At the close of the markets on Thursday, July 29, 2010, the market had lost some of the gains it had earlier in the week. Week to date, the S&P 500 Index was down 0.10%, Dow up 0.41% and the NASDAQ down at 0.78%. However, year-to-date, the Dow is up 0.37% and quarter-to-date it is up near 7%. It has been a strong month, providing good start to the third quarter.
In economic news, the number of people filing for unemployment dropped by 11,000. While this is not a significant drop, we feel that it is better than an increase. Interest rates still remain at historically low levels. We, like many others, have been expecting higher rates for about a year and a half.
Earnings have been very solid this season. ExxonMobil Corp. (NYSE: XOM) reported earnings jumped 91%, due in part to higher commodity prices and a surge in refining profit and production. Profits were up $1.60 a share, and revenue rose 24%. Consumer product earnings were disappointing with reports from Kellogg Company (NYSE: K) and Colgate-Palmolive (NYSE: CL). Their releases stated while profits are up, sales are not strong. We’ve seen strong earnings from companies in Financials and Tech. Across the board, companies have beaten estimates by a huge percentage on both revenue and earnings. We feel there is a good momentum this earnings season, with a solid organic growth in the markets.
Overall, a little more than 80% of the companies that reported have beaten estimates. On average, revenues have beaten estimates by about 8% and earnings have beaten estimates by a little more than 10%. We have been watching forecasts for the remainder of the year and not many companies have revised their numbers downward.
U.S. gross domestic product rose at an annualized, seasonally adjusted rate of 2.4% in April to June, relatively in line with estimates of 2% to 2.5%. Estimates had come down from the initial forecast of 3% to 3.5%.
New home sales numbers looked healthy, but offsetting the good news is the number of foreclosures that continue to plague the market. We are pleased to see that large banks like Wells Fargo (NYSE: WFC) and Bank of America (NYSE: BAC) are finally writing off underperforming loans. Cleaning these assets off the books makes for more reliable numbers and should denote a healing of sorts. It is among the first steps in reducing excess housing inventories and adjusting the prices of homes to current market values. While these write-offs reduce earnings, they were offset by a reduction in cash, which was reserved against future loan losses. The point though is that the banks and their loan portfolios are showing signs of improvement.
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.
