For the week of Monday, August 6, 2012 through Friday, August 10, 2012:
- Standard & Poor’s 500 Index: 1.07%
- Dow Jones Industrial Average: 0.85%
- NASDAQ Composite: 1.78%
The blue-chip benchmark snapped a nine-week string of Monday declines, when the Dow Jones Industrial Average rose on a Monday for the first time since May 21st. The Standard & Poor’s 500 Index flirted with 1400 for the first time in three months, as worries about Europe’s sovereign-debt crisis receded, and yields on Spanish and Italian bonds fell. On Tuesday, the S&P 500 index topped 1400 for the first time in three months after a Federal Reserve official called for additional central-bank stimulus. On Wednesday, investors nudged stocks a touch higher again, sending the Dow to a new three-month high. The day’s gains helped bring the four-day run for the Dow to about 300 points, and sent the blue-chip measure to its highest level since May. The Dow is now about 100 points from a December 2007 high and 7% off its all-time high.
Stocks continued to rally Thursday and Friday despite waning optimism over the ECB to tackle the region’s debt crisis. A better-than-expected jobless claims report and hopes over further action from China’s central bank helped keep the upward movement going. The markets’ indices ended the week up nearly 1.3%.
Economic Data
- Productivity and Costs:
- Nonfarm business productivity rose 1.6% in the second quarter, as output growth outpaced the increase in hours worked.
- The reading vastly outperformed consensus expectations.
- Revisions to 2011 data show stronger productivity growth than reported, explaining why hiring in large numbers has not happened during the recovery.
- International Trade:
- The U.S. trade deficit narrowed to -$42.9 billion in June from -$48 billion in May.
- This is the third straight month the deficit has narrowed.
- Despite a steep fall in petroleum prices, nominal exports managed a 0.9% gain.
- Nominal imports fell 1.5%.
- Most of the narrowing in the real goods balance, from -$47.7 billion to -$44.2 billion, came from a smaller nonpetroleum deficit.
- The U.S. trade deficit narrowed to -$42.9 billion in June from -$48 billion in May.
- Wholesale Trade:
- Wholesale inventories fell 0.2% in June, which was below the forecast of a 0.3% inventory build and May’s 0.3% gain.
- Merchant wholesalers’ sales declined 1.4% from May.
Earnings
- The Walt Disney Co. (NYSE: DIS)
- Walt Disney’s profit beat analyst estimates in the third quarter, but revenue came up short.
- Revenue rose to $11.09 billion up 4%, but still short of the $11.32 billion expected by analysts.
- Disney’s movie studio was behind much of the revenue miss, although the Marvel superhero epic “The Avengers” helped boost profit in the segment.
- Net income rose 24% to $1.83 billion, or $1.01 per share, beating analysts’ estimates of $0.93 per share.
- The company’s results represent the largest quarterly earnings in the company’s 89-year history.
- Walt Disney’s profit beat analyst estimates in the third quarter, but revenue came up short.
- Ralph Lauren Corporation (NYSE: RL)
- Citing the weak global economy, Ralph Lauren Corp. lowered its revenue forecast, despite that its first-quarter net income rose 5%.
- Net income for the quarter was $193.4 million, or $2.03 per share compared to $184.1 million, or $1.90 per share, a year ago.
- Analyst expected net income of $1.78 per share.
- Revenue rose 4% to $1.59 billion, while analysts expected $1.58 billion.
- Analysts had expected revenue to rise almost 4% in the July-September quarter.
- For the full year, the company still expects revenue to rise by a mid-single digit percentage, in line with analysts’ forecast.
- Citing the weak global economy, Ralph Lauren Corp. lowered its revenue forecast, despite that its first-quarter net income rose 5%.
- Macy’s Inc. (NYSE: M)
- Macy’s Inc.’s fiscal second-quarter profit surged 16%, with the department-store operator seeing revenue, and particularly online sales, rise.
- Same-store sales grew 3%, helped by a 36% rise in online sales.
- Its localized product offerings and exclusive brands have resonated with customers.
- The retailer raised its full-year earnings guidance to $3.30 to $3.35 a share.
- Macy’s reported a profit of $279 million, or $0.67 a share, up from $241 million, or $0.55 a share, a year earlier.
- Analysts predicted earnings of $0.64 a share.
- Macy’s revenue was up 3% to $6.12 billion last week, in line with analyst estimates.
- Macy’s Inc.’s fiscal second-quarter profit surged 16%, with the department-store operator seeing revenue, and particularly online sales, rise.
Interest Rates
- Treasury yields rose during the latest week, as investors felt confident enough to move back into stocks.
- The two-year Treasury rate rose six basis points to yield 0.28%, back in line with the six-month average.
- The five-year Treasury rate rose 13 basis points to 0.74%.
- The 10-year Treasury rate jumped 23 basis points to 1.71%, well above June’s historical lows.
- The 30-year Treasury yield also rose 23 basis points to 2.78%, still below its six-month average yield.
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.
