The market was down slightly for the month of May. Equities spent much of May in a gradual but relentless decline, and reversed much of April’s strong gains. This primarily was due to weaker than expected economic news this week. Manufacturing slowed, housing prices fell, and employment was stagnant failing to fuel the economic recovery. Greece continues to drag the eurozone down over the large debt and inability to repay its loans. The negotiations over the debt ceiling in the United States have not been productive. Interest rates have fallen, as the economy has slowed.
Economic Data
- ADP payroll data was far less than expected with 175,000 new jobs forecast and only 38,000 added to payrolls in May.
- Manufacturing and construction shed 10,000 jobs.
- Case-Shiller Home Price Index confirmed the housing market has entered a double dip.
- Home prices were down for the eighth straight month, and down 4.2% in the first quarter.
- Home prices are now hovering around 2002 levels.
- 23% of homeowners are underwater.
- Atlanta prices are at levels last seen in 2000.
- ISM Manufacturing Index fell in May to 53.5, down 6.9 points from the the previous month and below the first quarter average of 61.1.
- New factory orders and export orders slowed, and supply disruptions continue to slow the manufacturing sector.
- Second quarter growth could be hampered by the decrease.
- Debt ceiling talks in the United States have stalled, as both parties wrangle over spending cuts.
- Moody’s has issued a warning of a possible downgrade if the debt ceiling is not raised.
- Uncertainty continues to take its toll on the markets.
- Greek sovereign debt issues continue to hamper the eruozone.
- The European Central Bank and International Monetary Fund are negotiating whether Greece can meet specific spending cuts and asset sales, as a condition of new funding.
- Interest rates are down slightly, because investors fear the economy slowing, thus purchasing safe haven assets like U.S. Treasury bonds.
- Two-year Treasury yield is down to 0.43%;
- Five-year Treasury yield plunged 12 points to 1.6%;
- 10-year Treasury rate dropped to 2.96%, and
- 30-year Treasury yield fell to 4.17%.
- Auto sales were down 4% in May as a result of supply chain delays from the Japanese tsunami.
- Incentives to buyers were cut pushing prices up, and
- Rising fuel prices did not help much either.
Company News
- Costco Wholesale Corp. (NASDAQ:COST) had an increase in same-store-sales of 13% in May.
- Total Sales grew to $7.14 billion, up 17%, and
- Rising fuel and food prices are credited with the increases.
- Dollar General Corp’s (NYSE:DG) shares lost 9% after failing to meet analyst expectations
- Profit was up 15%, but earnings were $0.02 below expectations at $0.48 per share, and
- Sales are expected to grow and bring revenue up between $14.47 billion—$14.73 billion and earning of between $2.20 – $2.30.
- Jos. A. Banks Clothiers, Inc. (NASDAQ:JOSB) shares fell 13% on missing earnings.
- Profit grew 13%, while earnings were $0.64 a share, just below the expected $0.65 per share; however,
- Jos. A. Banks has maintained profitability through the recession.