After what looked like a pause mid-week, the market continued the party last week, pushing the S&P 500 above the psychological 1,000 mark and the Nasdaq to the 2,000 level. Markets clocked a fourth straight week of gains and climbed to the highest level since November. For the week ended August 7:
Dow: Up 2.2% to 9,370.07
S&P 500: Up 2.3% to 1,010.48
Nasdaq: Up 1.1% to 2,000.25
A better-than-expected jobs report and earnings reports boosted markets higher. In months past, the jobs report has been the party pooper for the market. This time it was finally different -- 247,000 jobs were lost in July, bringing the unemployment rate down to 9.4% from 9.5% in June. Economists were expecting the unemployment rate to tick up to 9.6%. It was the fewest number of jobs lost since August 2008. While still a sizeable chunk, it is a far cry from the job losses we’ve seen in previous months.
Earnings breakdown
Though we’re seeing improved signs of recovery, it’s still a mixed bag for earnings. Consumers are still reticent to spend, and operating conditions, though improved, have a ways to go before full recovery. We’ll need to see an improvement in year-over-year comparisons, not just sequential numbers, before we know we’re on our way.
Consumer basics giant Procter & Gamble (NYSE: PG ) posted an 18% decline in fiscal fourth-quarter earnings, due in part to a slump in sales of premium-priced products, as budget-conscious customers traded down to private, less expensive labels.
Toyota (NYSE: TM ) posted a loss in its fiscal first quarter as demand for cars remained weak and the yen remained strong. On the upside, the Japanese automaker said it sees a smaller-than-expected loss in the first half of its fiscal year ending Sept. 30, on strong Prius sales, raised sales targets in Japan, and cost-cutting.
Whole Foods (Nasdaq: WFMI ) saw fiscal third-quarter earnings rise a penny on cost-cutting. In an encouraging sign, the company saw its first sequential improvement in comparable-store sales trends in six quarters.
Pulte Homes (NYSE: PHM ) reported a wider second-quarter loss from a year ago, while revenues plunged 58%. New home orders were down 34% year-over-year, but up 11% from the first quarter.
American International Group (NYSE: AIG ) clocked its first profit since 2007, as the insurance giant that is now 80% owned by the government saw stabilization across risky assets and an increase in value of credit derivatives thanks to improved credit markets. AIG posted a $1.82 billion profit in the second quarter, compared with an astounding $5.4 billion loss in the 2008 quarter. Revenues rose 48%, though premiums slipped. The company warned that the insurance business continues to be challenging and that future quarters would be volatile.
Cisco (NYSE: CSCO ) saw fiscal fourth-quarter earnings plunge 42%, while revenues slumped 18%. On a positive note, the company said it saw orders grow sequentially and that we could be at a “tipping point” right now. Cisco, however, gave a cautious outlook, insisting that it needed to see a continuation of positive sequential trends for several quarters before it would be comfortable saying the company has “returned to normal business momentum.” These comments came in sharp contrast to previous optimistic rhetoric.
After three long months, PepsiCo (NYSE: PEP ) reached a deal to acquire its bottlers for $7.8 billion. The company’s CEO said the deal is crucial to reinventing its North American business, in that it will allow Pepsi to better control costs and distribution of carbonated drinks.
What’s ahead
Earnings season is winding down, but this last week will be heavy on retail, with stocks from Macy’s to Nordstrom reporting. The Federal Reserve will be in focus this week as it holds its monthly FOMC meeting. In the coming weeks, the central bank is expected to announce whether it will extend the TALF program -- as well as its Treasury security purchase program -- now that financial markets appear to have stabilized.
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