Markets
For the week of Monday, October 22, 2012 through Friday, October 26, 2012:
- Standard & Poor’s 500 Index: -1.48%
- Dow Jones Industrial Average: -1.77%
- NASDAQ Composite: -0.59%
The markets ended the week down. Monday, U.S. stocks rallied in the last hour of trading to eke out slim gains, as investors weighed corporate earnings reports, and shrugged off a reduced profit forecast from industrial bellwether Caterpillar. Tuesday’s anemic quarterly results from blue-chip companies DuPont and 3M sent stock and commodity prices tumbling, and drove investors toward the safety of Treasury bonds. All sectors finished in the red, and the NASDAQ Composite Index had its lowest close in two and a half months. The Dow now sits at a fresh seven-week low. On Thursday, stocks opened higher on optimism that the economies of both the United States and China may be recovering. Jobless claims fell by 23,000 in the latest week, while the Ministry of Industry and Information Technology said China’s factory output should grow faster sequentially in the fourth quarter. The markets remained relatively flat on Friday.
Economic Data
- MBA Mortgage Applications Survey:
- With declines in both the refinance and purchase index, mortgage applications fell for the third consecutive week.
- The refinance index fell almost 13% from last week.
- The purchase index fell for the first time in five weeks by 8.3%.
- With declines in both the refinance and purchase index, mortgage applications fell for the third consecutive week.
- New Home Sales:
- Housing continues to improve, as the 5.7% increase for September was in line with expectations for the housing market.
- The pace of sales increased to 389,000, the fastest pace since the tax credit-induced surge in early 2010.
- Months of supply was low at 4.5.
- The median sales price of new homes sold in September was $242,400.
- This was a gain of 12% from this time last year.
- Housing continues to improve, as the 5.7% increase for September was in line with expectations for the housing market.
- Federal Open Market Committee Minutes:
- The FOMC used the October meeting to pause and evaluate its recent efforts to boost the economy.
- The Fed decided to keep the purchases of mortgage-backed securities unchanged at $40 billion per month.
- It also reinforced the pledge to keep interest rates “exceptionally low” until mid-2015.
- The statement remained dovish, supporting our belief that the Fed will expand its asset purchases to include Treasury bonds when Operation Twist expires at year-end.
- The FOMC used the October meeting to pause and evaluate its recent efforts to boost the economy.
- Durable Goods:
- New orders for durable manufactured goods were up 9.9% in September.
- This was a big difference from the 13.1% decline in August.
- Excluding transportation, new orders grew 2.0%.
- Total shipments were up 0.8%, while inventories rose 0.3%.
- The details of the report were not encouraging; core capital orders were unchanged, while shipments declined 0.3%.
- New orders for durable manufactured goods were up 9.9% in September.
Earnings
- Caterpillar, Inc. (NYSE: CAT)
- Caterpillar cut its 2012 revenue and profit guidance again, stating the world economy is weaker than it thought.
- Caterpillar’s third quarter profit was $1.7 billion, or $2.54 per share, compared to $1.14 billion, or $1.71 per share, one year ago.
- Revenue rose 4.6% to $16.45 billion.
- The results included a gain of $273 million, or $0.27 per share, from selling a majority interest in a logistics business.
- Analysts had been expecting a profit of $2.21 per share, on revenue of $16.64 billion.
- AFLAC Inc. (NYSE: AFL)
- Aflac Inc. reported profits rose 36%, as a result of the company selling Japanese debt to boost investment returns.
- The supplemental insurer reported income of $1 billion, or $2.16 a share, compared to $736 million, or $1.57, a year ago.
- Operating income came in at $1.77 a share, above analyst estimates of $1.66.
- Aflac reported net realized investment gains of $186 million, mostly from sales of Japanese government debt.
- Aflac declared a quarterly dividend of $0.35 per share, a 6.1% increase from the $0.33 payout of the past four quarters.
- Netflix, Inc. (NASDAQ: NFLX)
- Netflix offered weak guidance for the fourth quarter, and reported figures for new streaming subscriptions that fell well short of expectations.
- The company reported sales of $905 million, in line with analyst forecasts.
- Netflix reported income of $8 million and earnings of $0.13 per share, beating analyst estimates of $0.04 per share.
- New U.S. streaming subscriptions, the engine of Netflix’s expansion efforts, were a disappointing 1.16 million, placing the company’s previously 2012 goal of 7 million new U.S. subscribers in doubt.
- Netflix offered weak guidance for the fourth quarter, and reported figures for new streaming subscriptions that fell well short of expectations.
- The Boeing Company (NYSE: BA)
- The Boeing Co. reported a profit of $1.03 billion, down 6% year-over-year, as a result of higher pension costs.
- Boeing reported revenue of $20.01 billion, up 13% year-over-year.
- Boeing is forecasting revenue between $80.5 billion and $82 billion for 2012.
- The company also maintained its forecast of delivering 585 to 600 jetliners this year, including as many as 85 of its new 787 and 747-8 jumbos.
- The Boeing Co. reported a profit of $1.03 billion, down 6% year-over-year, as a result of higher pension costs.
- Kimberly Clark Corp (NYSE: KMB)
- Kimberly Clark Corp said earnings were $1.34 per share, compared to the $1.33 expected by analyst.
- Sales were just under estimates at $5.2 billion, compared to the $5.3 billion expected.
Interest Rates
- U.S. benchmark yields touched a five-week high on Thursday after the Federal Reserve remained faithful to its monetary policy.
- The two-year Treasury rate rose just one basis point to 0.31%.
- The five-year Treasury rate increased nearly eight basis points to 0.82%, the highest in four months.
- The 10-year Treasury rate jumped eight basis points to 1.84%.
- The 30-year Treasury yield inched up six basis points to 2.99%, now just below the all-important 3% threshold.
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.
