned $10.33 billion, or $2.13 per share up from $7.35 billion last year.
- Expectations were for $2.12 per share with revenue of $118.5 billion.
- Shares rose on the earnings beat.
Interest Rates
- The two-year Treasury inched up 3 basis points to 0.30%, doubling off the recent low of 0.15% last month.
- The five-year Treasury rose 9 basis points to 1.16%, a decent rise from the 0.78% yield seen in September.
- The 10-year Treasury increased 9 basis points to 2.31%, just under a 0.6% rise from the all-time low set last month.
- The 30-year Treasury yield improved 6 basis points to 3.32%, a significant 0.80% rise in the past several weeks.
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.
