Permanent Value

Weekly Update: April 12- 16, 2010

Michael La Salle
April 16th, 2010

Markets Mixed as Goldman Sachs Gets Charged by the SEC

The major markets were mixed this week as the Dow Jones Industrial Average gained 0.19% and the S&P 500 was down 0.19%.  This comes despite a very strong beginning of the week, followed by the news of the Securities Exchange Committee charging Goldman Sachs with defrauding investors, which dragged the market down on Friday.

In economic news, the treasury announced Monday a total deficit of $65.4 billion in March, coming in much lower than March 2009 figure of $191.6 billion.  The Consumer Price Index had a month over month rise of 0.1% in March, calming inflation fears in the United States.  The University of Michigan Consumer Sentiment Index was down to 69.5 from 73.6 in March.  Expectations were set at 75.0.

In earnings news, Google Inc. posted better-than-expected earnings as the company reported earnings of $6.76 per share, beating analysts’ estimates of $6.60 per share.  JPMorgan Chase also surprised this week as the banking sector giant posted earnings of 74 cents per share, 15.62% higher than expectations of 64 cents per share.

What opportunities are ahead?

When the recession hit in late 2008, companies around the globe had to tighten their belts and cut some of their capabilities and some ultimately had to file for bankruptcy.  During the same time, other companies were able to cut costs enough to survive the downturn.  Now that the economy is revving up, those companies that were able to survive the recession now have any even stronger position than they had before.

One sector that this is apparent is the semiconductor industry, where stronger companies were able to cut production significantly instead of working at full capacity while the recession was still going strong.  By doing this, many companies kept their inventories down and in turn, there was no extra supply for the companies to sell when the economy began to bounce back.

Now that the global economy is improving, consumers and companies around the world looking for newer devices, and virtually anything you can think of has a semiconductor in it.  From the computers we work on, to the phones we communicate with, to the cars we drive all have semiconductors in them.

In fact, the chairman and CEO of the world’s largest manufacturer of semiconductors, Zhongmou Zhang, forecasts the global semiconductor industry production value will grow by 22% in 2010, and another 7% in 2011, giving investors an opportunity to benefit for the years to come.

Market Returns

  This Week Year to Date Last Year Last 5 Years
S&P 500 -0.19% 6.91% 37.77% 4.33%
Dow Jones Industrial Average 0.19% 5.66% 35.61% 9.23%


Next Week’s Economic Releases

April 19 – Leading Indicators Index

April 22 – Producer Price Index, Existing Home Sales

April 23 – Durable Goods Orders, New Home Sales