Back

Haverford Weekly Highlights

November 28, 2012

While everyone's focused on the fiscal cliff the federal debt ceiling cannot be ignored either. If the debt ceiling is not raised by February the federal government will essentially have to stop issuing debt. Stay tuned. Below are some more thoughts from Hank and the rest of the Haverford team on last week's happenings and what we can expect this week.
-Hank Smith, vice president and chief investment officer, Haverford

The markets were up last week because Congress was in recess and there was little news. Now that Congress is back in session the talk will be all fiscal cliff all the time although he think it's highly unlikely a solution will get done any time soon. With little time and a lame duck Congress the best we can hope for is an extension of the status quo with some conditions for a longer-term solution in mid-2013.

While everyone's focused on the fiscal cliff the federal debt ceiling cannot be ignored either. If the debt ceiling is not raised by February the federal government will essentially have to stop issuing debt. Stay tuned. Below are some more thoughts from Hank and the rest of the Haverford team on last week's happenings and what we can expect this week.

Last Week: 

·         Strong Holiday-Shortened Week: Wall Street had a big, black Friday, with stocks rising 1.3% in the half-day session. For the full holiday-shortened week, the Dow Industrials jumped 3.3% to 13,009.68, the best weekly showing since June 8. The S&P 500 tacked on 3.6%, to 1409.15, as Washington tiptoed rhetorically away from the edge of the fiscal cliff, and a rebound in tech stocks delivered a 4% gain for the Nasdaq Composite.

·         Cease-Fire Reached: Israel and Hamas agreed to a cease-fire of hostilities after eight days of conflict that killed five Israelis and 162 Gazans. The deal, brokered by Egypt's new Islamist government, calls for an end to the rocket attacks from Gaza into Israel and for Israel to stop targeting individuals. Israel isn't expected to lift a blockade of Gaza it enforced after Hamas, which rejects Israel's right to exist, won a Palestinian election in 2006.

·         Intel CEO Announces Retirement: In a surprise departure, Intel's CEO, Paul Otellini, will retire in May, three years before he turns 65. Intel's chairman said the move wasn't based on any specific factor, and it will consider external candidates but prefers those from the inside.

·         Housing Data Continues To Be Strong: Housing Starts for October rose 3.6 percent to an annual pace of 894,000. This follows a giant 15.1 percent revised surge in September and a 3.0 percent gain in August. In addition, sales of existing homes have been bouncing up and down and bounced back in October, up 2.1 percent to a 4.79 million annual rate following a revised 2.9 percent decline in the prior month. Sales in the Northeast, which was hit at month end by Hurricane Sandy, fell 1.7 percent. The report's other three regions, led by the West, all show gains.

·         Earnings So Far: Overall, 486 companies have reported earnings to date. Of these 486 companies, 70% have reported actual EPS above the mean EPS estimate and 30% have reported actual EPS below the mean EPS estimate. In terms of revenues, 41% of companies have reported actual sales above estimated sales and 59% have reported actual sales below estimated sales.

Look Ahead: 

·         GDP: The second reading of the 3rd quarter GDP will be released on Thursday with expectations for a 2.8% increase. This is much stronger than the 2.0% initial increase that was posted in the first advanced reading.

·         New Home Sales: New Home Sales will be released Wednesday with expectations for a 387,000 annual pace, slightly below last month’s reading of 389k. Last month’s number was the best annual rate since the stimulus efforts of mid-2010.