Friday’s Greek Riots Wipe Out Week’s Gains

 

Written Commentary:

For the week of Monday, February 6, 2012 through Friday, February 10, 2012:

• Standard & Poor’s 500 Index: -0.17%
• Dow Jones Industrial Average: -0.47%
• NASDAQ Composite: -0.06%

The market had a strong rally this week after strong employment data was released last Friday. Nonfarm payrolls leapt 243,000, almost 100,000 more than analysts expected. The unemployment rate also ticked down to 8.3%. This is good news for the economy, since roughly 70% of our gross domestic product is based on consumer spending. Jobless claims also continued their slow fall, with the four-week moving average falling to the lowest level since April 2008.

However, stocks were dragged down on Friday in reaction to the riots in Greece that were a result of recent austerity measures. A downgrade of Italian banks and poor economic readings for the United States added to the loss, which was the worst one-day loss this year.

Economic Data:

• Employment Data
  • Data released for the month of January showed nonfarm payroll employment rose by 243,000, far surpassing analyst expectations of 150,000.
  • The unemployment rate edged down to 8.3% from 8.5%.
  • We would not be surprised if the unemployment rate ticks up as previously discouraged workers re-enter the workforce and start searching for jobs again.
• Jobless Claims
  • Initial claims for the week fell to 358,000 from 373,000, which was more than expected.
  • Claims from two weeks ago were revised higher to 373,000 from 367,000.
  • Weekly jobless claims have remained below the psychologically important 400,000 level.
  • The four-week moving average fell to 366,250, the lowest since April of 2008.

Earnings

• The Walt Disney Company,  (NYSE: DIS)
  • Disney posted decent results for the fourth quarter thanks to the Media Networks unit and strong sales at the theme parks.
  • Net income rose to $1.46 billion, or $0.80 per share, from $1.30 billion, or $0.68 per share, last year.
    • This increase beat analyst expectations of $0.71 per share.
  • Revenue rose 1% from $10.72 billion to $10.78 billion, slightly less than the $11.20 billion expectation.
  • Revenue for the Media Networks unit, which includes ESPN and the Disney Channel, rose to $4.8 billion, an increase of 3%.
  • Theme park sales rose 10% to $3.2 billion.
• The Coca-Cola Company  (NYSE: KO)
  • Restructuring charges brought Coca-Cola’s net income down 71% for the quarter.
    • However, adjusted results beat expectations.
  • The beverage giant earned $1.65 billion, or $0.72 per share, far less than last year’s $5.77 billion, or $2.46 per share.
    • After restructuring charges, earnings were $0.79 per share.
  • Revenue rose to $11.04 billion, a 5% jump that was aided by higher prices and strong overseas sales.
• PepsiCo, Inc (NYSE: PEP)
  • The Coca-Cola rival beat expectations for the quarter after accounting for restructuring charges.
    • Net income was $1.42 billion, or $0.89 per share, over last year’s $1.37 billion, or $0.85 per share.
    • After restructuring costs and other charges, net income was $1.15 per share, higher than the $1.13 expected.
  • Revenue rose to $20.16 billion, an increase of 11% and higher than the $19.89 billion forecast.
  • For the year, net income rose 2% to $6.46 billion, or $4.03 per, share over $6.33 billion, or $3.91 per share, last year.
  • Revenue increased to $66.5 billion from $57.84 billion, a 15% jump.
• Cisco Systems, Inc (NASDAQ: CSCO)
  • The technology designer and manufacturer grew net income by 44% as the company tries to recover from a bad year.
  • Net income was $2.2 billion, or 0.40 per share, over last year’s $1.5 billion, or $0.27 per share.
  • After amortization and stock compensation costs, the company earned $0.47 per share beating expectations of $0.43.
  • Revenue rose 11% to $11.5 billion from $10.4 billion last year.
  • CSCO is raising its dividend to $0.08 per share in April.

Interest Rates

• The two-year Treasury increased two basis points to 0.25%, remaining stuck in a range between 0.15% and 0.3%.
• The five-year Treasury rose seven basis points to 0.84%, climbing off the Jan 31st all-time low of 0.7%
• The 10-year Treasury leapt 11 basis points to 2.04%, remaining close to the 2.0% mark.
• The 30-year Treasury yield rose five basis points to 3.17%, the most it has risen since October.

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