For the week of Monday, March 26, 2012 through Friday, March 30, 2012
- Standard & Poor’s 500 Index: 0.81%
- Dow Jones Industrial Average: 1.00%
- NASDAQ Composite: 0.77%
The markets rallied Monday when Federal Reserve Chairman, Ben Bernanke, emphasized low interest rates were needed to support the labor market. It is widely believed Bernanke’s statements were leaving doors open for more quantitative easing. However, by mid week, stocks fell, as investors were dealt disappointing U.S. and European economic data. Naturally, this pushed U.S. Treasury interest rates lower for the week. The week’s jobless claims on Thursday also failed to meet heightened market expectations.
Eyes were focused on Congress this week as Washington hosted a debate against Obamacare. Surprisingly, healthcare stocks lead the week in gains. The spin for healthcare seems to work both ways whether Obamacare were knocked down or upheld. Both healthcare stocks and Democrats would benefit if it were upheld; however, if it were knocked down, healthcare stocks would “return to normal” and the Democrats would have one issue on the table. We are never ceased to be bewildered by the markets’ reactions.
Economic Data
Case-Shiller Home Price Index:
- On a year-ago basis, existing-home price declines softened in the three months ending in January, relative to the same period in December.
- The 10-city composite dropped 3.9%, and the 20-city composite is down 3.8% from last year.
- Both are better than the 4.1% drop last month.
- On a seasonally adjusted basis, each composite fell only modestly:
- 0.1% in the 10-city composite and,
- Less than 0.1% in the 20-city composite
Conference Board Consumer Confidence:
- The Conference Board of consumer confidence dropped 1.4 points in March from a revised 71.6.
- Fear of rising gas prices and higher inflation in the coming months appears to have outweighed the continued improvement in the labor market.
- The expectations component fell from 88.4 to 83, while the present conditions component rose to 51 from 46.4. This is the highest level in more than three years.
- The index remains well above its fourth-quarter 53.6 average despite the slight fall.
Durable Goods:
- New orders for durable manufactured goods rose 2.2% in February, well above January’s 3.6% decrease.
- Excluding transportation, new orders rose 1.6%; however, total shipments declined 0.4% while inventories were up 0.4%
- Core capital orders rose 1.2%
- Core capital goods shipments added 1.4%
Gross Domestic Product:
- Real growth in the GDP accelerated to 3% from 1.8% in the third quarter according to the Bureau of Economic Analysis’ third estimate.
- This remains unchanged from their second estimate.
- A large swing in inventories, which had previously been causing a drag, helped by contributing nearly two-thirds the growth in the fourth quarter.
- This is a negative for growth early this year.
- Growth in fixed investment slowed.
- Trade became a drag on growth, as did government spending.
- Information that corporate profit growth slowed to 0.9% (not annualized) from 1.7% in the third quarter was new in this report.
- Gross domestic income growth accelerated to 4.4%, annualized from 2.6%.
- This was the fastest growth in nearly two years.
Jobless Claims:
- Initial claims pushed lower last week, remaining consistently near four-year lows and continuing to underscore labor market firming.
- Claims fell by 5,000 to 359,000 for the week ending March 24.
- The prior week’s claims were revised from 348,000 to 364,000.
- Continuing claims also declined in the prior week.
Earnings
Apollo Group Inc. (NASDAQ: APOL):
- Apollo Group reported a profit for its fiscal second quarter, even as enrollment in its schools fell.
- The college operator made $63.9 million, or $0.51 per share, for the quarter ending Feb. 29.
- That compares with a loss of $64 million, or $0.45 per share, in the same period last year.
- A year ago, more than $1 billion in cost and charges dragged down earnings.
- Excluding special items, Apollo earned $0.58 per share compared to $0.83 per share a year ago.
- That beat analyst expectations for profit of $0.38 per share.
- Revenue fell 7.5% to $969.6 million, as enrollments dropped by 8%. That was partially offset by tuition and other fee increases.
- Analysts expected revenue of $932.9 million.
- Apollo, like many for-profit educators, has been dealing with the impact of new federal regulations on enrollment.
Walgreen Company (NYSE: WAG):
- Walgreen’s second quarter profits fell 7.7%, as it exits from pharmacy benefits manager Express Scripts Inc. network.
- A mild cold and flu season did not help either.
- Same store sales fell by 2.1%, as the pharmacy sections offset the increase in the front store sales.
- Customer traffic and basket size improved, though prescriptions filled dropped 4.9% on a same-store basis.
- The drug store operator reported a profit of $683 million, or $0.78 a share, down from $739 million, or $0.80 a share, a year earlier.
- Analysts expected earnings of $0.77.
Family Dollar Stores Inc. (NYSE: FDO):
- Second quarter profits rose 11%, as shoppers continue to turn the store for the bargains and convenience that its stores offer.
- Family Dollar said that it is looking to offer a wider range of products to appeal to more customers.
- They also believe this will help their profits to continue to grow throughout the year.
- On Wednesday, the company reported quarterly net income of $136.4 million, or $1.15 per share up from the $123.2 million, or $0.98 per share reported a year ago.
- The results beat the $1.13 a share that analysts expected.
- The company’s revenue was in line with expectations, rising 9% to $2.46 billion from $2.26 billion a year ago.
- Revenue at stores open at least a year increased 4.5% lead by higher traffic and a higher average transaction.
- Family Dollar expects full-year earnings of $3.55 to $3.75 per share, with revenue up between 9% and 10%, indicating revenue of $9.32 billion to $9.41 billion.
- For the third quarter, Family Dollar foresees third-quarter earnings of $1.01 to $1.11 per share.
- Revenue at stores open at least a year is expected to rise 5% to 7%.
- Analysts expect third-quarter earnings of $1.06 per share.
Best Buy (NYSE: BBY):
- Best Buy reported fourth quarter profits that exceeded analyst expectations, but also said they would close 50 box stores across the U.S. this year, as they continue to control costs.
- At $2.47 a share, the profits for the three quarters that ended March 3rd excluded some items but exceeded analyst expectations.
- The retailer projected profits of $3.50 to $3.80 a share, while analyst project $3.70 a share.
M&A Activity and More
Hon Hai takes stake in Sharp Corp.:
- Taiwan electronics manufacturer Hon Hai Precision Industry Co. is taking a 10% stake in Japan’s struggling Sharp Corp. for about $806 million.
- Analysts say this is an effort to combat growing competition from Samsung Electronics Co.
- Hon Hai, owner of the Foxconn factories in China, is a key producer of iPads and iPhones for Apple Inc., the world’s most valuable company.
- Sharp and Hon Hai will form an alliance in liquid crystal displays and other electronics sectors to cut costs.
- Sharp makes flat-screen TVs and LCD displays for TVs, game consoles, tablet computers and smartphones, appliances and other products.
Nike sues Reebok over Tebow Apparel:
- Nike Inc. takes over as the NFL’s official jersey seller in April, but it is already trying to protect its share of the expected gold mine that is Tim Tebow in a New York uniform.
- The running shoe and apparel maker sued rival Reebok International Ltd. over sales of t-shirts and other apparel featuring the name and number of the famed National Football League quarterback, who was recently traded to the New York Jets.
- In the lawsuit, filed in Manhattan federal court late Tuesday, Nike claims that Reebok is selling New York Jets apparel with Tebow’s name, even though Reebok’s agreement with the NFL Players Association to produce such apparel expired before March 1.
- Nike claims Reebok should be limited to selling remaining existing inventory, which would only include Broncos Tebow apparel, not Jets products.
Interest Rates
- The two-year Treasury fell three basis points to 0.34%, putting it in line with its one-year average.
- The five-year Treasury fell 10 basis points to just over 1%, continuing its fall from a six month high just a week ago.
- The 10-year Treasury fell 12 basis points to 2.16% after recently touching a level of 2.38%.
- The 30-year Treasury yield fell more than 8 basis points to 3.28%, well below its one-year average of 3.56%.
At Henssler Financial we believe you should Live Ready, which includes understanding the risk you incur when trying to chase higher yields. If you have questions on your fixed investment portfolio, the experts at Henssler Financial will be glad to help. You may call us at 770-429-9166 or email us at experts@henssler.com.
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.
