Mixed News Results in Down Week

For the week of Monday, September 17, 2012 through Friday, September 21, 2012

• Standard & Poor’s 500 Index: -0.38%
• Dow Jones Industrial Average: -0.10%
• NASDAQ Composite: -0.13%

The markets spent much of the week mixed, only to finish slightly down. Last week the blue-chip laden Dow Jones Industrial Average rallied to its highest closing level since December 2007 after Federal Reserve Chairman Ben Bernanke announced an open-ended bond-buying program meant to spur the economy. However, on Monday, stocks snapped a four-day winning streak, as concerns about steel demand weighed on materials shares. A late selloff in crude oil dented the energy sector.

By Tuesday, the Dow rebounded to eke out a narrow gain, though most stocks finished lower as investors reacted to a downbeat earnings forecast from economic bellwether FedEx. Energy and materials stocks were the biggest losers. Financial stocks also were weak, and Bank of America was the worst-performing blue chip. By mid-week, stocks edged up, buoyed by a rally in home builders’ shares, after existing-house sales rose more than expected, and Japan’s central bank moved to stimulate the country’s economy. Thursday saw stocks lower globally, as data showing slowing growth in China and Europe and weak U.S jobless claims figures. Friday brought another mixed day for the markets.

Economic Data

• Chain Store Sales Snapshot:
  • The chain store sales index had its largest decline since the first week of the year, tumbling 2.5%.
  • The drop was attributed to slumping customer traffic with year-over-year growth dropping more than a percentage point to 2.1%.
• Housing Starts:
  • The Census Bureau revised July starts down.
  • August starts were up 2.3%, and are 29% above a year ago.
    • These numbers were all consistent with expectations.
  • Permit issuance slipped, but completions increased 0.7% compared with July.
    • Completions are up by 12% year over year.
    • Additionally, permits are being issued faster than a year ago.
• Existing Home Sales:
  • The August existing-home sales report adds to the evidence that the housing market is on its way up.
  • Home sales increased by 7.8% from July, and are 9% above the year over year mark.
    • At 4.82 million annualized units, the pace of sales is the fastest since May 2010.
    • Months of inventory declined to 6.1, and price appreciation is gaining.
  • The median existing-house price rose 9.5% year over year, compared to a 7.9% appreciation in July.
    • Some of the price gains can be attributed to a decline in distressed sales.
• Jobless Claims:
  • Foreshadowing a another weak month of unemployment, insurance claims fell by 3,000 to 382,000 for the week ending September 15.
    • Claims are still up 11,000 between August and September.
  • The move higher was limited by payback from Hurricane Isaac, which contributed to the 18,000 increase in initial claims in the previous week.
    • Continuing claims also fell 32,000 for the week.
    • Continuing claims for unemployment insurance fell 32,000 to 3.72 million for the week ending September 8, and the insured unemployment didn’t budge.

Earnings

• FedEx Corporation (NYSE: FDX)
  • FedEx Corp. fell short of analysts’ expectations and lowered its earnings forecast for the year.
    • The decline was attributed to the slowing global economy.
  • FedEx Corp. reported earnings of $459 million, or $1.45 per share.
    • Revenue rose 3% to $10.79 billion.
    • It earned $464 million, or $1.46 per share, on revenue of $10.52 billion in the same quarter a year ago.
  • FedEx lowered its expectations for U.S. economic growth to 2.2% in 2012 and 1.9% for next year.
• AutoZone, Inc. (NYSE: AZO)
  • AutoZone reported a 17.8% increase in earnings to $8.46 per share beating analysts’ estimates.
  • Sales climbed 4.6% to $2.76 billion, while gross profit widened to 51.8% from 51.2%.
  • Sales in stores open for at least a year rose 2.1%, below AutoZone’s expectations.
• Bed Bath & Beyond Inc. (NASDAQ: BBBY)
  • Shares of Bed Bath & Beyond Inc. moved lower after the housewares retailer reported disappointing second-quarter profit and a weak third-quarter forecast.
  • Bed Bath & Beyond earned $224.3 million, or $0.98 per share, compared to $229.3 million, or $0.93 per share, last year.
    • Sales increased $2.59 billion.
    • Analysts expected $1.03 per share on sales of $2.56 billion.
  • The acquisition of Cost Plus Inc. and distributor Linen Holdings helped with sales.
    • However, administrative expenses increased 15% year-over-year.
• General Mills, Inc. (NYSE: GIS)
  • General Mills reported earnings of $0.66, beating analysts’ estimates.
    • Total sales were $4.05 billion, just under the forecasted $4.08 billion.
    • Pricing trend and acquisitions helped boost the report.
  • General Mills launched more than 100 new products in the quarter.
    • The new brands supplemented strong sales from established items.
• ConAgra Foods Inc. (NYSE: CAG)
  • ConAgra Foods Inc. reported fiscal first-quarter earnings more than doubled, as both of the packaged-food company’s segments posted double-digit increases in profit.
    • The company has seen its revenue benefit from price increases in recent quarters.
    • However, its bottom line and margins have been squeezed by increased costs for raw materials.
  • ConAgra reported a profit of $250.1 million, or $0.61 a share, up from $93.8 million, or $0.22, a year earlier.
    • Revenue increased to $3.31 billion beating analysts’ expectation of $3.24 billion.
    • Sales in ConAgra’s consumer-foods unit rose 8%, as its operating profit increased 20%.
    • The company’s organic volume was down 4%.
  • The smaller commercial-foods segment’s sales climbed 4.6% and profit jumped 43%.

Company Activity and More

• Apple Begins Selling iPhone 5, and Sells 2 million in 24 Hours:
  • Apple beat the record sales for each of the last two iPhone releases,
  • The company sold 2 million iPhones in 24 hours, selling all their initial stock.
  • The tech giant said most phones would be delivered on time, but some would take as long as October to deliver.
  • Apple posted record sales of 1 million for the iPhone 4S, and 600,000 sales for the iPhone 4.

Interest Rates

• Treasurys notched another set of gains, as investors fretted about a slowdown in global growth.
  • The two-year Treasury rate held flat at 0.25%.
  • The five-year Treasury rate fell two basis points to 0.66%.
  • The 10-year Treasury rate dropped seven basis points to 1.73%.
  • The 30-year Treasury yield fell 10 basis points to 2.92% losing all gains from last week.

Disclosures

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