Weekly Advisor Analysis
July 22, 2013
Earnings Spring Stocks to New Highs
The S&P 500 gained 0.74 percent and reached fresh all-time highs again last week, closing at
1692.09, according to CNBC. Investors found solace in Ben Bernanke’s reassuring words which
cautioned investors from becoming too excited about interest rates rising anytime soon. In a
prepared testimony to Congress, Bernanke again reinforced interest rates would most likely
remain near zero for a considerable time, according to USA Today. Also aiding share prices were
positive corporate earnings reports which gave investors hope that fundamentals will continue to
carry the stock market higher and a positive report on the labor market.
Source: Yahoo! Finance
Bernanke Again Soothes Investors
Ever since Ben Bernanke informed Congress on May 22 the Federal Reserve will likely begin
tapering their monthly asset purchase program at some point in the near future, both stocks and
bonds have fumbled for direction. Given the Federal Reserve’s economic outlook, many believed
the asset purchasing program, which has been deemed by many to have been at least partially
responsible for the large recovery in stock prices these last several years, would conclude
altogether in 2014. Some investors assumed this meant interest rates would also be on the rise
soon. However, Bernanke again reassured investors during testimony last week the Federal
Reserve’s benchmark interest rates would likely remain near zero, even after their unemployment
target of 6.5 percent is reached as long as inflation remains below 2.5 percent, according to USA
Today.
12-month percent
change
Earnings Solid So Far
While we’re still quite early into the current quarter’s earnings season with less than 200
companies having reported, results have been mostly positive so far. According to CNBC, nearly
two-thirds of companies which have reported earnings per share have beaten consensus
expectations. However, several companies that derive revenue from operations outside the U.S.
have commented on how unfavorable moves in currency exchange rates have had a negative
impact on results, according to FactSet. As the dollar has strengthened against other foreign
currencies, particularly the Japanese Yen, over the past year it has reduced the amount of sales that
are translated back into dollars.
Number of Yen
per USD
Jobless Claims Decline
In a sign of strength for the U.S. labor market, the number of Americans filing new claims for
unemployment declined more than expected last week, according to the Labor Department. Initial
claims for unemployment benefits dropped to a seasonally adjusted 334,000, below the
expectations for 345,000. Continued improvement in this data, coupled with the improving new
jobs numbers, could be indicating companies are hiring more people. Traditionally, as more
people find new jobs, it’s positive for the overall economy because it leads to higher amounts of
consumer spending.
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Number of
Unemployment
claims
Value of S&P 500 Reaches $15 Trillion
According to CNBC, the overall market value of the companies which embody the S&P 500
surpassed $15 trillion last week. The value was calculated by Howard Silverblatt, a senior index
analyst at S&P Dow Jones Indices. According to Silverblatt, the S&P 500 has gained $9.1 trillion
in value since March 2009 and, interestingly, now totals more than the current U.S. national debt
outstanding of $16.7 trillion.
Best regards,
UDB Financial
Securities offered through LPL Financial, Member FINRA/SIPC.
* This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with the
named broker/dealer.
* The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be
representative of the stock market in general.
* The DJ Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity
futures market. The Index is composed of futures contracts on 19 physical commodities and was launched
on July 14, 1998.
* The DJ Equity All REIT TR Index measures the total return performance of the equity subcategory of the
Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific
periods.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to
predict future performance.
* Past performance does not guarantee future results.
* You cannot invest directly in an index.
* Consult your financial professional before making any investment decision.
Sources:
http://www.cnbc.com/id/15839133
http://www.usatoday.com/story/money/business/2013/07/17/bernanke-testifies-congress/2523085/
http://finance.yahoo.com/news/stock-futures-flat-eyes-bernanke-121535897.html
http://finance.yahoo.com/q/bc?s=%5EGSPC+Basic+Chart&t=5d
http://www.chicagofed.org/webpages/publications/speeches/our_dual_mandate.cfm
http://www.factset.com/websitefiles/PDFs/earningsinsight/earningsinsight_7.12.13
http://quotes.ino.com/chart/?s=FOREX_USDJPY&v=dmax
http://www.dailykos.com/story/2013/07/18/1224643/-Initial-unemployment-compensation-claim-returnsto-lower-level
http://www.cnbc.com/id/100895812
http://www.cnbc.com/id/100896510
http://research.stlouisfed.org/fred2/series/GFDEBTN/