Upbeat Economic Data Buoys Stocks Higher for the Week

Markets

For the week of Monday, October 21, 2013 through Friday, October 25, 2013:

• Standard & Poor’s 500 Index: 0.88%
• Dow Jones Industrial Average: 1.11%
• NASDAQ Composite: 0.75%

Stocks changed little on Monday as investors digested mixed earnings reports and awaited key employment data. The markets rallied on Tuesday on expectations that the Fed will keep its current easy-money policies in place into next year. This was a result of a weak jobs report for September. The report showed 148,000 jobs were added, which was below expectations for a gain of 180,000. By midweek, stocks declined as a result of weakness in global stocks and mixed earnings from a pair of industrial companies. European stocks retreated from recent multiyear highs, and the banking sector weighed on benchmarks after the announcement of stress tests. Stocks rose again on Thursday following upbeat economic data from the U.S. and China. Better-than-expected earnings from blue-chip companies also increased the mood. On Friday, the S&P 500 closed at a record high, but the broader market finished mixed.

Economic Data

• Existing Home Sales:
  • Existing home sales fell from 5.39 million to 5.29 million units for only the third decline of the year.
  • Inventory is currently at five months.
  • The median house price fell month-to-month.
• SEMI Book-to-Bill Ratio:
  • The semiconductor book-to-bill ratio fell to 0.97 in September from 0.98 in August.
  • The Semi book-to-bill ratio fell for the third straight month to its lowest level since last December.
• Chain Store Sales Snapshot:
  • The ICSC chain store sales index increased 1.4%.
  • Year-over-year growth was 3.2%.
• Employment Situation:
  • Payroll employment increased 148,000.
    • Leisure/hospitality and healthcare were the main drag on the results.
  • The unemployment rate ticked down to 7.2%.
• MBA Mortgage Applications Survey:
  • The Mortgage applications composite index fell 0.6%.
    • Purchase activity increased 0.7%.
    • Refinance applications fell 1.3%.
• Jobless Claims:
  • Initial jobless claims fell 12,000 to 350,000.
    • The four-week moving average rose from 337,500 to 348,250.
    • Continuing claims fell 8,000 to 2.874.
• International Trade:
  • The U.S. trade deficit increased to $38.8 billion from $38.6 billion.
  • The value of nominal exports eased to $189.2 billion in August.
    • This was slightly less than the $189.4 billion recorded in July.
  • Nominal imports were $228 billion, unchanged from the prior month.
    • The nonpetroleum deficit widened slightly to $58.2 billion.
    • The petroleum deficit eased to $18.6 billion,
    • The services surplus also eased to $19.4 billion. 

Earnings:

• McDonald’s Corp. (NYSE: MCD)
  • McDonald’s earned $1.52 billion, or $1.52 a share, compared to $1.46 billion, or $1.43 a share, year-over-year. 
  • Revenue increased 2% to 7.32 billion compared to 7.33 billion year-over-year.
    • Analysts expected $1.51 a share on revenue of $7.33 billion.
  • Same store sales increased 0.9%:
    • 0.7% in the United States and
    • 0.2% in Europe.
  • Same store sales in the Asia/Pacific, Middle East and Africa regions fell 1.4%.
• Netflix, Inc. (NASDAQ: NFLX) 
  • Netflix’s earnings soared to $32 million, or $0.52 a share, compared to $7.7 million, or $0.13 a share, a year ago. 
    • This beat analysts’ expectations of $0.48 a share.
  • Revenue increased 22% to $1.1 billion. 
• Harley-Davidson, Inc. (NYSE: HOG)
  • Harley’s earnings rose 21% to $162.7 million or $0.73 a share, versus $134 million or $0.59 a year ago. 
  • Revenue rose 8.3% to $1.18 billion.
  • Analysts expected earnings of $0.73 and revenue of $1.17 billion. 
• Lockheed Martin Corporation (NYSE: LMT)  
  • Lockheed Martin reported $873 million, or $2.66 a share, versus $727 million, or $2.21 a share, year-over-year.
  • Revenue fell from $11.9 billion to $11.3 billion.
  • Analysts expected $2.27 a share on $11.15 billion in revenue.
• Caterpillar, Inc. (NYSE: CAT)
  • Caterpillar’s earnings fell 44% to $946 million, or $1.45 a share, from $1.7 billion, or $2.54 a share, last year. Revenue slid 18% to $13.42 billion.
    • Analysts expected $1.68 on revenue of $14.29 billion.
  • Caterpillar lowered its 2013 forecast to $5.50 a share on revenue of $55 billion, from the previously reported $6.50 a share on $56 to $58 billion.

Interest Rates

• The two-year Treasury rates slipped one basis point to 0.31%.
• The five-year Treasury rate fell six basis points to 1.28%.
• The 10-year Treasury rate slid nine basis points to 2.49%.
• The 30-year Treasury yield dropped six basis points to 3.58%.

Disclosures

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