From Briefing.com: 4:36 pm Weekly Wrap
Despite lingering concerns about the economic outlook, the three major averages ended the week higher.
U.S. stocks started the period on a weak note, as a landmark strike at General Motors (GM) raised concerns about the outlook for other industrial companies and the economy. On Monday, approximately 73,000 workers in the United Auto Workers union went on strike against the Detroit-based auto maker, as the two sides failed to reach an agreement over cuts in health care costs and union demands to keep U.S. production jobs.
Financial shares also weakened during Monday's session on news that Deutsche Bank (DB), Germany's largest bank, may have to take a big write down of its leveraged loan commitments due to the meltdown in the sub-prime mortgage market.
The markets trended modestly higher on Tuesday, however, as disappointing earnings/sales updates from several notable companies and weak economic data were offset by strength in the Technology sector.
Fueling concerns about a slowdown in consumer spending, value-oriented retailer Target Corp. (TGT) warned that September same-store sales would fall below its previous forecasts because of weak customer traffic. Meanwhile, Lowe's Cos. (LOW), the nation's second largest home improvement chain, cut its full-year profit outlook due to unfavorable weather conditions in some parts of the U.S., and homebuilder Lennar Corp. (LEN) reported a large third quarter loss and said it would be cutting more jobs in the fourth quarter amid persisting weakness in the housing market.
On the economic front, the Conference Board reported U.S consumer confidence fell to a nearly two-year low of 99.8 in September, while existing home sales tumbled 4.3% as housing conditions continued to deteriorate and weigh on overall economic activity.
Stocks again showed some resiliency on Wednesday, as a tentative deal between General Motors and the UAW to end a strike alleviated some concerns that a prolonged strike could hurt economic growth. It also offset a softer than expected read on August durable goods new orders, which declined 4.9%.
On Thursday investos were rattled by a bleak new home sales report, but the market still traded higher as a surprising drop in weekly initial claims and strength in the energy sector, which flowed from rising crude prices, provided support.
The new home sales report for August showed an 8.3% decline to an annualized rate of 795K, further underscoring the problems facing the housing sector. Economists had expected a drop of 5.2%. Meanwhile, initial claims for the week ended September 22 fell to 298K. That was well below the consensus estimate of 320K and normal recession levels.
Stocks reversed course on Friday – the last trading day of the third quarter – as investors digested a large batch of economic news and lingering concerns about the outlook for corporate earnings and the economy.
In terms of economic data, August personal consumption expenditures, which make up over 70% of GDP, rose a stronger than expected 0.6%. The core PCE deflator – a closely watched gauge of inflation – was up just 0.1% for the month. The year/year increase in the core PCE deflator is a low 1.8%.
Meanwhile, the September Chicago PMI survey of manufacturing conditions in that region rose to 54.2 from 53.8 for August. While that was only a modest increase, it suggests manufacturing conditions did not deteriorate in September.
August construction spending rose 0.2%, after gaining 0.5% in July, as weakness in residential construction continues to offset non-residential construction. The revision to the University of Michigan consumer sentiment index during the month held fairly steady at 83.4 versus the prior read of 83.8.
--Richard Jahnke, Briefing.com
Index Started Week Ended Week Change % Change YTD
DJIA 13820.19 13895.63 75.44 0.5 % 11.5 %
Nasdaq 2671.22 2701.50 30.28 1.1 % 11.8 %
S&P 500 1525.75 1526.75 1.00 0.1 % 7.6 %
Russell 2000 813.11 805.45 -7.66 -0.9 % 2.3 %
10:43AM RF Micro Device announces expansion to accommodate rising demand for compound semiconductors (RFMD) 6.60 +0.12 : Co announces plans to expand its compound semiconductor manufacturing capacity to support growth expectations in the Company's Cellular and Multi-Market product groups. RFMD anticipates increased demand for its industry-leading compound semiconductor process technologies as a result of favorable market trends in the Company's primary markets... RFMD is currently increasing its manufacturing levels of both GaAs HBT and GaAs pHEMT in order to satisfy immediate forecasted demand.
08:19 am Jabil Circuit (JBL)
Contract electronics manufacturer Jabil Circuit (JBL 24.50) swung to a profit its fiscal fourth quarter, as higher revenue and lower expenses related to restructuring led to improved operating margin.
Still, Jabil shares were indicated slightly lower in pre-market activity. The company, which has been pressured by slower consumer spending trends and lofty energy prices, has seen its stock suffer over the past year. Shares have declined nearly 15% in the past twelve months, and have traded flat since the beginning of the year.
For its most recent quarter, Jabil earned $11.7 million, or $0.06 per share, compared with a year ago loss of $45.6 million, or ($0.22) per share. However, excluding restructuring charges and other one-time items, adjusted earnings were $0.29 per share - a penny better than analysts' expectations.
Revenue jumped 6% from a year ago to $3.13 billion, also beating the consensus estimate of $3.01 billion. The increase in revenue, along with lower operating expenses, led to better operating margin, which improved 50%.
Looking to the fiscal first quarter, Jabil projected adjusted earnings of $0.33 to $0.37 per share on revenue of $3.3 billion. That was in line with analysts' forecast for earnings of $0.35 per share and revenue of $3.31 billion.
--Richard Jahnke, Briefing.com |
