Weekly Review | Aug 11 to Aug 18

Approved for release August 18, 2014

Market Indices

Index Aug 11, 2014 Aug 18, 2014 Change Percent
DJIA 16557.27 16662.91 105.64 +0.64
Nasdaq 4387.38 4464.93 77.55 +1.77
S&P500 1933.43 1955.06 21.63 +1.12
Russell 2000 1136.48 1141.65 5.17 +0.45
Russell 1000 899.72 912.47 12.75 +1.42

Equity Review

Stocks ended mixed on Friday but posted weekly gains while trimming or erasing losses after falling on news of a clash between Ukrainian and Russian military units on Ukraine soil.  The S&P 500 fell to 1,955.06,  leaving the index with a 1.2% weekly gain. The Dow Jones Industrial Average trimmed a triple-digit loss to end the week up 0.7%  at 16,662.91.  Applied Materials reported third quarter earnings which beat analysts’ estimates by a penny. The California-based technology company that employs about 2,500 workers in Austin posted a profit of $301 million, or $0.28 per share. Applied Materials is the number one developer of semiconductor chip making equipment in the world. In June, stockholders approved its proposed $9.39 billion merger with Tokyo Electron Ltd., the Japanese company that is the number two maker of chip production machines. Cisco Systems posted earnings for its fourth quarter that beat analysts’ estimates yet came with the sobering news that the company plans to cut 6,000 jobs, or 8% of its global workforce. Cisco CEO John Chambers referred to the move as “a limited restructuring” and a “reallocation of resources” on the earnings call that followed the release of its results, which boil down to a better-than-expected increase in earnings and flat revenue for its fourth fiscal quarter, which ended July 26.  Cisco beat Wall Street’s estimates of $0.53 by earning $0.55. Wal-Mart Stores reported a 2.8 percent rise in quarterly revenue as earnings per share of $1.21 were in line with expectations, helped by higher sales at its smaller-format stores and online shoppers. Chief Executive Doug McMillon blamed intense competition and weak consumer spending for sluggish U.S. same-store sales.  “We’re encouraged by the performance of our small-format stores and e-commerce, areas where we’re investing significantly this year. But we wanted to see stronger comps overall in Wal-Mart U.S.”  Analysts say, “Markets are reacting to the ongoing developments in Russia and the Ukraine, but in the fog of war it makes little difference what the specific elements are in each event. Instead, what drives market valuations is the knowledge of applied costs. No matter how Ukraine, Russia, and the separatists sort themselves out, the costs continue to rise.”

Economic Indicators

Jobless Claims (4 wk avg)
-0.68 Aug 9, 2014 295,750
Aug 2, 2014 293,750
Monthly Job Gains
July 2012 209,000
June 2012 298,000
ISM Manufacturing Index
+3.25 July 2012 57.1
June 2012 55.3
ISM NonManufacturing Index
+4.82 July 2012 58.7
June 2012 56.0

Economic Review

August consumer sentiment hit the lowest level in nine months as the stock fueled negative expectations about the future. The preliminary reading was 79.2, down from the July reading of 81.8. Economists had expected a reading 82.3, supported by solid jobs news and lower gas prices. Retail sales in July posted the weakest growth in six months due to a disappointing report from auto dealers. According to the Commerce Department, overall sales were unchanged in July. The forecast was a 0.2% increase. Excluding auto, sales rose to 0.1%. The breakdown was a decline of 0.2% in automobiles, 0.1% decline for furniture and home furnishings, and a 0.5% decline for general merchandise stores. Meanwhile, sales were up 0.3% and 0.1% at food and beverage stores and gas stations respectively.  The number of Americans who filed for unemployment benefits rose by 21,000 to 311,000 for the week ended August 9, and was the highest level since June. Economists had expected claims of 300,000. The four-week average of new claims rose 2,000 to 295.750. Also, continuing claims rose 25,000 to 2.54 million in the week ended August 2. Crude oil for September delivery rose $0.54 or 0.5% to $96.11 a barrel. Economists say that weaker-than-expected eurozone economic growth data, conciliatory talk from Russian President Putin, reports that Iraq’s Prime Minister will step down, and Libya reopening its largest exporting port have all added to negative sentiment for oil. In addition, a weekly supply report on U.S. natural gas supplies showed a smaller-than-expected increase in inventories, sending prices 2% higher.

U.S. Bonds

Two Year Note 0.423

Ten Year Note 2.364

30 Year Bond 3.152

Currencies & Commodities

Euro 1.3385

Pound 1.6729

Yen 102.53

Canadian Dollar 1.0883

Crude Oil 96.49

Gold, Dec 1298.5

Economic Calendar

Monday

Housing Market Index 53.0

Tuesday

CPI 0.1 %

CPI Less Food & Energy 0.2 %

Housing Starts 0.963 M

Thursday

General Bus Conditions Index 20.0

Existing Home Sales 5.00 M

Leading Indicators 0.6 %

*Actual consensus values reported.

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