“Don’t write this down, but I find Milton probably as boring as you find Milton.” -Professor Jennings, Animal House, 1978

By David B. Armstrong, CFA | Nov 22, 2010 | Weekly Market Commentary

There was a lot of action last week but by the end, the equity markets were basically flat… which some people would say is boring.  However, it was nice to see good earnings from some tech companies as well as the news that Nike decided to raise their dividend.

We also saw some good news in the labor markets, consumer spending, manufacturing and exports – all which has led many to believe that Q3 GDP could be revised up to around 2.7%.  That’s nice – certainly better then revised down! Oh, and there was that big car company IPO too.

Of course this is the week that leads up to “Black Friday” and the new emerging, “Cyber Monday,” which will set the tone for early estimates on the holiday retail sales.

In all, we like the good Q3 earnings and we like dividends.

The equity markets, while still positive, were mostly flat for the week.  The Dow Jones Industrial Average (DJIA) rose 0.10% last week to finish at 11,204, the S&P 500 Index rose 0.04% to end at 1,200 and the Nasdaq Composite Index was flat to finish at 2,518.  The Russell 2000, which measures smaller capitalization stocks, rose 0.71%% to finish the week at 724.36.

Q3 earnings are just about finished, with just a few companies left to report.  Barring any massive surprises, it looks like just 56% of companies in the S&P 500 beat top-line (revenue) forecasts and 75% beat their bottom-line (net income or earnings per share).

The former was weaker than we would have liked to see for the quarter (we have been saying for most of the year that it was important for us to see good revenue growth since cost cutting could not go on forever).  However, 56% of the companies beat the expectations for revenue, so it’s not like it was a terrible quarter for revenue – it’s just that we would have liked to have seen it be 75% like the earnings number.

The earnings number was solid though, with the technology sector boasting the best results of all 10 S&P 500 sectors in terms of the highest percentage of companies to beat their earnings expectations.

A few weeks ago we wrote about the stock market becoming the stimulus our country needs to get back on our feet.  Perhaps we are starting to see signs of the market rally translating into business confidence.  We liked the big IPO last week as well as some merger news and a lot of corporate bonds being sold as well.

Enjoy your Thanksgiving this week.  Call us for help or if you have any questions.

Securities and Financial Planning offered through LPL Financial, a Registered Investment Advisor.  Member FINRA/SIPC

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