Stocks Closed a Volatile Quarter

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Markets

For the week of Monday, June 24, 2013 through Friday, June 28, 2013:

• Standard & Poor’s 500 Index: 0.91%
• Dow Jones Industrial Average: 0.74%
• NASDAQ Composite: 1.41%

The markets started the week extending recent declines, as bond yields jumped. Since May 21, the Dow has declined 4.7%, with the selloff accelerating after Federal Reserve Chairman Ben Bernanke’s statements following the Federal Open Market Committee meeting last week. A credit crunch in China is adding to the jitters, as the country has been fueling the global economy. U.S. stocks rallied Tuesday, recovering some of their recent losses. The rally continued into Wednesday with fears about a pullback in central-bank support faded. All 10 of the S&P 500’s sectors closed higher. Stocks jumped higher again on Thursday with upbeat reports on consumer spending and jobless claims. Stocks closed a volatile week, month and quarter lower on Friday. The markets are bracing for next week’s release of nonfarm payrolls.

Economic Data

• Chain Store Sales:
  • The ICSC chain store sales index gained 1.1% in the latest week.
  • Year-over-year growth was 1.6% for the week.
• Durable Goods:
  • Consumer confidence increased 7.1 points in June to 81.4.
    • This is its highest level in five years.
  • June’s expectations were for a 2.5-point increase in consumer sentiment.
  • The increase follows a 5.3-point rise in May, making a third consecutive monthly increase.
• Case-Shiller Home Price Index:
  • Existing-home price appreciation accelerated on a year-ago basis in the three months ended in April.
    • The 10-city composite rose 11.6% from a year ago, compared with the 10.3% increase originally reported last month.
    • The 20-city composite is up 12.1% over the same period, compared to the 10.9% increase last month.
  • On a not seasonally adjusted basis, the 10- and 20-city composites are up 2.6% and 2.5%, respectively.
    • Seasonally adjusted the 10-city index was up 1.8% from March, while the 20-city index was up 1.7%.
• New Home Sales:
  • New-home sales came in at an annual rate of 476,000 meeting expectations.
  • The increase is 2.1% above April’s revised rate of 466,000.
  • The months’ supply of homes for sale is just above a cyclical low.
• Gross Domestic Product:
  • Real GDP increased by 1.8% in the first quarter according to the third estimate.
    • This is up from 0.4% growth from 2012’s fourth quarter, but is a large downward revision from first quarter’s second estimate of 2.4%.
  • The acceleration was due to faster inventory accumulation, a smaller decline in federal defense spending, and faster consumer spending on utilities.
  • Inflation remained modest; however, disposable income fell sharply after the extra dividends and bonus payments of the fourth quarter.
    • Exports, imports and business investments were all lowered.
    • Profits fell 1.4% compared to the increase of 2.3% in the fourth quarter
  • Gross domestic income grew 2.5% compared to 5.5% in the fourth quarter.
• MBA Mortgage Applications Survey:
  • The mortgage applications composite index declined 3% for the week.
  • Refinance activity fell for the sixth week in the last seven.
  • Purchase applications had a small gain.
• Mortgage interest rates rose again to their highest level since July 2011.
• Jobless Claims:
  • Initial claims for unemployment insurance fell 9,000 to 346,000.
  • The prior weeks claims were revised up by 1,000 to 355,000.
  • The four-week moving average dropped by 2,750 to 345,750.
  • Continuing claims fell 1,000, remaining at 2.97 million.

Earnings:

• Apollo Group Inc. (NASDAQ: APOL)
  • Apollo Group reported third-quarter earnings fell 40% as fewer students enrolled.
  • The University of Phoenix’s enrollment was down 17% to 287,500.
  • Apollo earned nearly $80 million, or $0.71 a share, compared to $134 million, or $1.13 a share, last year.
    • Excluding restructuring costs and one-time items, earnings per share fell to $1.05 from $1.18.
  • Revenue fell 16%, to $946.8 million from $1.12 billion.
    • Analysts expected profit of $0.86 a share and revenue of $964.6 million.
• Carnival Corporation (NYSE: CCL)
  • Carnival reported a $41 million profit, attributing lower fuel costs and the timing of administrative expenses.
  • Earnings per share totaled $0.05, compared to $0.02 last year.
  • Revenue fell 1.7% to $3.48 billion.
    • Excluding one-time items, Carnival earned $0.09.
  • Analysts expected earnings per share of $0.06 on sales of $3.56 billion.
• Lennar Corp. (NYSE: LEN)
  • Revenue increased 53% to $1.43 billion in the quarter, compared to analysts’ expectation of $1.33 billion.
  • Net income dropped to $137.4 million, or $0.61 a share, compared to $452.7 million, or $2.06 a share.
    • Lennar recorded a tax benefit of $403 million last year, resulting in the large separation.
    • Analysts expected earnings per share of $0.33.
  • The home builder reported orders increased 27% to 5,705 homes in the spring selling season.
    • Lennar reported the average selling price rose 13% to $283,000.
• Walgreen Co. (NYSE: WAG)
  • Walgreens earned $624 million, or $0.65 a share, compared to $537 million, or $0.62 a share, last year.
  • Revenue rose about 3% to $18.31 billion.
    • Adjusted earnings per share were $0.85, excluding acquisition expenses and legal costs. 
• General Mills (NYSE: GIS)
  • General Mills met Wall Street expectations, reporting net income of $366.3 million, or $0.55 a share, compared to $325.4 million, or $0.49 a share, year-over-year.
    • Excluding one-time items, earnings were $0.53 a share.
  • Sales rose 8.5% to $4.41 billion, beating analysts’ expectations of $4.32 billion.
• Bed Bath & Beyond Inc. (NASDAQ: BBBY) 
  • The retailer reported a profit of $202.5 million, or $0.93 a share compared to $206.8 million, or $0.89 a share.
  • Revenue increased 18% to $2.61 billion.
  • Same-store sales rose 3.4%.
  • BBBY is undertaking an update of its online retailing and a rollout of specialty food and beverage sections in its stores, an addition made possible by the acquisition of Cost Plus World Market. 
• ConAgra Foods, Inc. (NYSE: CAG)
  • ConAgra’s profit beat analysts’ expectations.
    • ConAgra reported net income was $192.2 million, or $0.45 a share, compared to a net loss of $86.2 million, or $0.21 a share, last year.
    • Excluding one-time items, earnings per share was $0.60, beating the $0.59 per share analysts expected.
  • Net sales increased to $4.59 billion, a 34% increase, compared to the average estimate of $4.60 billion. 
• McCormick & Company, Incorporated (NYSE: MKC)
  • McCormick’s net sales grew 2%, with a 4% increase in consumer business sales.
  • The company reported earnings per share of $0.59, including $0.02 transaction costs associated with the completion of the WAPC acquisition.

Interest Rates

• The two-year Treasury rate increased four basis points to 0.37%.
• The five-year Treasury rate jumped 10 basis points to 1.41%, a new one-year high.
• The 10-year Treasury rate gained eight basis points to 2.50%, a new 2013 high.
• The 30-year Treasury yield increased four basis points to 3.55%—its highest level since September of 2011.

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.