It has been a great month. September 2010 saw the largest September rally in 71 years. The Standard & Poor’s 500 Index finished up 8.75%; the Dow Jones Industrial Average was up 7.72%, and the NASDAQ finished the month up 12.04%. Third quarter is typically seasonally confusing. July and August are generally slow. Then, we receive reports that back-to-school sales will do well, only to find out that they fall short.
However with this rally, the fourth quarter could be pretty strong. Many economists and market pundits think the consumer is likely to purchase more in the fourth quarter, and perhaps use their credit cards. We think we will start to see a turnaround. Generally fourth quarter sees positive employment numbers because of extra hiring for the holiday season. It will not be big numbers, but still a gain.
We suspect September’s unemployment numbers, on the other hand, will be up because of more people coming back into the job market. So while we expect to see some bad numbers now, we also expect to see more hiring shortly.
Mergers and acquisitions were also big news this week. Consumer products giant Unilever plc (ADR) (NYSE: UL) announced it would acquire Alberto-Culver Company (NYSE: ACV) for $3.7 billion in cash. Wal-Mart Stores, Inc. (NYSE: WMT) announced its intent to buy Massmart Holdings Limited, a Johannesburg-based distributor of consumer goods on the African continent. Most locally significant, Southwest Airlines Inc. (NYSE: LUV) will be buying AirTran Holdings Inc. (NYSE: AAI) for a purchase price of $1.4 billion.
The merger between Southwest and AirTran should really benefit travelers. It should provide us with cheap flights going west, and give Delta Airlines Inc. (NYSE DAL) some healthy competition. We do not see Delta increasing their rates with the loss of AirTran’s business class seating, because Delta will still want to fill their planes. Southwest is a well-run and well-financed company and AirTran has one of the youngest fleets. We should see more flights to more places. Southwest has also said that they would maintain their policy on fees, specifically, not charging for the first or second checked bag. Despite the potentially good changes coming out of this merger, we still say never own an airline in your portfolio—not with the collective way the airlines have lost money since the Wright brothers.
Interest rates continued their long downward march with 30-year Treasuries down to 3.70%; the 10-year Treasury fell to 2.52%; five-year Treasuries fell to 1.29%, and the two-year remained flat for the week.
Overall, it has been a great month, and an OK week. We believe we are looking at a good October.
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.
