Stocks Rise For A Third Week – January 2012

Up to date in less than 2 minutes:
Last week U.S. stocks rose for a third week, the longest winning streak since October, as better-than-estimated economic data and company earnings boosted confidence in American growth. For the week, the Dow, S&P 500, NASDAQ, and Russell 2000 rose +2.4%, +2.0%, +2.8%, and +2.7%, respectively.

 

Equity Performance Table
Last Week
Year to Date
Last 52 Weeks
Dow Jones Industrial
+2.4%
+4.1%
+7.1%
S&P 500 (Large Caps)
+2.0%
+4.6%
+2.5%
NASDAQ (Technology)
+2.8%
+7.0%
+3.6%
Russell 2000 (Small Caps)
+2.7%
+5.9%
+1.5%
Dow Jones U.S. Total Stock Market Index
+2.1%
+5.0%
+1.9%
Dow Jones Global Ex-U.S. Index (International)
+4.0%
+5.4%
-12.4%

 

Interest Rates
Prime Lending Rate
3.25%
Interest Rate Bias
Short-Term = Neutral; Intermediate Term = Neutral; Long-Term = Neutral
90 T-bill Rate
0.04%
90 Day LIBOR
0.56%
TED Spread
0.52%
30-Year Mortgage Rate
3.95%
15-Year Mortgage Rate
3.27%
5-Year Adjustable Mortgage Rate
2.90%
30-Year Treasury Yield
3.10%
10-Year Treasury Yield
2.03%
5-Year Treasury Yield
0.89%
2-Year Treasury Yield
0.24%

 

Notable Recent Dividend Increases
Lockheed Martin (“LMT”)
33.3%
Home Depot (“HD”)
16.0%
Emerson Electric (“EMR”)
15.9%
Union Pacific Corp (“UNP”)
25.0%
McDonalds Corp (“MCD”)
14.8%
 
 
 
Now, all the details……………………
 
Last week, the S&P 500 advanced +2% to 1,315.38. The S&P 500 has gained +4.6% in 2012, the best start to a year since 1997.  The Dow gained 298.42 points, or +2.4%, to 12,720.48, reaching the highest level since July 21st. The S&P 500 rose all four days U.S. exchanges were open last week as data bolstered confidence in the American economy. Claims for jobless benefits dropped to the lowest level since 2008 and confidence among homebuilders topped forecasts. “The domestic economy is strong and that’s helped the stock market,” Mark Bronzo, who helps manage $23.4 billion at Security Global Investors in Irvington, New York, said in a Bloomberg telephone interview.  “The market’s done pretty well in the face of some good earnings news and it seems to be overcoming some of the fears around Europe.”
Technology and energy companies led rallies by nine out of 10 S&P 500 Index groups, climbing more than +2.7%.  Sears Holdings Corp. (“SHLD”) added +46% amid speculation it may go private. Bank of America Corp. (“BAC”) led Dow Jones Industrial Average gains after posting a profit. International Business Machines Corp. (“IBM”) increased +5.2% after forecasting earnings that beat analysts’ estimates.
Companies from Goldman Sachs Group Inc. (“GS”) to Union Pacific
Corp. (“UNP”) and EBay Inc. (“EBAY”) topped analysts’ income projections.  S&P 500 companies, which beat profit estimates in the previous 11 quarters, will report a +3.4% increase in per-share earnings during the September-December period, analysts’ forecasts compiled by Bloomberg show.  Of the 51 companies in the S&P 500 that reported results since January 9th, 65% posted per-share earnings that beat projections, Bloomberg data show.
Google Inc. (“GOOG”), owner of the most popular Internet search engine, slumped -6.2% to $585.99 as fourth-quarter revenue and profit missed estimates. Chief Executive Officer Larry Page is moving into new markets to ignite growth outside Google’s traditional search-based business.  That effort contributed to an -8% drop in the average price Google gets when users click an ad, because it charges less for ads on mobile devices and in emerging markets, said Herman Leung, an analyst at Susquehanna Financial Group.
Carnival Corp. (“CCL”) tumbled -7.9% to $31.56.  The company owns the Costa Concordia cruise ship that ran aground off the coast of Italy last week, killing at least 11 people.  Carnival halted advertising for its Carnival Cruise Lines and announced a review of safety procedures in the aftermath of the accident.
Last week, the Dow Jones Global Ex-U.S. Index (broad international index) rose +4.0%. The Americas were up +2.3% with Brazil up +5.4%, Canada up +1.4%, and Mexico up +2.3%. Europe was up +2.7% with Germany up +4.3%, France up +3.9%, and Spain up +1.3%. Asia-Pacific was up +3.1% with Australia up +1.0%, China up +3.3%, Hong Kong up +4.7%, India up +3.6%, Japan up +3.1%, and Taiwan up +0.7%.
Treasuries dropped in price with the 10 year yield rising on the week to 2.03% from 1.86% in the week earlier.
The Baltic Dry Index, which tracks transport costs on international trade routes and may be a good leading indicator of economic activity, ended the week at 862, down from the week earlier closing level of 1,053. The index reached a high of 11,793 on May 20, 2008 and a low of 663 on December 5, 2008. The index last peaked at 4,661 set on November 11, 2009.
The TED spread measuring the difference between LIBOR and Treasury bill rates, which rose as high as 464 basis points during the liquidity crisis of 2008, is currently in more of a normal range of 52 basis points, but has increased as of late due to Euro bank concerns. The TED spread is a gauge of the willingness of banks to lend to one another. The lower the TED spread the more willing banks are to lend with each other. The TED spread fluctuates over time but generally has remained within the range of 10 and 50 bps (0.1% and 0.5%) except in times of financial crisis. A rising TED spread often presages a downturn in the U.S. stock market, as it indicates that liquidity is being withdrawn.
Last week, oil dropped -0.2% and closed at $98.46 per barrel. Year to date, oil is down -0.4%. The average price of unleaded gasoline dropped -0.1% last week to end at $3.383 per gallon per January 22nd data provided by AAA. Year to date, unleaded gasoline is up +3.2%. Natural gas was down -12.3% last week and closed at $2.343/MMBtu. Year to date, natural gas is down -21.6%.
Last week, gold rose +2.0% closing at $1,663.70 per troy ounce. Year to date, gold is up +6.3%. Last week the dollar was down -1.6% as measured by the U.S. Dollar Index with that index closing at 80.223. Year to date, the U.S. Dollar is up +0.1% as measured by the Dollar Index. Last week the Euro was up +0.9% against the U.S. dollar closing at $1.2909/Euro. Year to date, the Euro is down -0.2% against the U.S. Dollar.
Look for a slew of earnings in the coming week from the likes of McDonald’s (“MCD”), Regions Financial (“RF”), Kimberly Clark (“KMB”), Apple (“AAPL”), United Technologies (“UTX”), and Lockheed Martin (“LMT”). Look for economic reports this week on 4th quarter 2011 GDP, housing prices, durable goods orders, Fed rate decision (expected no change here), new home sales, and weekly jobless claims data.
Sources: Bloomberg, The Wall Street Journal, Barron’s, The New York Times, ValueLine.
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