Permanent Value

Weekly Update: October 18- 22, 2010

Michael La Salle
October 22nd, 2010

Earnings Push Stocks Higher

Stocks were slightly higher this week as the S&P 500 gained 0.59% and the Dow Jones Industrial Average increased 0.63% ahead of this weekend’s G20 meeting in Gyeongju, South Korea.

In economic news, industrial production was disappointing in September; declining 0.2% after analysts estimated a 0.2% increase for the month.  Housing starts, on the other hand, surprised on the upside after coming in at an annualized pace of 610,000 starts, 30,000 better than the expected 580,000 starts.  Jobless claims were also better than analysts’ estimates of 455,000 by 3,000 jobs, pushing the four-week moving average down 4,250 to 458,000 claims.

In quarterly earnings news, Citigroup beat analysts’ expectations by more than 22% as the company posted earnings of 7 cents per share.  Apple also surprised on the upside as the U.S. technology giant posted earnings of $4.64 per share, over 13% better than expectations.   Other notable companies that beat estimates this week include; Charles Schwab, General Electric, Mattel, Capital One, Hasbro, Halliburton, Yahoo!, Bank of America, Goldman Sachs, Harley-Davidson, Johnson & Johnson, Coca-Cola, Lockheed Martin, Wells Fargo, eBay, Boeing, Caterpillar, McDonalds, AT&T and Amazon.

China’s Appetite for Oil

Within the past few months China has taken over the spot for the world’s largest energy consumer.  Over the past year alone, China has increased their crude oil consumption more than 18% to an average 8.71 million barrels per day. 

This massive increase in consumption is coming from their huge economic growth rates.  A rapid boost in per-capita wealth, which does not look to be slowing down in the near future as the wealth trickles down from the large, affluent cities to the smaller ones is fueling energy expenditures as well.  As the Chinese economy continues to expand, their need for crude oil will also increase.

With the jump in oil demand that is going to be attributed to the growing Chinese economy, the price of black gold will also increase, making companies in the energy sector more and more profitable, and thus a great investment opportunity for the near future.

Market Returns

  This Week Year to Date Last 12 Months Last 5 Years
S&P 500 0.59% 6.10% 5.25% 0.30%
Dow Jones Industrial Average 0.63% 6.76% 10.43% 8.98%

 

Next Week’s Economic Releases

October 25 – Existing Home Sales

October 26 – Consumer Confidence

October 27 – Durable Goods Orders, New Home Sales

October 28 – Jobless Claims

October 29 – Gross Domestic Product, Consumer Confidence