Investors Continue to Push the Markets into Record Territory

Markets

For the week of Monday, October 11, 2013, through Friday, October 15, 2013:

• Standard & Poor’s 500 Index: 1.61%
• Dow Jones Industrial Average: 1.37%
• NASDAQ Composite: 1.74%

The week began with improving U.S. labor market conditions leading investors to push the Dow to another record high. On Tuesday, conflicting comments from Fed officials dragged the markets down. Atlanta Fed President, Dennis Lockhart, a nonvoting member of the Federal Open Market Committee, said the Fed could reduce the pace of its $85-billion-a-month bond-buying program in December. Later he said that “monetary policy overall should remain very accommodative for quite some time.”

Wednesday brought record highs again for the markets on rising hopes for continued central-bank stimulus efforts. Investors turned their focus to a Thursday confirmation hearing for Janet Yellen to lead the Federal Reserve. The markets continued their ascent on Thursday, despite poor earnings from Wal-Mart and Cisco.  Stocks closed higher Friday, pushing both the S&P 500 Index and Dow further into record territory. Many investors appear to believe the Federal Reserve will maintain its economic stimulus program a while longer. 

Economic Data

• Chain Store Sales Snapshot:
  • The ICSC chain store sales rose 1.2% for the week.
  • The year-over-year growth also increased 2.3%.
    • Apparel logged strong sales.
• Jobless Claims:
  • Initial claims for unemployment insurance fell 2,000 to 339,000.
    • With claims falling for five consecutive weeks, the four-week moving average edged lower to 344,000.
    • While the last week’s figure was revised up 5,000 to 341,000, continuing claims remained unchanged at 2.87 million.
• Productivity and Costs:
  • On a seasonally adjusted annualized basis, nonfarm productivity increased 1.9% in the third quarter.
    • This indicates benign inflation, because productivity growth is holding unit labor costs down.
  • The second quarter was revised down significantly.
• International Trade:
  • The U.S. trade deficit widened to $41.8 billion in September.
    • This was considerably higher than the consensus estimates.
    • Nominal exports fell to $188.9 billion from $189.3 billion a month earlier.
    • Nominal imports rose 1.2% in September from August’s $230.7 billion.
  • Both the nonpetroleum deficit and the petroleum deficit widened to $61.3 billion and $19.8 billion, respectively.  

Earnings

• Macy’s, Inc. (NYSE: M)
  • The department store beat analysts’ expectations, earning $177 million, or $0.47 a share, versus $145 million, or $0.36 a share, last year.
  • Revenue rose 3% to $6.28 billion.
    • Analysts expected earnings per share of $0.39 on revenue of $6.19 billion.
• Cisco Systems, Inc. (NASDAQ: CSCO)
  • The technology leader posted lower-than-expected revenue, earning just $2 billion, or $0.37 a share, down 5% from $2.09 billion, or $0.39 a share, last year.
    • Adjusted earnings totaled $2.9 billion, or $0.53 a share, beating analysts’ expectationd by $0.02.
  • Cisco’s revenue grew 2% to $12.09 billion, but analysts expected a higher revenue of $12.35 billion.
• Kohl’s Corp. (NYSE: KSS)
  • Kohl’s earnings fell 18% on declining same-store sales.
    • Same-store sales fell 1.6%, versus a 1.1% gain last year.
  • The company earned $177 million, or $0.81 a share, versus $215 million, or $0.91 a share, last year.
  • Revenue slipped 1% to $4.44 billion from $4.49 billion.
    • Analysts expected earnings per share of $0.86 on revenue of $4.55 billion.
• Wal-Mart Stores, Inc. (NYSE: WMT)
  • The big-box retailer’s earnings rose 2.8%, but saw revenue fall short.
  • Wal-Mart earned $3.74 billion, or $1.14 a share, versus $3.64 billion, or $1.08 a share, last year.
  • Net sales were up 1.6% from last year to $114.88 billion.
  • Analysts expected earnings per share of $1.13 on sales of $116.9 billion.

Interest Rates

• The two-year Treasury rate fell two basis points to 0.30%.
• The five-year Treasury rate slid six basis points to 1.36%, continuing its slide from early September.
• The 10-year Treasury rate slipped four basis points to 2.71%.
• The 30-year Treasury rate sank six basis points to 3.79%.

Disclosures

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