After strong first-quarter gains in the stock markets and April’s year-to-date highs, week after week of declines battered the three U.S. indices. However, this week’s rally left the Dow industrials the only one of the four major indices with a gain for the quarter, taking the lead from the small caps for 2011’s first half. The Dow finished the quarter strong with the rally bringing it into positive territory for the quarter, up 0.77%. The S&P 500 ended the quarter down 0.39% but remains up for the year at 5.01%. The NASDAQ also ended down 0.27% but remains up for the year at 4.55%. Market movements were led by the healthcare, energy, consumer discretionary and industrial sectors.
This week, Greece finally agreed to the austerity measures imposed by the European Central Bank and the International Monetary Fund (IMF) in order to avoid a default in July. The Federal Reserve Bank’s second round of Quantitative Easing has come to an end. Job losses were basically unchanged with claims dropping by 1,000. Home prices continued their decline, but some markets posted slight month-over-month gains as the spring buying season data became available. All-in-all, we believe the quarter ended positively.
Economic Data
- Greece
- There were protests preceding the Greek parliament’s vote to approve the austerity measures required by the European Banks and IMF to avoid a default.
- Greece approved the measures, avoided default and continues to struggle with deficits and spending cuts.
- This gives European Banks holding Greek debt a chance to insulate themselves from a possible default in the future.
- There were protests preceding the Greek parliament’s vote to approve the austerity measures required by the European Banks and IMF to avoid a default.
- Quantitative Easing part two ends
- The Federal Reserve Bank’s second round of the Quantitative Easing program officially came to an end on June 30th.
- As of right now there will not be a third round of Quantitative Easing unless the recovery loses significant momentum.
- However, the Fed will continue to hold treasuries until maturity to keep interest rates from spiking.
- For the week ending June 25th, initial jobless claims decreased by 1,000 to 428,000.
- Data for the previous week was unchanged, and
- Little has changed for unemployment situation in the United States as the recovery continues.
- Hopefully, jobless claims will recede in the second half of the year as the economy gains steam gearing up for the holiday season.
- Home Prices actually rose month-over-month for the first time in eight months.
- However, in the Case-Shiller 20-city index, prices dropped 4% in April;
- Housing continues to remain a drag on the economy, and
- Atlanta home prices rose 1.65% for the month.
- The debit card swipe fees cap of $0.12 was revised and raised to $0.21 under the Dodd-Frank Financial Reform Bill.
- The other reforms include the ability of the card issuer to add up to 0.05% onto a transaction, depending on the amount and type.
- A proposed $0.01 fee could be added for fraud loss insurance.
- Both Visa Inc. (NYSE: V) and MasterCard Incorporated (NYSE: MA) rose on the news.
Company News
- Nike, Inc. (NYSE: NKE) reported this week with earnings above expectations.
- Revenue and net income rose by 14%, with $594 million of revenue for the quarter at $1.24 per share, beating both last year’s $522 million in revenue and this year’s expectations of $1.16 per share.
- Despite higher costs for materials, labor and freight costs, Nike was able to beat expectations because of high product demand.
- Sales were $5.8 billion, an increase over the $5.08 billion from last year and above the $5.52 billion analysts expected.
- Nike’s stock shares rose 10% on the news.
- Family Dollar Stores, Inc. (NYSE: FDO) grew earnings by 6%, but did not quite meet analysts’ estimates for the quarter.
- Net income increased from $104.4 million to $111.1 million, or $0.91 per share.
- Revenue was just shy of expectations at $2.15 billion.
- Family Dollar managed to increase same-store-sales by 4.7%.
- Despite just missing expectations, shares rose 0.8% .
Interest Rates
- Two-year Treasury rate rose 0.44%, but is still under April’s 0.75% rate.
- Five-year Treasury rate jumped to 1.66%, a healthy rise of 0.29%, but also below April’s level of 2.3%.
- 10-year Treasury rate shot to 3.09%, up 0.23% for the highest weekly gain in months.
- 30-year Treasury yield leaped to 4.37%, up 0.25% total in the last month.
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.
