Status of the Economy: A Week in Review 1/31/11 – 2/07/11

| February 15, 2011 | Categories: Economy | Comments Off on Status of the Economy: A Week in Review 1/31/11 – 2/07/11
Report to CIO
Week 3: 1/31/11 – 2/07/11
Team Supreme
Team Members:
Maryam Farooq, Patrick Hand, Alex Pellas, Griffin Roer,
Paul Rosser, Ben Shaver, Cole Taylor, Brian Trentacost
Week in Review 3
a.       Market Info
General:
                                                              i.            Top 3 Performing ETFs (as of 2/7/11): iPath Global Carbon ETN [GRN], Deutsche Bk Ag Ldn Brh [DDP], iPath Dow Jones-AIG Cotton Total Return Sub-IndexSM ETN [BAL]
                                                            ii.            Worst 3 Performing ETFs (as of 2/7/11): Barclays Bk Plc [BXDD], Citigroup Fdg Inc [CVOL], Barclays Bk Plc [RTSA]
                                                          iii.            S&P 500
1.      2.7% rise in the S&P 500 to 1310.87. It has rose 94% since March 2009, which is the largest increase for an analogous period since 1936.
2.      Is up 29% since the 2010 low on July 2 because of strong global economic growth and higher-than-estimated earnings
3.      The index reached its 31-month apex on February 1, at 1300, and last month U.S. manufacturing increased at its peak pace since May 2004 and consumer spending beat expectations.
○       Last quarter, 71% of the companies in the S&P 500 Index reported more revenue than analysts’ forecasts. Sales are beating estimations by an average of 2.2%, which is the most in two years. U.S. earnings have been ahead of Wall Street estimates for seven consecutive quarters but sales have been lagging estimates on average since 2008 but the unexpected revenue growth shows that the economic expansion is strong enough to greatly reduce layoffs and the closing of plants.
4.      According to Bloomberg analysts, estimates through February 6, total revenue may rise 7.5% in 2011 for the S&P 500, which would mark an all-time high at $1,017.44. During the recession, sales decreased 13% between November 2008 and October 2009 as businesses and consumers had to cut back on spending. The recent trend of increased demand for goods and services and higher sales than estimated should result in an ending to corporate expense reductions to increase earnings.
Company News:
                                                          iv.            General Motors Co.
1.      On 2/1, stated that U.S. sales beat analysts’ estimates as they rose 22% last month.
2.      Motors plans to add a third shift and approximately 750 jobs to its assembly plant in Flint, Michigan to meet increasing demands for pickups
3.      Since General Motors’s initial public offering on November 17, shares have risen 11%.
                                                            v.            UPS
1.      Shares reached its highest price since April 2008 at $74.59
2.      This is due to a fourth quarter in which adjusted profit increased 44% to $1.08 a share, and sales increased 8.4% to $13.4 billion
3.      This can also be partially accredited to increased online shopping during the holiday season.
                                                          vi.            Google Inc.
1.      Preparing for the largest employee growth for a single year in the history of the company as at least 6,000 people are expected to be hired. During the last week of January the company received a record amount of applications at 75,000.
2.      On January 21, Google beat revenue forecasts by 5.1%.
                                                        vii.            Ensco Plc
1.      An oil driller with rigs worldwide agreed to obtain Pride International Inc. for $7.3 billion, which will make it the second largest offshore drilling company in the world.
○       Ensco’s acquisition of Pride will expand Ensco to Brazil and Africa, which are two of the world’s fastest growing offshore drilling markets.
2.      Investors will gain 0.4778 Ensco share and $15.60 for each Pride share under terms of an agreement made today by Ensco in a statement; the $41.60 a share offer is a 21% premium to Pride’s closing price on February 4.
b.       Economic Info
                                                              i.            Domestic
1.      EIA Petroleum Report
○       According to this past week’s report, we have yet to see any considerable impact on oil via the unrest in the Middle East. Daily refinery output exceeded daily domestic demand by 100,000 barrels. However, Natural gas stores were down more than expected- probably due to people staying inside during the wintry weather.
2.      Consumer Credit
○       Showed a M/M change of $6.1B on Monday- well above the projected range of -$1B to $2.5B. “The rise in revolving credit is important, reflecting the strength of the holiday shopping season and the new confidence among consumers to finance their purchases once again with their cards.”
3.      Unemployment Rate
○       Dropped 0.6% – may just have to do with people who have stopped looking for jobs. But, the report showed very mixed results, with the details provided: “For the latest month, private service-providing jobs rose 32,000 after a 146,000 increase in December. A standout sub-component is retail trade, which posted a 28,000 increase despite bad weather. Goods-producing jobs rebounded 18,000, following a 7,000 decrease in December. Manufacturing is showing a boost in momentum as jobs jumped 49,000 after a 14,000 gain the month before. Construction likely was damped by adverse weather, falling 32,000 in January, following a 17,000 decline the prior month. Mining edged up 1,000 in January. Government jobs fell 14,000, following an 18,000 drop in December.”
                                                            ii.            Foreign
            North America:
1.      Canada
○       Canada’s dollar decreased against the U.S. dollar as crude oil, Canada’s biggest export, fell. The Canadian dollar had risen to its highest level since May 2008 against the U.S. on February 4 after government reports showed the in January employers contribution to an increase in jobs four times greater than expected. In Toronto at 12:40 p.m. Canada’s currency fell 0.2% to 98.94 cents per U.S. dollar. Futures on crude oil fell 1.4% to $87.75 a barrel after reaching $87.68, the lowest level since January 28.
Europe:
2.      Europe
○       An early estimate has put Europe’s inflation rate at 2.4% in January, up from 2.2% in December. Many experts are warning not to focus and worry too much about the inflation rate at the moment, despite increasing commodity costs. The inflationary rates are within healthy ranges according to these experts.
3.      Germany
○       Unemployment rate fell to .1% to 7.4% in January.
Middle East:
4.      Egypt
○       Despite the continuing political unrest, the impacts were being felt minimally the global markets. The expectations for the price of oil were to increase and be more volatile, however, due to no supply side shock, oil traded relatively flat for the week. India
○       Exports rose by 36.4% in the year to December, and imports declined by 11.1%. The country’s trade deficit shrank sharply, to $2.6 billion in December from $11.8 billion a year earlier.
Asia:
5.      Russia
○       The central bank left interest rates unchanged but raised banks’ reserve requirements in its monthly policy meeting on January 31st.
SE Asia:
6.      India
○       Exports rose by 36.4% in the year to December
○       Imports declined by 11.1%
○       Country’s trade deficit shrank to $2.6B in December from $11.8B a year earlier
7.      Indonesia
○       Inflation quickened to a 21-month high of 7% in January. Exports rose by 26% in December from a year earlier.
8.      Taiwan
○       GDP growth slowed to 6.5% in the year to the fourth quarter from the previous quarter’s 9.8% GDP growth.
South America:
9.      Brazil
○       The industrial growth declined to 2.7% in the year to December from 5.3% in the 12 months to November. Output shrank by 0.7% month-on-month in December.
c.        Political Info
                                                              i.            Domestic
1.      President Obama addressed the U.S. Chamber of Commerce on Monday advising business leaders to begin hiring in return for tax breaks and other government support for exports and innovation
2.      Energy Secretary Steven Chu and Interior Secretary Ken Salazar announced on Monday $50 million in funding for wind-energy R&D to be employed off the coasts of four U.S. states: Delaware, Maryland, New Jersey, and Virginia.
                                                            ii.            Foreign
1.      Continuing Political Unrest in Egypt
2.      Japan
○       lent foreign-currency reserves to the IMF in efforts to help Ireland stay afloat
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