For the week of Monday, April 16, 2012 through Friday, April 20, 2012
- Standard & Poor’s 500 Index: 0.60%
- Dow Jones Industrial Average: 1.40%
- NASDAQ Composite: -0.36%
The markets ended the week mixed. A strong retail sales report combined with less than stellar industrial production numbers contributed to the week’s mixed movements. Bank earnings provided a bright spot as many state they have reduced home inventory and foreclosures. However, we still warn investors to be cognizant of banks involved in self trading. We prefer banks that make loans over banks that engage in proprietary trading. As an example, this week we added PNC Financial Services (NYSE: PNC) to the Henssler Traditional Portfolio. PNC Financial is a bank that provides loans to small businesses, and also owns 20% of BlackRock, Inc., a multinational investment management corporation known for its ETF portfolios.
Economic Data
- Retail Sales
- Consumers still spent aggressively in March as retail sales grew a stronger than expected 0.8% excluding autos.
- Building supply stores still lead the growth with sales declining in drug stores, restaurants and grocery stores.
- Year-over-year sales increased slightly by 6.5%.
- Housing Starts
- Home building continues to improve although slow and uneven.
- At 654,000 units in March, the survey showed home starts declined for the second month, but permits and completions have increased in recent months.
- The 5.8% decline in March was mostly attributed to the decline in multifamily home starts as single family homes were mostly flat.
- Industrial Production
- Industrial production remained soft for March but was lead by a 1.5% increase in utility output, which had been weak because of the warmer weather.
- Total factory output was flat for the second straight month, and for the first time since November 2011 reported a decline, falling 0.2%.
- Motor vehicle manufacturing showed a slight increase, which was offset by a 0.3% decline in non-auto manufacturing.
- Existing Home Sales
- Existing home sales declined 2.6% in March from February for a second month of decline.
- This decline brings the pace of sales down to 4.48 million annualized units.
- Even with the decline, sales are up 5.2% from last year and 20% annualized from the fourth quarter last year.
- A decline in listings held the supply numbers stable at 6.3 months’ of supply in March, despite slower sales.
- Median home prices also increased 2.5% year-over-year in March following a share of distressed home sales.
- Jobless Claims
- Initial claims fell by 2,000 to 386,000 for the week ending April 14.
- Claims from last week were revised higher to 388,000 from 380,000.
- Continuing claims also increased in the prior week.
Earnings
- International Business Machines Corp. (NYSE: IBM)
- IBM Corp. reported flat revenue despite a 7% increase in net income in the first three months of the year.
- IBM earned $3.07 billion, or $2.61 per share, in the quarter, up from $2.86 billion, or $2.31 per share, a year earlier.
- IBM expects adjusted earnings of at least $15 per share, up from its earlier outlook of at least $14.85 per share.
- Analysts were expecting $14.93 per share.
- Excluding acquisition costs and pension-related expenses, the company earned $2.78 per share, above the $2.66 per share that analysts were expecting.
- Revenue was flat at $24.7 billion; however, analysts were expecting revenue of $24.82 billion.
- IBM’s decline was in hardware and financing as it has focused more on its software and services where the company has seen it highest profits of late.
- IBM Corp. reported flat revenue despite a 7% increase in net income in the first three months of the year.
- Intel Corporation (NASDAQ: INTC)
- First quarter earnings fell 13% as more was spent on research and marketing while revenues were flat.
- Earnings for the quarter beat analysts’ expectations.
- Intel’s first-quarter net income was $2.74 billion, or $0.53 per share, down from $3.16 billion, or $0.56 per share, a year ago.
- Analysts expected earnings of $0.50 per share.
- Revenue was flat at $12.9 billion.
- Analysts were expecting $12.8 billion.
- Intel said it expects $13.1 billion to $14.1 billion in second-quarter revenue, with a midpoint of $13.6 billion, above the analysts’ forecast of $13.4 billion.
- First quarter earnings fell 13% as more was spent on research and marketing while revenues were flat.
- Qualcomm Inc. (NASDAQ: QCOM)
- Qualcomm said its fiscal second quarter profits more than doubled because of a strong demand for smart phones.
- However, the company said it expects cost to rise as it makes more chips, and that the company may not meet third- and fourth-quarter averages that analysts expect.
- Qualcomm reported net income of $2.23 billion for the quarter that ended March 25, compared with $999 million a year earlier.
- Revenue was $4.94 billion, up 28% from $3.87 billion in the same period a year earlier.
- The Travelers Companies Inc. (NYSE: TRV)
- The Travelers Companies, one of the largest insurers of U.S. businesses, boosted its dividend as first-quarter operating profit exceeded analysts’ expectations and the company continued to raise prices.
- Net income fell 4% to $806 million, but rose when measured on a per-share basis to $2.02 a share.
- The company earned $839 million in last year’s first quarter.
- Operating profit of $2.01 a share beat the consensus expectation by $0.49 as underwriting income and revenue improved.
- Operating profits exclude some investment results.
- The company raised its dividend by $0.05 to $0.46 cents per share.
- Travelers has been pushing through price increases for over a year, partly in response to a rise in natural disasters and a decline in interest rates that have dampened returns from its investment portfolio.
- The company said its business insurance segment, its largest unit, raised rates on returning customers by 8% in the first quarter, up from 6% in the fourth.
- PNC Financial Services (NYSE: PNC)
- The financial service company posted earnings that beat first-quarter expectations as it absorbed merger costs but beat analyst expectations on credit quality.
- However, earnings were lower than one year ago.
- PNC reported net income fell to $811 million, or $1.44 per share, from $832 million, or $1.57 per share, a year earlier.
- The adjusted earnings were $1.49 per share, compared with analysts’ average estimate of $1.43.
- In March, PNC completed its acquisition of RBC Bank as a result the report included a pre-tax expense of $145 million or $0.18 cents per share.
- The financial service company posted earnings that beat first-quarter expectations as it absorbed merger costs but beat analyst expectations on credit quality.
- UnitedHealth Group Inc. (NYSE: UNH)
- UnitedHealth Group Inc.’s first-quarter earnings rose 3.1%, as the health insurer continued to benefit from members’ lighter use of medical services.
- The company reported a profit of $1.39 billion, up from $1.35 billion a year earlier.
- Revenue jumped 7.3% to $27.3 billion.
- UnitedHealth also raised its full-year earnings outlook.
- In the latest period, UnitedHealth’s consolidated medical-care ratio, which reflects the portion of insurance premiums used for patient care, fell to 81% from 81.4% a year earlier.
- The company’s UnitedHealthcare insurance business saw its revenue increase 6.9% to $25.5 billion.
- Revenue from Optum, its information- and technology-based health-services business, jumped 7.7% to $7.33 billion.
- UnitedHealth Group Inc.’s first-quarter earnings rose 3.1%, as the health insurer continued to benefit from members’ lighter use of medical services.
M&A Activity
- GlaxoSmithKline PLC
- GlaxoSmithKline PLC (GSK) offered an unsolicited $2.6 billion bid for research partner Human Genome Sciences Inc.
- Human Genome Sciences, a biotech company, felt the $13 a share bid did not reflect the inherent value of the company.
Interest Rates
- The two-year Treasury fell two basis points to 0.27%, putting it below its six-month average yield.
- The five-year Treasury fell six basis points to 0.83%, down around 30 basis points in the past two weeks.
- The 10-year Treasury dropped nine basis points falling below the 2% mark.
- The 30-year Treasury yield slipped 10 basis points to 3.11%, holding at its six-month average.
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.
