Markets often experience sudden volatility during a post-crisis phase. This week investors appeared to be a little more risky moving back into stocks. Global woes seem to be easing as news of the riots in North Africa did not appear to be as bad as initially thought. Japan saw radiation levels in their water decrease. Domestically, jobless claims remained below 400,000, pushing unemployment to a two and a half year low.
Interest rates reversed course of recent week, jumping as investors got back into the stock market this week.
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Two-year U.S. Treasury yields 0.66%;
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Five- and 10-year U.S. Treasurys yield 2.07% and 3.37%, respectively;
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The 30-year Treasury yields 4.47%, and
- All are well off of their lows, but still extremely low compared to a historical perspective.
Broad Picture Economics: While jobless claims have shown the labor market moving in the right direction, the real estate market continues to weigh heavy on the economy
- The demand for new home sales remains depressingly weak, with sales dropping at an unexpectedly sharp pace of 16.9% in February.
- A bottom is still unpredictable as a shadow inventory of bank-owned homes remains.
- There is an estimated 8.9-month supply of homes.
- New home sales are 28% lower than one year ago.
- Median new home prices declined 9% from one year ago.
- Sales of existing homes also dropped in February.
- The decline of 9.6% was larger than anticipated.
- New orders for durable manufactured goods fell 0.9% in February, going against expectations for an increase of 1.5%.
- However, unfulfilled orders, which is a sign of future demand, rose 0.4% .
In earnings news, Henssler Traditional Portfolio holding Tiffany & Co., (NYSE: TIF) and Dividend Growth Portfolio holding General Mills Inc. (NYSE: GIS) reported earnings along with big names like Walgreen’s, Carnival Corp., Discover Financial and Best Buy.
- Tiffany & Co. was the star of the week as fourth quarter net income increased to $181.2 million or $1.41 per share.
- Tiffany expects Japanese sales to drop 15% in the first quarter.
- Japan accounted for 18% of Tiffany’s business in 2010.
- The company expects first-quarter earnings of about $0.57 a share.
- General Mills fiscal third-quarter net income rose 18%, and maintained its 2011 adjusted earnings outlook of $2.46 to $2.58 a share.
- Walgreen Company’s (NYSE: WAG) fiscal second-quarter earnings rose 10%, but the drug store operator’s gross margin was flat at 28.8% after expanding the past few quarters.
- Carnival Corp. (NYSE: CCL) suffered from high fuel prices with profits down 13%, but they met analyst expectations by cutting other costs. For the quarter, CCL reported net income of $152 million or $0.19 a share, down from $0.22 last year.
- Discover Financial Services (NYSE: DFS) said higher card use and fewer unpaid customer balances helped it post better-than-expected profit.
- DFS reported net income of $495 million or $0.84 a share.
- Analysts expected $0.60 per share.
- Best Buy Company, Inc. (NYSE: BBY) net income fell 16% as a result of weak sales in televisions and electronics.
We do not recommend clients buy bond funds over CDs.
- Bond funds are fine to hold, but not for 10-year liquidity.
- You never know what it will be worth when you need the money.
- We suggest you purchase a fixed-investment security with a maturity that matches your anticipated liquidity need.
- Bond funds will suffer as interest rates rise.
- In five or 10 years, investors in bond funds could be underwater in their investments, because interest rates will likely increase.
- Bond funds can be attractive, because the fixed-income investment world can be very complicated, and many managers have methods that allow them to take advantage of narrowing spreads and mispricings.