Volatile Market on Fears Fed Will Taper Treasury Buying

Markets

For the week of Monday, June 10, 2013 through Friday, June 14, 2013:

• Standard & Poor’s 500 Index: -0.96%
• Dow Jones Industrial Average: -1.11%
• NASDAQ Composite: -1.28%

The stock markets ended Monday trading mixed. Investors seemed to ignore the United States’ credit rating outlook being upgraded to stable from negative. Tuesday’s markets were volatile, as investors were concerned with the sharp rise in the Japanese yen and a reversal in the Treasurys market. Stocks closed broadly lower on Wednesday, with the Dow Jones Industrial Average posting its first three-day string of losses this year.

Stocks dipped early Thursday, as a result of a sharp tumble in the Japanese market. A pair of better-than-expected economic data kept a limit on losses. Investors are still worried about the Federal Reserve tapering its bond-buying program. Stocks continued their tumble Friday, on fears that stimulus efforts will soon taper off. The volatile trading preceded the Federal Open Market Committee meeting next week, which should shed more light on the Fed’s near-term plans for U.S. monetary policy. The University of Michigan survey showed a drop in U.S. consumer sentiment.

Economic Data

• Chain Store Sales:
  • The Chain Store Sales Index fell 2.7%, bringing year-over-year growth down to 2.2% a four-week low.
• Wholesale Trade:
  • Wholesale inventories increased by 0.2% in April.
  • The inventory-to-sales ratio fell to 1.21.
• MBA Mortgage Applications Survey:
  • The mortgage application composite index rose 5%.
    • This was the first increase in a month.
  • Refinance and purchase applications were both higher despite higher interest rates.
• Jobless Claims:
  • Initial claims fell 12,000 to 334,000 for the week.
  • This includes the week after Memorial Day, when new filings can be volatile.
  • Continuing claims increased from 2.971 million to 2.973 million.
• Retail Sales:
  • Retail sales rose 0.6% in May.
    • This was good news following April’s 0.1% increase and March’s 0.3% decrease. 
  • Autos rose 1.8% helping the increase.
  • Excluding autos, retail sales rose 0.3% in May.

Earnings:

• Ulta Salon, Cosmetics & Fragrances, Inc. (NASDAQ: ULTA)
  • Ulta Salon reported profit increased 20% to $41.8 million, or $0.65 per share.
  • Revenue rose 23% to $582.7 million.
  • Both results beat expectation of $0. 62 per share earnings, and revenue of $576.3 million.
  • Ulta reported e-commerce revenue increased 70% year-over-year.
• H&R Block, Inc. (NYSE: HRB)
  • H&R Block Inc. reported earnings of $664.3 million, or $2.42 per share compared to $586.1 million, or $1.99 per share, year-over-year.
  • Revenue increased to $2.2 billion from $2 billion.
  • Last-minute tax law changes and new fraud controls delayed the start of tax season, creating obstacles for the company during the quarter.
    • Analysts expected earnings of $2.61 per share, on revenue $2.28 billion.

M&A Activity & More:

• SoftBank Raises Bid for Sprint:
  • SoftBank of Japan increased its takeover bid for Sprint Nextel to $21.6 billion, in an effort to block a rival bid by Dish Network.
  • Under the new terms, SoftBank agreed to shift about $1.5 billion earmarked for Sprint to the company’s shareholders instead.
  • Current investors can sell their shares at $7.65, up almost 5% from the first offer.
    The new offer is up almost 19% and valued at about $7.48 a share from the original bid.
• India-Based Tire Maker Agrees to Buy Cooper Tires:
  • India’s Apollo Tyres Ltd. has agreed to buy Cooper Tire & Rubber Co. for $2.5 billion.
  • This one of the largest U.S. acquisitions by an India-based company.
  • The two tire makers hope to compete with bigger global rivals.
  • Apollo will issue a debt to pay a 43% premium to acquire the larger Cooper Tire & Rubber Co.

Interest Rates

• The two-year Treasury rate increased three basis points to 0.32%.
• The five-year Treasury rate soared 11 basis points to 1.12%.
• The 10-year Treasury rate climbed 12 basis points to 2.20%.
• The 30-year Treasury yield stepped up nine basis points to 3.34%, a new one-year high.

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.