Upwardly Revised GDP Number Ends Week on Positive Note

Markets

For the week of Monday, December 16, 2013 through Friday, December 20, 2013:

• Standard & Poor’s 500 Index: 2.44%
• Dow Jones Industrial Average: 2.97%
• NASDAQ Composite: 2.60%

The markets ended the week in green territory as the economic news continued to be positive. Friday brought an upwardly revised gross domestic product number of 4.1%, this number was increased from the previously reported 3.6%. This continued to build on positive news from earlier in the week. Monday saw stocks climb as economic data was positive. Tuesday saw stocks fall as investors awaited the decision from the Federal Open Market Committee. Wednesday saw the Dow Jones Industrial Average rally to a record close as the FOMC announced that it would begin to ease its quantitative easing program by lowering the amount of asset purchases from $85 billion to $75 billion. It also strengthened its guidance on interest rates and stated that it would not increase its funds rate until well after the unemployment rate reaches 6.5%.

Economic Data

• Industrial Production:
  • Industrial production rose 1.1% in November.
    • Manufacturing production rose 0.6%.
    • A 3.4% increase in motor vehicle and parts production was the strong reading.
  • Aside from the auto sector, manufacturing output rose 0.5%.
  • Mining output rose 1.7%.
• Productivity and Costs:
  • Nonfarm business productivity rose 3% in the third quarter.
  • Output was revised higher
  • Hours worked were unchanged.
• Chain Store Sales Snapshot:
  • Chain store sales rose 4.8% over the past week.
  • The increase was 2% year-over-year.
• MBA Mortgage Applications Survey:
  • Mortgage applications composite index fell 5.5%.
    • Purchase activity decreased 6%.
    • Refinance applications fell 4.3%.
  • Mortgage interest rates increased slightly.
• FOMC Meeting:
  • The Federal Open Market Committee announced it will begin cutting its monthly asset purchases from $85 billion to $75 billion in January.
  • Interest rate guidance was also strengthened.
  • The fed funds rate will remain in place until after the unemployment rates fall below 6.5%.
• Jobless Claims:
  • Initial claims for unemployment insurance benefits increased 10,000 to 379,000, however rates are volatile this time of year.
  • The four-week moving average increased from 330,250 to 343,500.
  • Continuing claims rose 94,000 to 2.884 million.

Earnings: 

• Lennar Corp. (NYSE: LEN:
  • Lennar’s earnings rose 32% as it sold more homes at higher prices.
  • Lennar earned $164.1 million, or $0.73 a share, compared to $124.3 million, or $0.56 a share, one year ago.
    • New orders rose 13% to 4,498 homes
    • Average sales price increased 18%.
    • Revenue rose 42% to $1.92 billion.
  • Analysts expected $0.62 a share on $1.88 billion in revenue.
    • Full-year earnings decreased to $479.7 million, or $2.15 a share, from $679.1 million, or $3.11 a share, last year.
• FedEx Corp. (NYSE: FDX):
  • FedEx’s profit missed estimates as customers continued to shift toward cheaper ground-shipping options and away from overnight air.
  • FedEx earned $500 million, or $1.57 a share, compared to $438 million, or $1.39 a share, last year.
    • Analysts expected $1.64 a share.
    • Revenue rose 3% to $11.4 billion.
• General Mills, Inc. (NYSE: GIS): 
  • General Mills stated higher ingredient costs and a fall in sales led to lower-than-expected results.
  • The consumer food manufacturer’s income increased to $550 million, or $0.84 a share, compared to $541.6 million, or $0.82 a share, a year ago.
  • Analysts expected $0.88 a share on revenue of $4.94 billion.
• ConAgra Foods, Inc. (NYSE: CAG):
  • ConAgra’s earnings increased 18%.
  • The company reported profits of $248.7 million, or $0.58 a share, compared to $211.6 million, or $0.51 a share, year-over-year.
    • ConAgra had projected adjusted earnings of $0.55.
    • Revenue rose 26% to $4.71 billion.
  • Analysts expected $4.63 billion.
• Darden Restaurants, Inc. (NYSE: DRI):
  • Darden Restaurants is looking to:
    • Suspend the opening of new Olive Garden locations;
    • Limit the opening of LongHorn Steakhouses, and
    • Possibly spin off or sell Red Lobster, all as a part of its plan to boost shareholder value.
  • For the quarter, Darden’s earnings fell to $19.8 million, or $.15 a share, compared to $33.6 million, or $0.26 a share, a year ago.
    • Excluding costs, Darden earned $0.20 a share.
    • Revenue rose to $2.05 billion.
  • Analysts expected $0.20 a share, on revenue of $2.07 billion.
  • The company now foresees fiscal 2014 EPS falling 15% to 20% versus last year.
    • It previously predicted a 3% to 5% decline.

Interest Rates

• The two-year Treasury rate increased five basis points to 0.37%.
• The five-year Treasury rate rose 15 basis points to 1.68%.
• The 10-year Treasury rate increased eight basis points to 2.94%.
• The 30-year Treasury yield rose three basis points higher to 3.90%.

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