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Schnack Financial Group, Inc
Randy Schnack
President/CEO 227 South Blvd Oak Park, IL 60302-4712 708-386-2790 info@schnackfinancial.com www.SchnackFinancial.com |
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Friday, May 4, 2012
May Newsletter
Saturday, January 21, 2012
Week in Review: Markets rise on slightly upbeat earnings and economic news
For the week ended January 20, 2012
- U.S. jobless claims down sharply
- U.S. inflation tame
- China shows signs of slowing growth
- German economic sentiment jumps
- Earnings mixed for major financial and technology firms
Markets were positive overall as talks between the Greek government and the Institute of International Finance continued Friday in an effort to cut a deal that would substantially lower Greece’s debt payments to private-sector creditors. U.S. economic news was modestly encouraging, as jobless numbers fell, U.S. price indices stayed fairly flat, and home sales improved somewhat. The Chinese economy showed signs of slowing, while German economic sentiment rebounded.
A steady stream of corporate earnings reports were mixed. Many reflected the challenges faced by large U.S. banks. Others, including earnings results from U.S. technology giants, were more encouraging. Stocks rose overall globally, and U.S. Treasury yields rose as demand for the safe-haven securities eased, reflecting improved investor sentiment.
U.S. and global economic news
Greek debt deal loomsDiscussions between the Greek government and private sector creditors continued for a third day Friday, ahead of efforts to complete a second rescue package for the troubled country. With a potential bailout in the works for next week, time is critically important. A senior delegation from the International Monetary Fund, European Central Bank, and European Union arrived in Athens Friday to discuss the rescue package. Next Monday, European finance ministers will meet in Brussels to work out their portion of the next Greek bailout, forecast at €130 billion.Weekly U.S. jobless claims drop by 50,000Initial jobless claims fell by 50,000 to a seasonally adjusted 352,000 in the week ending January 21, decreasing the four-week average by 3,500 to 379,000. Both numbers are well below the 400,000 mark, widely viewed as indicative of the U.S. economy adding jobs overall.
U.S. housing market improves slightly, misses expectationsSales of U.S. existing homes rose 5.0% in December from November, the third straight monthly increase, according to the National Association of Realtors. However, the results fell short of a forecast of 5.2% growth. For all of 2011, 1.7% more homes sold than in 2010. Overall, 4.26 million homes were sold last year, down from a peak of more than 7 million in 2005.
Consumer, producer inflation tameReadings on U.S. producer and consumer prices, released by the U.S. Department of Labor, showed little month-to-month change in December. The producer price index fell 0.1% in December from November on lower food and energy costs. However, core prices, stripping of food and energy, rose 0.3%. For the year, producer prices rose 4.8%. The consumer price index was unchanged in December, and increased 3.0% for the year. The core CPI edged up 0.1% for the month and rose 2.2% for all of 2011.
Chinese economy and manufacturing gauge slipChina’s gross domestic product grew 8.9% in the final quarter of 2011 compared with a year earlier, a higher-than-expected growth rate but an indication of a slowdown for the world’s fastest economic engine. On a quarterly basis, China’s GDP growth was 8.2%. A separate report showed that China’s manufacturing purchasing managers index stood at 48.8, just below the threshold of 50 that separates growth from contraction. This was the third straight month of declining manufacturing activity in China.
German economic sentiment index has record riseGermany’s latest ZEW monthly economic sentiment index rose to -21.6 in January from -53.8 in December, the single largest monthly increase since the survey’s inception in 1991. Germany also paid the lowest interest rate ever on two-year Treasury notes Wednesday, 0.17%, as debt downgrades on France and Austria last Friday made German debt more appealing.
Germany cuts growth forecastThe German government cut its economic forecast for 2012 for the second time in recent months. Currently, Germany expects its economy to grow 0.7%, down from 1.0% in October, which was a reduction from its original 1.8% projection for the year.
U.S. and global corporate news
Kodak files for bankruptcyFollowing through on its rumored move, Eastman Kodak filed for bankruptcy protection after running short of cash. The photography icon has secured close to $1 billion in financing from Citigroup to help keep it in business through its bankruptcy proceedings. Kodak is hoping to improve liquidity, sell some of its patent portfolio, and shed some legacy liabilities, including pension and health care obligations.Goldman-Sachs reported a 58% drop in fourth-quarter profit on a slump in investment-banking revenue and trading activity, as many of the firm’s individual and corporate clients remain leery about investment prospects.
Morgan Stanley swung from a quarterly profit of $871 million a year ago to a loss of $227 million in the fourth quarter of 2011 because of weakness in its institutional securities business as well as a large legal settlement with bond insurer MBIA. Revenue in Morgan Stanley’s institutional business fell by 42%.
Bank of America had better-then-expected results, posting a profit just shy of $2 billion, as weaknesses in trading (profits down 73%) and investment banking (fees 34% lower) were more than offset by large one-time asset sales. These sales included divestiture of a major interest in China Construction Bank and some Canadian credit card operations.
Citigroup’s profit fell 11% from a year earlier, and its revenue slipped by 7%. The global bank is aggressively cutting costs but has been challenged by weak capital markets, as equity underwriting, trading, and advisory revenue fell.
BlackRock’s profit declined 16% as the number-one global money manager by assets saw a shrinkage in assets under management, investment advisory fees, and securities lending revenue. BlackRock’s overall revenue fell 11%.
Wells Fargo, the largest U.S. consumer lender, reported a 20% increase in its fourth-quarter profit on improvements in its consumer loan portfolio and limited exposure to investment banking.
Tech bellwether Intel has strong quarterIntel posted a 5.7% gain in fourth-quarter earnings as the technology bellwether’s business withstood tougher competitive pressures and economic constraints in Europe and China. Intel’s revenue rose 21% on strong demand from a number of its business divisions.
Google’s 7% profit growth disappointsSearch engine giant Google posted weaker-than-expected earnings results despite a 7% profit growth and 25% rise in revenue from its year-earlier period. These numbers were down sharply from its third-quarter results of a 26% profit growth and 33% gain in revenue.
IBM software success offsets hardware weaknessIBM grew its fourth-quarter earnings 4.4% as gains in software and services revenue offset a slowdown in its hardware business.
Microsoft flat profit beats expectationsSoftware giant Microsoft profited from strength in its Office program suite and Xbox gaming system to outweigh weakness in its Windows operating system. For its second fiscal quarter, ended December 31, Microsoft’s overall earnings were down by the slightest margin, to $6.62 billion from $6.63 billion.
GE profit slides 18%General Electric’s fourth-quarter earnings fell 18% on a decline in revenue after it sold its majority stake in NBC Universal. However, GE’s industrial business saw infrastructure orders grow 15% from a year earlier. Revenue shrank 7.9% overall.
Japanese group to pay $7.3 billion for RBS aircraft leasing businessA group of Japanese companies, headed by Sumitomo Mitsui Financial, has agreed to buy the Royal Bank of Scotland’s aircraft leasing business for $7.3 billion, the British bank’s largest divestiture since being bailed out three years ago. The British government holds an 82% interest in RBS.
The week ahead
- McDonald’s and Apple announce their quarterly earnings on Tuesday, January 24.
- Boeing releases its earnings on Wednesday, January 25.
- Germany’s Ifo survey is released on Wednesday, January 25.
- The National Association of Realtors announces its pending home sales on Wednesday, January 25.
- The Conference Board releases its monthly leading economic indicators on Thursday, January 26.
- The U.S. Department of Commerce publishes its durable goods orders report on Thursday, January 26.
- Ford releases its earnings on Thursday, January 26.
- The U.S. Labor Department releases its initial estimate for fourth- quarter GDP on Friday, January 27.
Stay focused and diversified
In any market environment, we strongly believe that investors should stay diversified across a variety of asset classes. By working closely with your financial advisor, you can help ensure that your portfolio is properly diversified and that your financial plan supports your long-term goals, time horizon, and tolerance for risk.
Diversification does not guarantee a profit or protect against loss.
The information included above as well as individual companies and/or securities mentioned should not be construed as investment advice, a recommendation to buy or sell, or an indication of trading intent on behalf of any MFS product.
Securities discussed may or may not be holdings in any of the MFS funds. For a complete list of holdings for any MFS portfolio, please see the most recent annual, semiannual, or quarterly report. Full holdings are also available on the individual Fund Profile tab in the Products and Performance section of mfs.com.
Past performance is no guarantee of future results.
Sources: MFS research; The Wall Street Journal; The Wall Street Journal Online; Bloomberg News; Financial Times; Forbes.com; CNNMoney.com; msnbc.com.
--see disclaimer below--
Friday, September 30, 2011
Week in Review: Stocks mixed as investors weigh eurozone bailout hopes against slowing economy
U.S. and global economic news
Germany agrees to increase bailout contributionGermany's parliament approved legislation to increase the eurozone bailout fund's lending capacity to €440 billion, from around €250 billion, and to make the fund more flexible. The move was lauded as the clearing of a major hurdle in the path to the containment of Europe's sovereign debt crisis. Also this week, the Greek Parliament approved a new property tax law in a closely watched vote, a key step in the country's efforts to secure further aid.
Standard & Poor's and Fitch downgrade New Zealand's debtStandard & Poor's and Fitch Ratings downgraded New Zealand's local currency debt amid concern that government and household debt are expanding. New Zealand is the first Asia-Pacific nation in a decade to have its debt cut from AAA. S&P cut the local currency debt one level to AA+. Foreign currency debt was cut to AA from AA+.
Eurozone inflation hits three-year highEuropean inflation unexpectedly accelerated at the fastest pace in almost three years; the rate for September jumped to 3% from 2.5% in August. The increase further complicated the work of the European Central Bank as it fights to contain the region's debt crisis. Germany's inflation rate rose in September to 2.8%, from 2.5% in August.
Chinese manufacturing shrinks for third monthChinese manufacturing shrank for the third month in a row as measures of new orders and export demand fell.
U.S. consumer spending, new home sales fallU.S. consumer spending slowed in August as incomes unexpectedly dropped for the first time in almost two years; that drop forced households to dig into their savings. Purchases rose 0.2% after a 0.7% increase the previous month. Also in August, sales of new homes fell to a seasonally adjusted annual rate of 295,000, which was down from 302,000 a month earlier. The inventory of new homes fell to 162,000, the lowest level on record since 1963. In July U.S. home prices rose for a fourth month but remain lower than they were a year ago.
U.S. and global corporate news
Amazon debuts Kindle FireAmazon, the world's largest online retailer, debuted its e-reader Kindle Fire. The company is betting that its device, which is smaller and less than half the price of Apple's iPad, can present a challenge to that popular product.
BofA to charge for debit card useBank of America announced plans to charge customers $5 per month to use their debit cards. Other banks are expected to follow with similar moves, which are intended to make up for funds lost to a new regulation that puts a cap on how much banks can charge merchants for debit card transactions.
The week ahead
- The Institute for Supply Management reports on national manufacturing activity on Monday, October 3.
- Markit publishes its eurozone purchasing managers index on Monday, October 3.
- The Bank of Japan ends its two-day policy meeting on Friday, October 7.
- The U.S. Bureau of Labor Statistics releases the unemployment rate on Friday, October 7.
Stay focused and diversified
In any market environment, we strongly believe that investors should stay diversified across a variety of asset classes. By working closely with your financial advisor, you can help ensure that your portfolio is properly diversified and that your financial plan supports your long-term goals, time horizon, and tolerance for risk. Diversification does not guarantee a profit or protect against loss.
In any market environment, we strongly believe that investors should stay diversified across a variety of asset classes. By working closely with your financial advisor, you can help ensure that your portfolio is properly diversified and that your financial plan supports your long-term goals, time horizon, and tolerance for risk. Diversification does not guarantee a profit or protect against loss.
The information included above as well as individual companies and/or securities mentioned should not be construed as investment advice, a recommendation to buy or sell, or an indication of trading intent on behalf of any MFS product.
Securities discussed may or may not be holdings in any of the MFS funds. For a complete list of holdings for any MFS portfolio, please see the most recent annual, semiannual, or quarterly report. Full holdings are also available on the individual Fund Profile tab in the Products and Performance section of mfs.com.
Past performance is no guarantee of future results.
Sources: MFS research; The Wall Street Journal; The Wall Street Journal Online; Bloomberg News;Financial Times; Forbes.com; CNNMoney.com; msnbc.com.
--see disclaimer below--
Friday, September 2, 2011
Week in Review: Stagnant jobs situation troubles markets
U.S. and global economic news
U.S. job growth fizzlesU.S. employment stagnated in August, with no job growth, according to the monthly nonfarm payroll report released by the Labor Department Friday morning. It was the first time in 11 months there was no net increase in U.S. jobs. The disappointing news, however, was influenced by the 45,000 Verizon workers who were out of work because they were on strike at the time the report was compiled. Still, the report's employment picture fell far short of the 60,000- to 65,000-job gain that had been anticipated by economists, and the U.S. unemployment rate remained at 9.1%.
More significantly, the weak showing reflected a lack of confidence among U.S. employers following the debt-ceiling showdown in Washington, the S&P downgrade of U.S. debt, the plummeting stock market, and ongoing concerns about Europe’s sovereign debt crisis. While the report conveyed a flat employment picture, it did indicate an increase of 17,000 jobs in the private sector.
ADP reports 91,000 more private sector jobsPrivate businesses added 91,000 jobs in August, on a seasonally adjusted basis, according to a report released by payroll giant Automatic Data Processing (ADP) and Macroeconomic Advisers, a consultancy. Almost all the hiring occurred at small businesses (a gain of 58,000) and medium-size businesses (30,000 new jobs). Businesses with 500 or more employees added only 3,000 jobs.
U.S. manufacturing growth stays surprisingly strongU.S. manufacturing activity grew slightly in August, according to the Institute for Supply Management’s factory index, which fell slightly to 50.6 from 50.9 in July. Economists had expected a drop to 48.5.
Weekly jobless claims ease slightly in United StatesInitial claims for unemployment benefits by U.S. workers fell by 12,000 to a seasonally adjusted 409,000 in the week ended August 27, according to the Labor Department. However, the four-week moving average of new claims rose by 1,750 to 410,250.
Consumer confidence indices slipU.S. consumers lost confidence in August, according to several confidence gauges. The Conference Board’s index of consumer confidence dropped to 44.5 from 59.2 in July, its lowest reading since April 2009. The survey also showed that consumers expect inflation to rise to 5.8% in the next 12 months. Bloomberg’s Consumer Confidence Index fell to -49.1 from -47.0 in July, its second lowest level in two years. The Thomson Reuters/University of Michigan final index of consumer confidence in August slipped to its lowest level since November 2008.
Consumer spending rose in JulyU.S. consumers spent more than expected in July, on the basis of a report from the U.S. Department of Commerce, which showed that consumer spending rose 0.8%, the largest gain in five months. Income rose 0.3%, and the savings rate slowed to 5.0% from 5.5% in June, a trend that suggests a rise in confidence about the economy.
Eurozone confidence fadesEconomic confidence among Eurozone businesses and consumers fell in August. The Economic Sentiment Indicator declined for the sixth-straight month, to 98.3 in August from 103.0 in July, the European Commission reported. It was the weakest reading since March 2010 and far below the 100.5 expected by economists. The consumer confidence index slid to -16.5 from -11.2, its largest one-month decline since 1990. In a separate report, Eurostat, the European Union statistics office, reported that inflation remained at 2.5% in August and unemployment stood unchanged at 10.0% in July.
Global manufacturing activity slumpsManufacturing activity slumped across much of the world in August, according to various reports. Manufacturing in the Eurozone contracted, U.K. factory activity hit a two-year low, and a Chinese manufacturing index straddled the line between expansion and contraction, at 50.9, just above its 29-month low recorded in July. South Korea’s purchasing managers' index fell into negative territory, to 49.7 from 51.3 in July.
German economic resilience a positive sign for EuropeBullish reports from Germany indicate that Europe’s largest and strongest economy continues to grow. Unemployment remained at its lowest level in two decades in August as unemployment fell for the twenty-sixth consecutive month. The unemployment rate remained at 7%, its lowest level since German reunification in 1991. Machine orders grew 9% in July from a year earlier.
Canadian economy shrinksCanada’s economic output shrank unexpectedly in the second quarter, its first contraction in two years. Canada depends heavily on international trade and has been hurt by the U.S. and European economic slowdown. Canadian GDP declined 0.1% in the second quarter, for an annualized 0.4% contraction. Among the G-7 nations, only Japan and Canada had a contraction in economic activity in the second quarter.
U.S. and global corporate news
U.S. auto sales riseSales rose in August for U.S. car manufacturers. Chrysler Group reported a 31% jump in sales, while General Motors and Nissan Motor each reported close to a 20% increase and Ford Motor had an 11% gain. Because of a slow recovery in production after the March tsunami, Japan’s Honda Motor and Toyota Motor reported decreases in U.S. sales of 24.3% and 12.7%, respectively.U.S. Justice Department a hard sell on mergerThe U.S. Department of Justice filed an antitrust lawsuit to block a proposed $39-billion merger between AT&T and T-Mobile USA, saying that it would substantially decrease competition, lead to higher prices, and reduce product innovation.
Bombardier profit soarsCanada’s transportation giant Bombardier posted a 53% jump in second-quarter profit as revenue grew in both its aerospace and transportation divisions.
The week ahead
- The European Union reports its quarterly gross domestic product data on Tuesday, September 6.
- The U.S. Federal Reserve Board releases its "Beige Book," providing commentary on current economic conditions, on Wednesday, September 7.
- Germany, France, the U.K., Canada, and Australia release their monthly trade figures next week.
- The U.S. Commerce Department releases its trade balance data for August on Thursday, September 8.
- The U.S. Labor Department publishes its weekly report on unemployment insurance claims on Thursday, September 8.
In any market environment, we strongly believe that investors should stay diversified across a variety of asset classes. By working closely with your financial advisor, you can help ensure that your portfolio is properly diversified and that your financial plan supports your long-term goals, time horizon, and tolerance for risk. Diversification does not guarantee a profit or protect against loss.
The information included above as well as individual companies and/or securities mentioned should not be construed as investment advice, a recommendation to buy or sell, or an indication of trading intent on behalf of any MFS product.
Securities discussed may or may not be holdings in any of the MFS funds. For a complete list of holdings for any MFS portfolio, please see the most recent annual, semiannual, or quarterly report. Full holdings are also available on the individual Fund Profile tab in the Products and Performance section of mfs.com.
Past performance is no guarantee of future results.
Sources: MFS research; The Wall Street Journal; The Wall Street Journal Online; Bloomberg News; Financial Times; Forbes.com; CNNMoney.com; msnbc.com.
Sunday, August 14, 2011
U.S. and global economic news
European debt concerns grow; ECB buys more bondsOn Monday and again Tuesday, the European Central Bank bought Italian and Spanish government bonds to stabilize borrowing costs for the European Union’s third- and fourth-largest economies in a critical and dramatic move to stem Europe’s growing debt crisis. The ECB’s bond purchase program had been inactive for four months before the central bank resumed purchases of Portuguese and Irish bonds last week.
Eurozone production slipsEurozone industrial production shrank 0.7% from May to June, the European Union’s statistics office reported. France’s economy had no growth in the second quarter, while Greece’s economic output contracted 6.9% from a year earlier.
U.S. Treasuries continue to serve as safe havenDespite the downgrade of U.S. sovereign debt from AAA to AA+ by Standard & Poor’s, demand for U.S. Treasury securities remained very high this week. Yields, moving in the opposite direction to bond prices, fell to 2.10% for the 10-year Treasury note on Wednesday and just 0.17% for the two-year note. Yields rose slightly by Friday – to 2.25% and 0.19%, respectively – as a more optimistic mood settled the market somewhat. Few alternatives exist to U.S. Treasuries, given their depth and liquidity, with more than $9.3 trillion in debt outstanding.
U.S. consumer confidence plummetsConfidence among U.S. consumers fell in August to its lowest point since May 1980. The Thomson Reuters/University of Michigan preliminary index of consumer sentiment plunged to 54.9 from 63.7 in July. A decline to 62 was expected in a Bloomberg News survey. Rising pessimism after the downgrade of U.S. debt and the current stock market volatility could weigh down consumer spending.
Gold benefits from heightened uneaseGold lived up to its reputation as an investment to hold amid uncertainty and volatility. The price of an ounce of gold in a forward contract rose to $1,817on Wednesday before dipping below $1,800 Thursday.
U.S. retail sales riseRetail and food services sales were 0.5% higher in the United States in July from June, as consumers spent more on gasoline, electronics, and other merchandise.
U.S. productivity weakened in second quarterU.S. worker productivity fell for the second consecutive quarter, as employee output per hour declined at an annual rate of 0.3% in the second quarter of 2011 after falling 0.6% the previous three months. Declining efficiency and rising costs are disincentives for companies to hire more staff or increase pay.
Jobless claims easeInitial claims for unemployment benefits by U.S. workers fell by 7,000 to a seasonally adjusted 395,000 in the week ended August 6, according to the U.S. Department of Labor. The four-week moving average of new claims fell by 3,250 to 405,000.
German exports dropGerman exports declined in June, in another sign of economic weakness in Europe. Exports from Germany fell 1.2% from May while imports rose 0.3%. Demand for German-produced goods eased as neighboring countries sought to reduce spending because of the sovereign debt crisis and the demand for fiscal restraint.
U.S. and global corporate news
Commerzbank hurt by Greek debt exposureCommerzbank, Germany’s second-largest bank, had a 93% drop in its net profit in the second quarter from the year-earlier period after writing down all of its Greek sovereign debt exposure. Operating profit fell 77%. However, Commerzbank said its core bank is on track for a 2011 operating profit higher than last year’s 1.98 billion euros.
McDonald’s same-store sales up 5.1%Same-store sales at McDonald’s restaurants rose 5.1% in July, as the fast-food giant’s sales grew in all regions. McDonald’s continues to benefit from competitive pricing and an increasingly diverse menu. The company’s system-wide sales grew 14% in July.
Macy’s, Polo, Kohl’s profits up, Penney flatDepartment store chain Macy’s increased its earnings 64% in the second quarter from a year earlier. Same-store sales grew 6.4% while online sales were up 40%. Polo Ralph Lauren posted a 52% rise in first-quarter earnings and projects revenue growth in the high teens to low-20% range.Kohl’s reported a 17% increase in profits, but sales were up less than 4%, below analysts’ expectations. JCPenney had flat profits and lower sales, reflecting its departure from its catalog business.
Cisco SystemsNetworking equipment maker Cisco Systems had a 36% drop in net income in its fiscal fourth quarter as a result of a $772 million restructuring charge. Its revenue rose 3.3% from the year-earlier period, higher than analyst expectations, and the firm’s CEO, John Chambers, said Cisco was making solid progress on turning its fortunes around.
The week ahead
- The U.S. Department of Commerce releases housing starts data on Tuesday, August 16.
- European Union publishes flash GDP data on Tuesday, August 16.
- The U.S. Department of Labor publishes Consumer Price Index figures on Thursday, August 18.
- Existing home sales published by the National Association of Realtors on Thursday, August 18.
- U.S. Conference Board publishes leading indicators report on Thursday, August 18.
- Corporate earnings reports from Lowe’s, Dell, Home Depot, Wal-Mart, Deere during the week.
Stay focused and diversified
In any market environment, we strongly believe that investors should stay diversified across a variety of asset classes. By working closely with your financial advisor, you can help ensure that your portfolio is properly diversified and that your financial plan supports your long-term goals, time horizon, and tolerance for risk. Diversification does not guarantee a profit or protect against loss.
In any market environment, we strongly believe that investors should stay diversified across a variety of asset classes. By working closely with your financial advisor, you can help ensure that your portfolio is properly diversified and that your financial plan supports your long-term goals, time horizon, and tolerance for risk. Diversification does not guarantee a profit or protect against loss.
The information included above as well as individual companies and/or securities mentioned should not be construed as investment advice, a recommendation to buy or sell, or an indication of trading intent on behalf of any MFS product.
Securities discussed may or may not be holdings in any of the MFS funds. For a complete list of holdings for any MFS portfolio, please see the most recent annual, semiannual, or quarterly report. Full holdings are also available on the individual Fund Profile tab in the Products and Performance section of mfs.com.
Past performance is no guarantee of future results.
Sources: MFS research; The Wall Street Journal; The Wall Street Journal Online; Bloomberg News;Financial Times; Forbes.com; CNNMoney.com; msnbc.com.
Friday, August 5, 2011
Schnack Financial Newsletter for August 2011
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Monday, August 1, 2011
Week in Review: Unresolved U.S. debt drama weighs on markets - Week ending July 29, 2011
Global economic news
U.S. economy barely expands in second quarterThe U.S. economy grew anemically in the second quarter. Gross domestic product grew at an annualized, seasonally adjusted pace of 1.3%, the U.S. Department of Commerce reported. The rate of growth in the first quarter was revised downward, to 0.4% from the earlier estimate of 1.9%. Economists had expected the GDP to rise 1.8% in the second quarter. Consumer spending rose at an annualized 0.1% rate, its weakest level in two years.
Spain on review for debt downgradeMoody's Investors Service placed Spain's "Aa2" credit rating on review for a possible downgrade. The yield on Spain's 10-year government bond rose 1.7 percentage points to 6.136%, widening the spread between Spanish sovereign debt and similar German debt to 354.2 basis points. This underscores the financial strain the second Greek bailout package is having on other financially weak European countries.
U.S. jobless claims fall to 398,000Initial jobless claims fell by 34,000 to 398,000 for the week ended July 23, below the 400,000 level, which generally indicates an economy with overall job growth. The four-week average fell by 8,500 to 413,750.
Chicago Purchasing Managers’ Index fallsThe Chicago Purchasing Managers’ Index decreased to 58.8 in July, from 61.1 in June, according to the Institute for Supply Management. A reading of 60.2 had been expected. Readings above 50 indicate an expanding business sector.
U.S. home sale contracts rise in JuneThe number of contracts to buy previously owned U.S. homes surprisingly rose in June, as buyers were attracted to lower house prices and lower borrowing costs. The 2.4% rise in pending home sales followed a gain of 8.2% in May. Because of high cancellation rates, however, its difficult to gauge whether this will lead to higher home sales.
May home prices flatU.S. home prices rose in May from April but remained below year-earlier levels. The Case-Shiller index of 10 major metropolitan areas rose 1.1% and the 20-city index was 1% higher in May than a month earlier. Year to year, prices for the two indexes were down 3.6% and 4.5%, respectively.
Durable-goods orders dropDurable-goods orders fell by 2.1% in June, the second decline in three months, pointing to ongoing economic sluggishness, according to the U.S. Commerce Department.
Consumer confidence gets mixed readingU.S. consumer confidence rose in July, according to the Conference Board. Its monthly index of consumer confidence rose to 59.5 from 57.6 in June. However, the Bloomberg Consumer Comfort Index fell to -46.8 in the week ended July 24, from a reading of -43.3 the previous week. The Reuters/University of Michigan’s consumer sentiment index fell to 63.7 in July from 71.5 in June.
Eurozone confidence dipsBusinesses and consumers in the eurozone grew less confident about their prospects in July, according to the Economic Sentiment Index, the European Commission’s monthly survey of economic confidence. The measure dropped to 103.2 from 105.4 in June. It was the ESI’s fifth-straight monthly decline.
U.K. consumer confidence fallsConsumer confidence in the U.K., already sagging, fell further in July. A sentiment index fell to -30, its lowest point since April, from -25 in June and -22 a year earlier. All components of the index fell. The U.K. economy grew a meager 0.2% in the second quarter after being flat for the previous half year.
India fights inflation with higher interest rates
The Reserve Bank of India, the country’s central bank, raised interest rates by 0.5 percentage points to 8.0%, its eleventh increase since March 2010. Indian inflation reached 9.44% in June.
German inflation creeps higherConsumer prices rose 0.4% in Germany in July, and 2.4% from a year earlier. Because Germany is dependent on the European Central Bank (ECB) for monetary policy and the ECB must also watch out for weak European economies, Germany may have to accept rising inflation for now.
Global corporate news
UPS delivers higher profitsGlobal shipping firm United Parcel Service posted a 26% growth in second-quarter profit on strength in China and Europe. UPS said it expects robust profit growth on international routes in the coming months.
European carmakers outpace American rivalsGerman auto maker Daimler and France’s PSA Peugeot-Citroen both announced healthy profit increases this week, while Ford’s profit fell andChrysler posted a loss for the second quarter. Peugeot reported a 19% rise in profit for the first half of 2011 despite the impact of the Japanese earthquake and tsunami and the production interruption that created. Daimler had a 29% rise in second-quarter net profit on thriving demand for new trucks and luxury cars in many major global markets. Ford’s profit was trimmed by spending on new-model development and higher prices for commodities. Chrysler’s loss was due to a $551 million one-time charge to repay loans to the United States and Canadian governments.
Higher prices boost oil giants’ profitsRoyal Dutch Shell, British Petroleum, and Exxon all benefited from higher oil prices in the quarter ending June 30. BP bounced back from a $17-billion loss a year ago, stemming from a $32-billion charge to cover costs of the Gulf of Mexico oil spill, to a second-quarter net profit of $5.62 billion this year. Total revenue rose 39% in the quarter. Shell’s profits rose to $8.7 billion from $4.4 billion a year ago. Exxon’s net income was $10.7 billion, up from $7.6 billion a year ago.
RIM, Nokia and Nintendo show impact of losses to AppleResearch in Motion, Nokia, and Nintendo continue to struggle in the face of very tough competition from Apple and Google in the smart phone space. Research in Motion announced a plan to cut 2,000 jobs, 11% of its workforce, as the BlackBerry maker struggles with shrinking market share of North American smart phone sales. Nokia’s debt was downgraded two notches, to "Baa2" from "A3," by Moody’s Investor Service, reflecting the sharp deterioration of Nokia’s market position. Apple and Samsung Electronics overtook Nokia for the top two positions in the global smartphone market in the second quarter, according to market research firm Strategy Analytics. Nintendo cut its profit forecast for the year ending next March by more than 80% as its 3DS hand-held player has been hurt by gamers’ appetite for games that can be played online or on smart phones, including Apple’s iPhone.
Dunkin’ Donuts serves up IPO, coffee competition to heat upThe hunger for initial public offerings continued this week, with 11 IPOs, including an offering from Dunkin’ Donuts that raised $423 million, and will promote the franchiser’s growth.
The Week Ahead
- Pfizer, Comcast, MasterCard, Prudential, and Time Warner report earnings next week.
- The European Monetary Union releases its unemployment report on Monday, August 1.
- The ADP monthly employment report is released on Wednesday, August 3.
- The Bloomberg Consumer Confidence Index is released on Thursday, August 4.
- The U.S. nonfarm payroll report and U.K. producer price index are released on Friday, August 5.
In any market environment, we strongly believe that investors should stay diversified across a variety of asset classes. By working closely with your financial advisor, you can help ensure that your portfolio is properly diversified and that your financial plan supports your long-term goals, time horizon, and tolerance for risk. Diversification does not guarantee a profit or protect against loss.
The information included above as well as individual companies and/or securities mentioned should not be construed as investment advice, a recommendation to buy or sell, or an indication of trading intent on behalf of any MFS product.
Securities discussed may or may not be holdings in any of the MFS funds. For a complete list of holdings for any MFS portfolio, please see the most recent annual, semiannual, or quarterly report. Full holdings are also available on the individual Fund Profile tab in the Products and Performance section of mfs.com.
Past performance is no guarantee of future results.
Sources: MFS research; The Wall Street Journal; The Wall Street Journal Online; Bloomberg News;Financial Times; Forbes.com; CNNMoney.com; msnbc.com.
Monday, July 25, 2011
Week in Review: Stocks higher as debt deals and positive earnings cheer investors
U.S. and global economic news
European leaders agreed to aid package for GreeceEuropean leaders on Thursday agreed on a plan to reduce Greece's debt burden in an effort to prevent contagion to other weak economies in the eurozone. The overall size of the bailout package to cover Greece's financial gap is €109 billion and will include the participation of the International Monetary Fund and the private sector. The plan also cuts interest rates on bailout loans to Greece and doubles the repayment period to 15 years. Officials said the interest rates on Ireland's and Portugal's bailout loans will be cut to the same low level. European leaders also agreed on new steps to prevent the spread of Greece's debt problems. In the wake of the debt deal, Fitch Ratings said the role of the private sector in the Greek bailout plan would constitute a "restrictive default." In other words, the proposed debt exchange implies a 20% net present value loss for banks and Greek government debt holders.
U.S. lawmakers continue debate over deficit reduction dealIn the United States, Congress and the White House continued negotiations to cement a deal to increase the government's borrowing authority while cutting spending and overhauling the tax code. The White House has said if the government's $14.29 trillion debt ceiling is not raised by August 2, the United States will run out of cash to pay its bills. Standard & Poor's repeated a warning that there is a 50% chance that it will lower the U.S. credit rating within three months. The company first warned of this possibility on July 14.
Weekly U.S. jobless claims riseU.S. jobless claims unexpectedly rose last week after declining for two weeks in a row. Claims increased by 10,000 to a seasonally adjusted 418,000, after declining for two weeks in a row. The four-week moving average of new claims, considered a more reliable indicator of the performance of the labor market, fell last week by 2,750 to 421,250. Economists consider the economy to be adding more jobs than it is shedding when the weekly claims number falls below 400,000.
German business confidence fallsGerman business confidence fell more than expected in July, according to the Ifo Institute's business climate index, which dropped to its lowest level in nine months.
U.S. home sales fallSales of previously owned homes fell 0.8% in June to a seasonally adjusted annual rate of 4.77 million, the lowest level in seven months, amid weakness in the job market and overall economy. It was the third-straight monthly decline and worse than forecast. Also in June home construction rose to the highest level in five months. Compared with the same month a year earlier, new home construction was up 16.7%; however construction is still below a healthy level, which economists say would be a pace of 1 million to 1.5 million units. In June, that annual level was at 629,000. Meanwhile, the National Association of Home Builders reported that confidence among homebuilders rose in July from June but remained at depressed levels as the housing market continued to struggle.
U.S. leading indicators riseThe Conference Board reported that its index of U.S. leading indicators rose 0.3% in June from a 0.8% increase in May. The gauge measures the outlook for the next three to six months.
U.S. and global corporate news
Morgan Stanley performance surprises investorsMorgan Stanley posted a smaller-than-expected second-quarter loss, which sent the company's stock surging the most in two years. The loss came from a $1.7 billion charge related to the conversion of Mitsubishi UFJ Financial Group's preferred Morgan Stanley stake. Morgan Stanley posted a 14% gain in trading revenue and was the only major U.S. bank to report a gain in this area. Bank of America reported losses of $8.83 billion in the second quarter as mortgage-related charges outweighed lower credit costs. Goldman Sachs Group's second-quarter profit came in at $1.05 billion, significantly lower than expectations, after market conditions led the firm to reduce risk taking to the lowest levels in five years. Even so, profits rose 77% from $613 million a year ago.
Tech companies report strong profitsApple's fiscal third-quarter earnings more than doubled, exceeding analysts' expectations, as the company reported surging sales of the iPhone and iPad. Microsoft's profit rose 30% in its fiscal fourth quarter helped by the software and service contracts of its corporate customers. IBM reported an 8% increase in net income as the 100-year-old company got a boost from robust sales of new models of its mainframes. The company also lifted its profit forecast amid buoyant demand for software. Intel, the world's largest chipmaker, reported that its sales rose 21% while net income rose to $2.95 billion from $2.89 billion in the year-earlier quarter. The company also forecast third-quarter sales that exceeded some analysts' estimates. EMC reported a 28% gain in second-quarter earnings as companies increased spending on storage products and software for Internet-based computing, and eBay reported a 25% jump in revenue, while net income fell 31%.
Coke, Johnson & Johnson, and Harley-Davidson announce resultsCoca-Cola's second-quarter profit rose 18%. The company got a boost from a bottler acquisition and from strong volume growth overseas. Johnson & Johnson reported a 20% decline in second-quarter profit on costs associated with its exit from its heart-device business and product recalls. Profits, however, exceeded Wall Street expectations. Harley-Davidson, the largest U.S. motorcycle manufacturer, said profit rose after it increased sales in the U.S. market for the first time in almost five years.
Borders to liquidate remaining storesBorders was forced to liquidate its remaining 399 stores after receiving too few bids in a bankruptcy auction. The company, which employs about 10,700 people, is now expected to go out of business by the end of September.
Zillow raises $69.2 million in IPOZillow, the online real estate information service, raised $69.2 million in its initial public offering.
Express Scripts to buy Medco; CNOOC to purchase OPTI CanadaExpress Scripts agreed to buy Medco Health Solutions for $29.1 billion in cash and stock. In merging, the companies will form the largest manager of drug prescription services with nearly a third of the market. China's largest offshore-oil producer, CNOOC, agreed to buy bankrupt Canadian oil sands developer OPTI Canada for about $2.1 billion. The agreement comes as China seeks to invest in energy projects amid a global commodities boom. In past deals, Chinese firms have targeted minority stakes in Canadian companies.
Harry Potter movie sales set recordThe last of the long-running series of Harry Potter films, Harry Potter and the Deathly Hallows — Part 2, from Time Warner's Warner Bros. Pictures set a sales record for its U.S. opening and took in nearly one half a billion dollars worldwide.
The week ahead
- 3M, Boeing, Exxon Mobil, DuPont, Merck, and Chevron report earnings next week.
- The Standard & Poor's/Case-Shiller Composite-20 Home Price Index is released on Tuesday, July 26.
- The Conference Board reports on consumer confidence on Tuesday, July 26.
- The European Commission publishes its consumer confidence indicator for the eurozone on Thursday, July 28.
- The Nomura/JMMA (Japan Materials Management Association) Purchasing Managers' Index is released Thursday, July 28.
In any market environment, we strongly believe that investors should stay diversified across a variety of asset classes. By working closely with your financial advisor, you can help ensure that your portfolio is properly diversified and that your financial plan supports your long-term goals, time horizon, and tolerance for risk.
Diversification does not guarantee a profit or protect against loss.
The information included above as well as individual companies and/or securities mentioned should not be construed as investment advice, a recommendation to buy or sell, or an indication of trading intent on behalf of any MFS product.
Securities discussed may or may not be holdings in any of the MFS funds. For a complete list of holdings for any MFS portfolio, please see the most recent annual, semiannual, or quarterly report. Full holdings are also available on the individual Fund Profile tab in the Products and Performance section of mfs.com.
Past performance is no guarantee of future results.
Sources: MFS research; The Wall Street Journal; The Wall Street Journal Online; Bloomberg News; Financial Times; Forbes.com; CNNMoney.com; msnbc.com.
Monday, July 11, 2011
MARKET WEEK: JULY 11, 2011
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Last Week's Headlines
Eye on the Week Ahead
Alcoa's Monday announcement represents the unofficial kickoff of the second-quarter earnings season. Minutes of the Fed's last meeting could provide additional insight into members' post-QE2 outlook, and inflation data will be watched for signs of acceleration. Finally, as the debt deadline nears, it could have an effect on investors' psyches.
Key dates and data releases: Federal Reserve Open Market Committee (FOMC) minutes, international trade (7/12); wholesale inflation, retail sales (7/14); consumer inflation, industrial production (7/15).
Data source: Includes data provided by Brounes & Associates. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. Equities data reflect price change, not total return.
The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment.
--see disclaimer below--
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