Positive Numbers for Holiday-Shortened Week

Markets

For the week of Tuesday, September 3, 2013 through Friday, September 6, 2013:

• Standard & Poor’s 500 Index: 1.40%
• Dow Jones Industrial Average: 0.80%
• NASDAQ Composite: 1.97%

After a day off on Monday for the Labor Day holiday, stocks closed higher Tuesday despite worries about military strikes in Syria and a rise in Treasury yields, which distracted investors from strong economic data. On Wednesday, stocks posted the largest one-day rise in five weeks on strength in auto makers and technology shares. Both are good signs that the U.S. economic recovery is still intact. Stocks continued their upward climb on Thursday after an unexpected rise in service-sector business activity; however, labor-market data was mixed. Stocks closed mixed on Friday as the August employment report clouded speculation about whether the Federal Reserve would opt to taper its stimulus program later this month. August U.S. nonfarm payrolls rose by a less-than-expected 169,000. The jobless rate fell to 7.3% from 7.4%, because fewer people are looking for work.

Economic Data

• ISM Manufacturing Index:
  • The ISM manufacturing index increased from 55.4 to 55.7.
    • The reading remains above the second quarter average of 50.2.
  • New orders were above 60 for the first time since early 2011.
  • Production and employment both declined.
• MBA Mortgage Applications Survey:
  • The mortgage applications composite index increased to 1.3%.
    • Refinancing advanced 2.4%, the first increase in almost three months.
    • Purchase activity fell 0.4%.
  • The average 30-year fixed mortgage rate fell to 4.73%.
• Chain Store Sales Snapshot:
  • The ICSC chain store sales index fell 0.6%, reversing the previous weeks gain.
  • Year-over-year growth was 1.8%, well below the 2.3% year-to-date average.
• International Trade:
  • The U.S. trade deficit widened to $39.1 billion in July.
    • Nominal exports fell to $189.4 billion from $190.5 in June.
    • Nominal imports rose to $228.6 billion from $225.1 billion in June.
    • The nonpetroleum deficit widened to $58.6 billion
    • The petroleum deficit widened to $18.7 billion
  • The services surplus was roughly stable at $19.4 billion.
  • The data suggest U.S. domestic demand continues to grow, while external demand for U.S. goods is weaker.
• Beige Book:
  • The Federal Reserve’s Beige Book from early July to late August, shows economic activity is expanding moderately across all Federal Reserve districts.
    • Some districts reported consumers remain cautious and are price-sensitive; however, consumer spending rose in most districts.
  • Demand and finance offerings led to strong car sales in most districts.
  • Nonfinancial service conditions improved modestly.
  • New hours-of-services led firms in the Midwest and South to report a shortage of truckers, though transportation service output rose overall.
  • Manufacturing expanded modestly across districts.
    • Auto, housing and infrastructure production were all strengths. 
• Jobless Claims:
  • Initial claims fell 9,000 to 323,000 for the week.
  • Continuing claims fell 43,000 to 2.951 million.
• Productivity and Costs:
  • Nonfarm business productivity rose 2.3% in the second quarter.
  • Productivity was much stronger than previously reported.
    • Output was revised higher and hours worked were revised lower.
• Factory Orders:
  • Manufactured goods orders fell 2.4%.
  • Previous growth figures were revised down to show a 7.4% decline.
    • Durable goods shipments fell 0.3%;
    • Unfilled orders grew 0.4%, and
    • Inventories grew 0.2%.
  • Core capital goods orders were revised down to reflect a 4% decline.
  • Shipments of core capital goods were revised to a 1.7% fall, from the 1.5% estimate.
• ISM Services Index:
  • The ISM nonmanufacturing index increased to its highest level since 2005, increasing from 56 to 58.6 for August.
    • New orders were above 60.
    • The employment index increased to 57 from 53.2.
  • The business activity index was above 60 for its second consecutive month.

Earnings:

• H&R Block, Inc. (NYSE: HRB)
  • H&R Block attributed the quarter’s loss to higher operating expenses and other costs, even though revenue rose.
  • As is typical for H&R Block’s May-July quarter, the company reported a loss of $115.2 million, or $0.42 a share, compared to a loss of $107.4 million, or $0.39 a share, year-over-year.
    • H&R Block’s adjusted earnings were a loss of $0.40 a share.
    • Analysts expected an adjusted loss of $0.37 a share.
  • Revenue increased to $127.2 million, from $96.5 million.
    • Analysts expected $100 million in revenue.
• Dollar General Corp. (NYSE: DG)
  • Dollar General’s reported income $245.5 million, or $0.75 a share, from $214.1 million, or $0.64 a share, a year ago.
    • After adjustments, the company earned $0.77 a share beating analysts’ estimates of $0.74 a share.
    • The efforts to selling more groceries and brand-name products seemed to attract customers to its stores.
  • Total sales beat estimates of $4.36 billion, rising 11.3% to $4.39 billion.
  • Same-store sales increased 5.1%, beating the estimates of 4.2%.
• Navistar International Corporation (NYSE: NAV)
  • Navistar reported a loss of $247 million, or $3.06 a share, compared to a profit of $84 million, or $1.22 a share, last year.
    • That quarter included an income tax benefit of $188 million.
    • Excluding one-time items, Navistar reported a continuing operations loss of $2.94 a share versus a profit of $1.16, last year.
  • Revenue fell 12% to $2.9 billion.
  • Analysts expected a loss of $1.30 on revenue of $2.92 billion.

Interest Rates

• Rates increased this week on the possible tapering by the Federal Reserve.
  • The two-year Treasury rate increased 10 basis points to 0.50% a new two-year high.
  • The five-year Treasury rate jumped 16 basis points to 1.80%, also a two-year high.
  • The 10-year Treasury rate also soared 16 basis points to 2.94%.
  • The 30-year Treasury yield rose 14 basis points to 3.84%.

Disclosures

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