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Weekly Review | May 7 to May 14

Market Indices

Index	May 7, 2012	May 14, 2012	Change	Percent
DJIA	13036.00	12820.60	-215.4	-1.65
Nasdaq	2940.41	2933.82	-6.59	-0.22
S&P500	1368.79	1353.39	-15.4	-1.13
Russell 2000	788.73	790.06	1.33	+0.17
Russell 1000	645.43	639.93	-5.5	-0.85

Equity Review

Last week investors continued to watch developments in Greece, where party leaders have been engaged in talks in an effort to bring together a coalition government in the wake of last Sunday’s election results.  Positive consumer sentiment failed to outweigh J.P. Morgan’s big news, causing losses for U.S. stocks.  The S&P 500 closed down 1.2% at 1,353.39 for the week, while the Dow Jones finished down 1.7% at 12,820.60 for the week ended May 11.  J.P. Morgan shares closed down 9% on Friday due to the announcement that the bank suffered a $2 billion trading loss.  Although earnings season is mostly over, several companies reported quarterly results last week.  Kohl’s Corporation said net income for the retail stores fell to $154 million or $0.63 per share versus $0.69 one year ago, but beat the estimate of $0.60 per share.  S&P 500 component Cisco Systems Inc. reported net income above Wall Street’s expectations for its third quarter.  Net income for the computer networks company rose to $2.17 billion or $0.48 per share versus $0.33 last year.  Analysts had expected $0.41 per share.  Cisco’s CEO said, “We are successfully executing against our long-term strategic plan of growing profit faster than revenue, and in a cautious IT spending environment, we continue to outperform our competitors.”  The Walt Disney Company reported second quarter results.  Net income for the media conglomerate rose to $1.14 billion or $0.58 per share versus $0.44 a year ago, which is a 21% increase.  The estimate for the current quarter was $0.56 per share.  Management said, “We’re incredibly optimistic about our future, given the strength of our core brands, Disney, Pixar, Marvel, ESPN and ABC, and our extraordinary ability to grow franchises across our businesses.”  Priceline.com Inc. reported first quarter results above Wall Street’s expectations.  The online travel company said net income was $182 million or $4.28 per share versus the estimated $3.63 per share.  The company said hotel business was up 47% over last year.  This week investors expect to be concerned over a potential exit from the EU by Greece, as well as problems brewing in Italy and Spain.

Economic Indicators

Economic Review

The number of people filing for unemployment benefits was unchanged for the week ended May 5.  First time jobless claims were 367,000 according to the Labor Department.  Economists believe the economy is still growing and adding jobs, but only at a moderate rate.  U.S. consumers increased their debt in March for the seventh straight month.  Most of the increase was non-revolving debt such as auto loans, personal loans and student loans for a combined $16.2 billion increase in March. The National Federation of Independent Business said its small-business optimism index rose 2 points to 94.5, led by an 11-point jump in earnings trends and putting the gauge at the same level as in February, 2011.  The report is based on the responses of 1817 randomly sampled small businesses in the NFIB’s membership.  Job openings increased to 3.74 million in March from 3.57 million in February, a 17% increase from the prior year.  After a 1.5% spike in March, U.S. import prices fell 0.5% in April, mainly due to the drop in oil prices.  Excluding fuel, U.S. import prices rose 0.1% last month.  The Commerce Department said the U.S. trade deficit widened by 14.1% in March to $51.8 billion.  The consensus was a deficit of $50 billion.  A drop in gasoline prices pulled producer prices down in April by the most in six months.  The Labor Department said the 0.2% drop marked the biggest decline since October.  Economists expected a 0.1% drop.  Consumer sentiment moved higher in May to the best reading since the recession thanks to gasoline prices.  The index jumped to 77.8 from 76.4 in April.  An index of consumer expectations actually declined, possibly due to April’s report of slowing jobs growth.  This week on the calendar will be retail sales and housing data.