MIAMI — American Express has reached a settlement with the U.S. Treasury Department over more than 14,000 tickets that were issued for travel between Cuba and countries outside the U.S., officials announced Monday.
American Express Travel Related Services, Inc. has agreed to pay $5.2 million to settle potential civil liability for apparent federal violations. The Treasury Department found that foreign branch offices and subsidiaries of American Express issued about 14,487 tickets for travel to and from the island between December 2005 and November 2011.
By Narrative Science Analysts expect higher profit for American Express when the company reports its second quarter results on Wednesday, July 17, 2013. The consensus estimate is calling for profit of $1.21 a share, reflecting a rise from $1.15 per share a year ago. …read more
As highly as we Fools think of Warren Buffett and Berkshire Hathaway , we’d be foolish (with a lower-case “f”) to believe any company is truly without risk.
With that in mind, here are six ways Berkshire could potentially fail investors going forward:
1. Losing to the market on Buffett’s terms Over the years, Buffett has largely made his name by identifying stocks whose share prices have lagged the intrinsic value of their underlying businesses. As a result, it should come as no surprise that Buffett believes the best way to measure Berkshire’s performance is by calculating its book value.
Sure enough, as I noted last month, Buffett himself lamented Berkshire’s respectable 2012 book value growth of 14.4% as “subpar” after it fell short of the S&P 500’s 16% gain.
What’s more, while Buffett has helped Berkshire’s book value per share rise an astounding 586,817% over the past 48 years (seriously — that’s no typo!), he readily admits that, with Berkshire’s enormous capital base, its book value per share going forward will probably have a hard timeincreasing “at a rate even close to its past rate.”
2. Losing to the market on Mr. Market’s terms Even if Berkshire’s book value per share manages to outpace the broader market‘s return, you can bet that if the share price lags, many fickle investors still won’t be patient enough to wait for the price to catch up with the value of the business.
Of course, that is part of why it’s so hard to be a value investor, but the fact remains that there will be more years during which Berkshire Hathaway stock will lag the market. For example, look at how much faster Berkshire’s book value has increased relative to both its share price and the S&P 500 over the past five years:
While this isn’t necessarily Berkshire’s fault, you can bet many investors will inevitably perceive it as a failure.
3. Failure to maintain superior management As Peter Lynch once said, “Go for a business that any idiot can run — because sooner or later, any idiot probably is going to run it.”
Before you go yelling “Blasphemy!” from the rooftops, I’m all too aware that Berkshire’s current management team is as solid as they come. Heck, there are at least six people with whom I wouldn’t be surprised should they be chosen as Buffett’s eventual successor.
Until that time comes, however, nobody can be positive that Berkshire’s future management team will be able to even partially replicate the success of the unrivaled team that is Buffett and Charlie Munger.
Without a doubt, Buffett has done marvelously well investing both Berkshire’s shareholder equity and insurance float in stocks. Over the years, Buffett has amassed enormous positions in now-legendary stocks such as Coca-Cola , American Express , Wells Fargo , and Procter & Gamble . Sure enough, take a look at what Buffett’s patience had achieved with these four stocks as of the end of
Quick Take American Express built on the momentum gained in 2012, with a 4% increase in net revenues and 8% increase in pretax income. Despite recent tax hikes, consumer spending remained strong in the U.S., as the company reported a 5% increase in revenues and 8% increase in pretax income from the country. Outside the U.S., the company continued growth through third-party issued cards which reached 38.1 million. The global network and merchant service division, which is responsible for third party issued cards, reported a 4% increase in revenues and 8% increase in pretax income. American Express reported another strong quarter of earnings as total revenues, net of interest expense and provisions for losses increased 4% year-on-year, for the three months ending March. The pretax income increased by 8% over the prior year’s figure. Strong consumer spending trends in the U.S. and international expansion via the company’s global network and merchant service were the main reasons for the growth observed in the quarter.
Credit card company American Express Co.’s quarterly revenue came in below analyst expectations as cardmember spending growth remained muted.
Cardmember spending in the first quarter increased 7 percent, adjusted for foreign currency translations. This was the fourth successive quarter of single-digit growth after nine quarters of double-digit growth.
Expense accounts have come under greater scrutiny as companies look to cut costs to protect profit margins, hurting the credit card lender, which gets more than a quarter of its U.S. billed business from affluent corporate customers.
However, American Express‘s billed business was up 6 percent at $224.5 billion and total cards in force crossed 100 million during the quarter.
The company has the lowest delinquency rate among the large credit card companies, including JPMorgan Chase & Co. (JPM), Discover Financial Services, Capital One Financial Corp. (COF), Bank of America Corp. (BAC) and Citigroup Inc. (C).
It set aside $497 million to cover future bad loans in the quarter, 21 percent more than it had provisioned last year, reflecting its larger lending portfolio.
American Express Co. (AXP), which lends directly to consumers and also competes with Visa Inc. (V) and MasterCard Inc. (MA) to process credit card transactions, said global network and merchant services revenue increased 4 percent to $1.3 billion.
Consolidated expenses during the quarter remained in check, rising marginally, as the company looks to control costs and maintain a leaner operating structure.
The company said in January it would cut about 5,400 jobs as part of a global restructuring and took a related $600 million charge.
Profit for the quarter ended March 31 rose to $1.28 billion, or $1.15 a share, from $1.26 billion, or $1.07 a share, a year earlier.
Total revenue, net of interest expense, increased 4 percent to $7.88 billion.
Analysts on average had expected earnings of $1.12 a share on revenue of $8.03 billion, according to Thomson Reuters I/B/E/S.
American Express shares were marginally down in trading after the bell. They closed Wednesday at $64.13 on the New York Stock Exchange.
Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool’s free investing community, money transfer giant Western Union has earned a respected four-star ranking.
With that in mind, let’s take a closer look at Western Union and see what CAPS investors are saying about the stock right now.
Western Unionfacts
Headquarters
Englewood, Colo. (1851)
Market Cap
$8.5 billion
Industry
Data processing and outsourced services
Trailing-12-Month Revenue
$5.7 billion
Management
CEO Hikmet Ersek (since 2010) CFO Scott Scheirman (since 2006)
[Western Union] has a admirable competitive advantage that is derived from its business model that takes full advantage of the network effect. As the company ties up loose ends regarding its misstep in Mexico and regulatory issues play out, this stock will be back on track. Very cheap valuation given its future prospects and sustainable moat.
If you want market-thumping returns, you need to put together the best portfolio you can. Of course, despite a strong four-star rating, Western Union may not be your top choice.
We’ve found another stock we are incredibly excited about — excited enough to dub it “The Motley Fool’s Top Stock for 2013.” We have compiled a special free report for investors to uncover this stock today. The report is 100% free, but it won’t be here forever, so click here to access it now.
Want to see how well (or not so well) the stocks in this series are performing? Follow the TrackPoisedTo CAPS account.
The S&P 500 and the narrower, price-weighted Dow Jones Industrial Average just recorded their best weekly performances of the year. The S&P 500 is now up 11.4% on the year.
Not surprisingly, then, the VIX , Wall Street‘s fear gauge, plumbed its lowest level since March 15 on Friday, even dipping below 12 on an intraday basis. (The VIX is calculated from S&P 500 option prices and reflects investor expectations for stockmarket volatility over the coming 30 days.)
The earnings drum is beating As I’ve argued several times in this column, the rally that began off last year’s June low is being driven by valuation, rather than earnings, with the market willing to pay a higher multiple for a dollar of earnings, as investor risk aversion continues to dissipate. There are good reasons for this — to a certain extent — as fears of global macro dislocations have receded. However, I think it’s worth sounding a few words of caution.
At a price-to-earnings ratio of 14.3, the S&P 500 may not look expensive on the basis of 2013 operating earnings per share; however, that figure masks the range of valuations across the different sectors. In a yield-starved environment, investors have been snapping up shares that pay rich dividends, and that enthusiasm is reflected in the P/E multiples of the consumer staples, telecoms, and utilities sectors, at 17.4, 19.7, and 16.4, respectively.
Furthermore, I continue to believe that the S&P 500’s current forward multiple understates how expensive it really is. Consider that the 14.3 P/E assumes that operating earnings per share will rise nearly 15% year-on-year in 2013. That figure strains credulity; 2012 growth was 0.4%. On this point, first-quarter earnings will provide us with some clues either way, and we have a heavy week ahead of us in terms of earnings announcements, with nearly 15% of the companies in the S&P 500 reporting quarterly results, including more than a third of the Dow components — 11, to be exact:
If you’re ready to invest based on competitive advantage, long-term value creation, and valuation, The Motley Fool’s chief investment officer has selected his No. 1 stock for this year. Find out which stock it is in the brand-new free report: “The Motley Fool’s Top Stock for 2013.” Just click here to access the report and find out the name of this under-the-radar company.
Fool contributor Alex Dumortier, CFA has no position in any stocks mentioned; you can follow him on LinkedIn.
The Motley Fool recommends American Express, Coca-Cola, Intel, Johnson & Johnson, McDonald’s, and UnitedHealth Group and owns shares of Bank of America, General Electric, Intel, IBM, Johnson
Earnings season is in full swing, and a full third of the companies on the Dow Jones Industrial Average are set to report last quarter’s data this week. From consumer-goods giants such as Coca-Cola to health-care staples such as Johnson & Johnson, seemingly every sector of the blue-chip index is on pace to capture investors’ attention in the next few days. Let’s look at what you should be watching out for as America’s most prominent stocks face their biggest test of 2013.
What should you look out for? The Dow’s week of earnings starts off with Tuesday’s slate, as Intel , Coke, and J&J report on their most recent quarters. Intel’s had a tough time recently with the PCmarket‘s decline, and analyst expectations for both the company’s revenue and earnings are down from a year ago. The company’s done its best to diversify, reaching out to the fast-growing mobile market while advancing into new fields such as Internet TV, but don’t expect to see the fruits of Intel’s diversification efforts show up this early. For now, this is still a company stuck with its ties to the falling PC industry.
Analysts expect better EPS results from J&J and Coke, however: Projections for the two companies’ earnings average year-over-year growth of 2.2% and 2.3%, respectively. Coca-Cola’s steadily advanced overseas despite fighting against regulatory hurdles and legislation at home, promoting its iconic brand around the globe in an effort that should help this stalwart company’s future. Although analysts project slightly lower revenue from the company, Coca-Cola looks to be on good footing for the long term.
Financials take center stage on Wednesday, as both Bank of America and American Express report earnings. Analysts expect earnings per share from these companies of $0.22 and $1.22, respectively; B of A’s projected earnings represent significant year-over-year growth over last year’s $0.03 mark. Financial firms have done well recently — B of A has been one of the Dow’s top risers over the past year — but consumer spending has been shaken by the payroll-tax holiday expiration earlier this year, along with sequestration. On Wednesday, we’ll be able to see just how much these events have affected consumer-oriented companies such as American Express. While the company’s earnings are expected to grow around 5% over last year, tightening consumer wallets could put a dent in AmEx’s results.
Thursday brings three more companies up to bat, with UnitedHealth Group , IBM, and Verizon to the forefront. UnitedHealth provides a particularly interesting report to watch as the company shifts toward the full arrival of Obamacare next year. Analysts expect a drop in the company’s earnings to $1.14 per share this quarter, down from $1.31 a year ago. Still, UnitedHealth has done a good job growing its subscription base and advancing internationally, two trends that should bolster its numbers. IBM and Verizon, on the other hand, are both expected to post year-over-year EPS gains for
Another tax season is nearly behind us. If you’re slated to receive a refund, you may wonder how to best use the money. Here are five great ideas to consider for your refund dollars.
1. Spend a small percentage of it Take 10% of your refund money and spend it on something for yourself. Doing so will help you stick to your plans for the rest of the money. If you’re too strict with yourself, you may be more likely to fall off the financial wagon. The average tax refund amount is just shy of $3,000, according to the IRS. So if you receive the average $3,000 refund, spend $300 of it. But use the remaining $2,700 wisely. Check out the following ideas for how to do just that.
2. Pay off high-interest debt Put your money to excellent use by paying off any outstanding credit card debt you may have. If paying it all off isn’t feasible, then consolidate your debt. Several credit cards offer 0% on balance transfers. For instance, Citigroup‘s Citi Simplicity and JPMorgan Chase‘s Slate cards offer 0% on balance transfers for 18 and 15 months, respectively, and no annual fees. If you qualify, transfer your balance as soon as possible. The immediately set up and stick with a monthly payment plan. Discipline yourself to have the entire balance paid off before the 0% time clock is up.
3. Build your savings account Take this opportunity to bolster your savings such that you have at least three months’ worth of living expenses socked away. Money market or savings accounts will provide you with the best rates. For example, American Express‘ high-yield savings account pays 0.85%, and Capital One Financial‘s Capital One 360 offers a 0.75% APY. Both accounts boast no minimum balances and no fees. Meanwhile, EverBank Financial pays an attractive 1.01% money market rate but requires a $1,500 minimum opening balance.
4. Fund a Roth IRA for 2013 Get a jump on this year’s Roth IRA contribution. Sure, you have until April 15, 2014, to make your contribution for the 2013 tax year. But don’t wait. The earlier in the year you fund your Roth, the more months of tax-free growth you’ll accrue. And that can amount to a lot of money over your working life.
5. Revisit your tax withholdings Consider talking with an accountant about why you’re getting a refund in the first place. When you receive a refund, it’s only because you’ve overpaid to Uncle Sam throughout the year. He’s essentially used your money all year long. Don’t stand for that another year. Discuss your situation with a tax professional, or, if you’re more hands-on, tackle the issue yourself.
Foolish bottom line Put your tax refund money to good use by employing these strategies. Making small steps toward improving your financial situation can make a big difference later in life.
The best April Fool’s jokes feel real. That’s why we put so much time and effort into ours. And yet, good as it was, CardHub.com may have done us one better with an email profiling a low-fee credit card from no less than the Internal Revenue Service.
“With Tax Day fast approaching and a large segment of U.S. consumers continuing to struggle as the economic recovery trudges on, the IRS has launched a new credit card that cash-strapped taxpayers can use to satisfy Uncle Sam. It offers 0% for 36 months, doesn’t charge a balance transfer fee, and can only be used to pay the IRS,” the pitch read.
And it was genius, says Tim Beyers of Motley Fool Rule Breakers and Motley Fool Supernova. Each day, the headlines scream of how politicians are fighting over ways to fix the deficit. Meanwhile, CardHub.com says consumers packed on an additional $36.2 billion in new debt last year.
Rising balances have proven to be a boon for the likes of American Express , Citigroup , and JPMorgan Chase , all of which have seen revenue and profit from credit card use rise noticeably over the past two years. (Though Chase suffered a modest decline in 2012 after sharp increases the year prior.)
Knowing the data and the context made the joke seem frighteningly real, Tim says in the following interview with The Motley Fool’s Erin Miller. Please watch this short video to get his full take, and then leave a comment to let us know if you’re struggling with debt right now, and if so, how you’re handling the burden.
With big finance firms still trading at deep discounts to their historic norms, investors everywhere are wondering if this is the new normal, or whether finance stocks are a screaming buy today. The answer depends on the company, so to help figure out whether JPMorgan is a buy today, I invite you to read our premium research report on the company today. Click here now for instant access!
American Express Amps up the 2013 Tribeca Film Festival®
Music and Film Take the Stage for Tribeca Fans in New York and Online
NEW YORK–(BUSINESS WIRE)– From kick-off to close, American Express is bringing a host of music experiences to this year’s Tribeca Film Festival, culminating with a live streamed performance by Vampire Weekend directed by award-winning actor, director and producer Steve Buscemi as part of the “American Express Unstaged” concert series. Multiple music-related activities complete a roster of events that American Express will bring to Tribeca Film Festival fans from the latest in gourmet popcorn to the hottest red carpet moments.
“We are absolutely thrilled to bring American Express Unstaged to the Tribeca Film Festival this year,” said Deborah Curtis, vice president of entertainment at American Express. “This live streamed music series celebrates the art of music through the unique storytelling abilities of visionary filmmakers. Vampire Weekend and Steve Buscemi are fellow New Yorkers and, like the Tribeca Film Festival, celebrate everything that the city has to offer. Film and music are inextricably linked, and this show will truly celebrate not only their relationship, but our long support of the Tribeca Film Festival.”
“American Express has been an incredible partner to Tribeca since our inception helping us support filmmakers and bring the festival to audiences around the city and beyond; we are excited to continue that tradition this year, said Jon Patricof, President and COO of Tribeca Enterprises. “We have a long history of celebrating the connection between music and film and are especially excited that American Express is helping further this effort at the 2013 Festival.”
Music Meets Film at The Tribeca Film Festival
Opening the Festival with Mistaken for Strangers:American Express has signed on to open the 2013 Tribeca Film Festival as a sponsor of the Opening Night Gala following the world premiere of the film Mistaken for Strangers on Wednesday, April 17th. Director Tom Berninger chronicles his experience on tour with his brother, Matt Berninger, frontman for the critically acclaimed rock band The National, in this funny and affecting film, which will also play during the Festival’s 12th edition. This is the second time that American Express and The National have worked together. In May 2010, American Express live streamed a performance by
It took a while, but the Dow Jones Industrials finally warmed up to the start of earnings season by rising 60 points and setting a new all-time record high. Yet even though anxiety about the huge bull-market run that stocks have enjoyed since 2009 has some investors considering whether they ought to take profits and run, today’s market action shows a surprising dynamic that is a big shift from more normal investor behavior.
Ordinarily, with markets at new highs, worried investors would bid up shares of consumer giants. Yet many of the Dow’s top consumer companies finished lower today. Procter & Gamble fell two-thirds of a percent, while Coca-Cola backed off a 52-week high to finish lower by 0.4%. Both companies generally have defensive characteristics that worried investors typically like, as their businesses aren’t very sensitive to changing economic conditions, and they sell products that have relatively inelastic demand. Yet both stocks trade at above-market valuations, and recent concerns about Coke’s sales-volume challenges and P&G’s product miscues have conservative investors feeling less secure about their ability to withstand a market reversal.
Meanwhile, it was tech stocks — far from the usual favorite among defensive investors — that finished with huge gains. Although the Dow’s tech components can point to news to justify part of their gains, investors are also gravitating to their cheap valuations as providing a margin of safety in the event of a future downturn.
McDonald’s , also a defensive favorite, had its own problems today, falling from new highs to end down 0.4%. For the fast-food giant, an outbreak of bird flu in China could lead to reduced numbers of customers in the emerging nation, which has been an important part of the McDonald’s growth story in recent years. Reported price cuts could help, but they might also merely exacerbate sales declines by trimming margins and leading to further weakness.
Finally, American Express fell more than half a percent after the European Commission said it’s looking at a couple of card networks that target the continent to see if there are anticompetitive practices involved in the fees they charge and the agreements they have with merchants. AmEx wasn’t specifically mentioned, but given its growth ambitions, it faces many of the same issues as its rivals and could potentially face the same issues that the EC mentioned.
McDonald’s turned in a dismal year in 2012, underperforming the broader market by 25 percentage points. Looking ahead, can the fast-food giant reclaim its throne atop the restaurant industry, or will this unsettling trend continue? Our top analyst weighs in on McDonald’s future in a recent premium report on the company. Click here now find out whether a buying opportunity has emerged for this global juggernaut.
Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool’s free investing community, credit card giant MasterCard has earned a respected four-star ranking.
With that in mind, let’s take a closer look at MasterCard and see what CAPS investors are saying about the stock right now.
MasterCard facts
Headquarters (founded)
Purchase, N.Y. (1966)
Market Cap
$65.3 billion
Industry
Data processing and outsourced services
Trailing-12-Month Revenue
$7.4 billion
Management
CEO Ajaypal Banga (since 2010) CFO Martina Hund-Mejean (since 2007)
On CAPS, 92% of the 3,342 members who have rated MasterCard believe the stock will outperform the S&P 500 going forward.
Just last week, one of those Fools, bigelli13, succinctly summed up the MasterCard bull case for our community:
Low risk, high return. Financial strength is high. Lots of recent momentum. Profit margin is greater than industry average. … Growing profit margins from previous year. Large market cap. Forecasted cash flows per share in five years is greater than current share price.
If you want market-thumping returns, you need to put together the best portfolio you can. Of course, despite a strong four-star rating, MasterCard may not be your top choice.
We’ve found another stock we are incredibly excited about — excited enough to dub it “The Motley Fool’s Top Stock for 2013.” We have compiled a special free report for investors to uncover this stock today. The report is 100% free, but it won’t be here forever, so click here to access it now.
Want to see how well (or not so well) the stocks in this series are performing? Follow the TrackPoisedTo CAPS account.
The Dow Jones Industrial Average has gone well beyond its industrial roots to encompass a wide assortment of companies from different industries. That has helped the Dow become a broad-based measure not only of the industrial sector but of the entire stockmarket.
In particular, financial stocks play an important role in the Dow, with several components focusing on banking, insurance, and other financial services. Let’s take a look at how these companies have fared so far in 2013 and what their prospects are for the rest of the year and beyond.
At first glance, it may seem strange to see Travelers topping this list. After all, the company has had to deal with two straight years of substantial losses, with hurricanes Irene and Sandy leaving massive destruction in their wake. But one thing to remember about insurance is that losses can actually help insurance companies in the long run, giving them room to raise premiums and boost longer-term profits.
American Express has seen good gains as its Bluebird prepaid-card initiative has started to pay off. So far, AmEx has drawn in nearly half a million brand-new customers with Bluebird, showing that the card is meeting AmEx’s goal of hitting a totally different demographic from its high-end premium card offerings. Moreover, as prepaid cards have no credit risk at all, AmEx stands to reap the rewards of transaction-based income with no downside.
Why the banks are lagging JPMorgan Chase and Bank of America haven’t done as well as the other financial stocks in the Dow. Both big banks have clearly suffered long-term reputational damage from the financial crisis and their efforts to recover, and questionable foreclosure practices have led to ongoing legal battles and high-priced settlements with regulators and government entities, as well as private companies such as mortgage-insurance firms.
Looking forward, banks could continue to see pressure as long-awaited foreclosure activity finally picks up in states that require more lead time for their legal procedures. By contrast, so long as 2013 proves to be a more typical year for catastrophic losses, Travelers stands to benefit from higher rate income. The big winner could be AmEx, especially if early trends to broaden its customer base continue to work well.
Despite its recent weakness, Bank of America’s stockdoubled in 2012. Will the stock recover? Find out whether B of A has more gains ahead by reading our premium research report on the big bank. Inside, you’ll find detailed analysis from our top banking specialists, including three reasons to buy and three reasons to sell. Click here now to claim your copy.
The Dow Jones Industrial Average closed over 9,000 points for the first time in its history on April 6, 1998. The 9,033.23 close was reached largely on news of a merger between Citicorp — now Citigroup — and Dow component Travelers , the largest corporate tie-up in history to that time, defying the weakness in other, broader indexes. Travelers soared 21% on news of the deal, and non-component Citi rose 16%. The divergence between the Dow and other indexes prompted Charles Pradilla of Cowen to tell The New York Times that “this market is probably a little ahead of itself.”
It was a big year for big deals in 1998. At that point in the year, more than 2,500 deals worth more than $316 billion had already been announced, a 50% increase over 1997’s total for the comparable period. Stock-based transactions in an environment of ballooning stock prices surely helped to drive the year-over-year growth in deal value. The path to 9,000 also saw divergence in the Dow’s components — nine components, primarily heavy-industry and commodity stocks, were lower when the index reached 9,000 than they had been at Dow 8,000. This was offset by big gains of at least 30% in eight other Dow stocks, during that period. This group included all of the Dow’s financially focused components, including Travelers, American Express, and JPMorgan Chase .
The Citi deal, however, was far and away the largest of the year’s deals to date. Announced at a value of $70 billion, the stock-based merger swelled to $84 million during the day as investors bid up shares of the two companies, anticipating a clear path through regulatory hurdles that at that point would have made such a deal technically illegal. The Gramm-Leach-Bliley act had yet to be proposed, and a similar Glass-Steagall-destroying effort had died in the House of Representatives not a week before the deal was proposed. To become Citigroup, with an estimated $50 billion in revenue, $700 billion in assets, and $140 billion in market cap, the two companies would have to work hard to undo decades of regulatory precedent. Victory would have gained the new company top ranking among the world’s largest financial-services companies. Ultimately, they succeeded, ushering in a new era of financial consolidation — but talk of records would fade as the dot-com bubble produced ever more outlandish merger valuations, culminating in the disastrous AOL and Time Warner tie-up that wound up destroying the vast majority of its shareholders’ wealth after the bubble popped.
One man’s junk … Drexel Burnham Lambert created the junk bond in 1977, and it found great success when offered for the first time on April 6, 1977. Drexel’s rise and fall would become the stuff of Wall Street legend (you can read more on its collapse by clicking …read more
Well, it could have been worse. After lackluster employment reports on Wednesday and Thursday, the alarm bells sounded even louder this morning, when the Department of Labor reported that just 88,000 jobs were added in March. Still, the Dow Jones Industrial Average bounced back from an early 170-point loss to finish down just 41 points, or 0.3%, as many investors seemed to see the sell-off as a buying opportunity. It was the worst week of the year for the S&P 500 and Nasdaq, and for the Dow, its worst week since February, though it only fell 13 points.
The number of new jobs added was the lowest total since October, and comes after several months of strong job growth. In fact, the figures in January and February were revised upward by a total of 61,000, to 148,000 and 268,000. Economists are struggling to come up with an explanation for the sudden drop off, and have suggested that increases in the payroll tax and income taxes on the wealthy, as well as sequestration, have contributed to the weak labor market. Ninety-five thousand jobs were added in the private sector, while governments shed a net of 7,000 jobs, many of which were in the Postal Service. The unemployment rate dropped from 7.7%, to 7.6%, but the decrease was primarily the result of job seekers giving up on finding a job.
Cisco Systems was among the poorest performers on the Dow today, falling 2% after fellow network provider F5 Networks reported disappointing preliminary earnings, and fell 19% as a result. F5 missed its own revenue guidance by 7%, and also reported lower-than-expected earnings per share, while Radware, another industry peer, also reported poor preliminary results. For more information, see my colleague Evan Niu‘s coverage here.
American Express was the worst performer on the Dow, falling 2.1%, as the weak employment growth likely hurts the credit-card issuer more than most companies. The Jefferies Group also voiced some concerns about the lender heading into earnings season, and gave it a price target 10% below its current value. Total consumer borrowings jumped from $12.7 billion in January, to $18.1 billion to February, a trend that should favor the lender.
Meanwhile, Boeing bucked the overall trend, rising 1.4% after reporting a successful test flight of its troubled Dreamliner 787 jet, which had been grounded due to battery fires. The aircraft-maker now says testing has been completed, which leaves that 787 in the hands of regulators who originally ordered the composite jet grounded.
After a subpar week, investors can look forward to the beginning of earnings season, which could reverse the downward trend caused by poor employment numbers. Alcoawill be the first Dow stock to report earnings, releasing on Monday after hours. Analysts are expecting an EPS of $0.08 from the aluminum maker, which has been among the poorer performers on the blue chips so far this year.
Market participants have been hit with poor jobs data three days in a row this week, and each seemed to be worse than the one before. On Wednesday, ADP released their report, which indicated that the private sector added only 158,000 jobs. Thursday, the Labor Department published weekly jobless claims that rose to 385,000 initial claims last week. And today, the Bureau of Labor Statistics announced that only 88,000 new jobs were created in the month of March.
The three reports combined paint a really bad picture of the jobs marke,t and caused the market, in general, to decline today. The Dow Jones Industrial Average lost 40 points, or 0.28%, while the S&P 500 performed slightly worse, losing 0.43%. The NASDAQ, unfortunately, took third place, after it lost 0.65% of its value.
Technology stocks really took it on the chin today, and to read about a few of the big losers, click here. Or to learn about some of the other Dow losers, continue reading below.
Shares of American Express fell 2.14% today on the heels of the poor jobs data. When the country is in a state of high unemployment and a poor jobs market, consumers tend to spend less money or, at the very least, borrow less money. That means credit cards are often put in the back of the wallet, and cash is used more frequently. With lower transaction counts, and less borrowed money to charge interest on, the credit card company may likely post lower revenue, resulting in lower profits.
The Home Depot was also hit hard by the jobs report today. Shares lost 0.89% of their value after the report indicated that retail trade employment declined by 24,000 in the month of March, and 10,000 of that came directly from building material and garden supply stores. Although Home Depot announced that it was planning to hire 80,000 seasonal workers this year, the cold weather throughout the country during the month of March has surely pushed the hiring dates back.
Another big loser today was Coca-Cola , as shares fell 1.13%. The soft drink king is up 10.57% since the start of 2013, but lagging behind the Dow’s 11.15% gain year to date. Shares recently set a new 52-week high, and are still within striking distance of that mark, even after today’s decline. Shares remain reasonably priced at 20 times past earnings, or 17 times expected earnings, and some consider the company’s 2.8% dividend yield just as safe as treasury yields.
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Down nearly 175 points in early trading, the Dow Jones Industrial Average sold off sharply on a disappointing employment report that showed continuing struggles in the job market. With earnings season kicking off next week, the blue chip index rallied later in the day, but still closed 40 points lower, ending with 0.3% losses, at 14,565. The first full week of trading in April saw all three major indexes fall after a red-hot start to the year.
Defying the broader trend, aerospace mainstay Boeing added 1.4% after completing its final test flight of the redesigned 787 Dreamliner battery system. Boeing has been scrambling to deal with systemic issues with its Dreamliner model since earlier this year, when a small fire broke out on a plane at the Boston terminal. The FAA still needs to stamp its approval on the reworked battery system, but today, investors saw at least some forward progress in that area.
Though there weren’t many positive catalysts for the stock today, McDonald‘s managed to end as one of the Dow’s top performers, tacking on 0.8% to close the week. Whether investors were attracted by its 3.1% dividend, or whether Wall Street simply thinks high unemployment makes for more fast food customers, remains to be seen, but the restaurant does have some serious issues to address. Just yesterday, New York City workers staged citywide protests at multiple fast food restaurants, demanding higher wages and the right to organize.
Hit especially hard by today’s labor market woes, credit-card provider American Express slipped 2.1%, to finish as the worst performer in the Dow. Although corporate profits remain at historically high levels, American Express relies heavily on continued consumer spending for growth, and the pressure will be on when the company reports quarterly profits April 17.
Finally, shares of Cisco Systems ended 2% lower today, though if there’s any solace to be had, it’s from the fact that shares primarily slipped on news of a competitor’s weakness. Cratering nearly 20% lower, shares of F5 Networks stumbled after announcing preliminary figures that (surprise!) weren’t that great. Cisco also agreed to acquire cellular communications company, Ubiquisys, for $310 million, which may have temporarily depressed shares.
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Blue-chip stocks are broadly lower today after a disappointing government report showed that the labor market recovery may be in jeopardy. With roughly an hour left in the trading session, the Dow Jones Industrial Average is down by 81 points, or 0.56%.
Data released by the Department of Labor this morning showed that the U.S. economy added a mere 88,000 jobs last month. Economists surveyed by Reuters and Bloomberg had expected figures of 200,000 and 190,000, respectively.
Despite this, the official unemployment rate nevertheless ticked down to 7.6% — though the “improvement” was a function of a shrinking labor force, as opposed to an absolute gain in employment.
Digging into the number further reveals that public-sector employment contracted by 7,000 workers last month. By comparison, private-sector employment expanded by 95,000 jobs. In addition, the retail sector declined by a net 24,000 jobs after adding an average of 32,000 positions for the past six months.
Analysts are attributing the lackluster results to a number of factors. In the first case, March was unseasonably cold. In Fargo, N.D., for example, the average temperature was 17.3 degrees — that’s 10.5 degrees below average and 24.3 degrees colder than the same month last year. And in the second case, many believe that the results of the sequester — $85 billion in federal budget cuts triggered early last month — are already being seen in the data. As an analyst quoted in The Wall Street Journal put it: “Job creation clearly sputtered in March. I chalk some of it up to trepidation over the sequester.”
On the heels of today’s news, 23 out of the Dow’s 30 stocks are in the red. Leading the way down are shares of American Express . For a company that relies on consumer spending to fuel its bottom line, the news out of the labor market was particularly unwelcome. In addition, as my colleague Jessica Allingnoted, “Another blow may have come in the form of a downgrade to ‘hold’ by Jefferies Group analysts yesterday.”
Also heading lower today are shares of beleaguered personal-computer maker Hewlett-Packard . After Thursday’s closing bell, the company announced that its chairman is stepping down from his role, though he’ll remain on the board — click here to read the official press release. Meanwhile, two other directors have decided to depart the board entirely. Fellow Fool Anders Bylundcalled it a “much-needed step toward a healthier business,” given the state that the company has found itself in under their stewardship.
Heading higher, alternatively, are shares of Boeing . The aerospace company has struggled over the past few months to identify and fix a design defect in its flagship 787 Dreamliner, which was grounded by global aviation authorities earlier this year after batteries on at least two aircraft caught fire. Sending Boeing‘s shares higher today was news that it began a final test flight of the 787 to demonstrate that the problem has been …read more
If you were hoping to end your investing week in the green, think again. Stocks are swinging sharply lower, and the Dow Jones Industrial Average has found a home in the red today following March’s disappointing jobs numbers, which dropped precipitously from February. As of 2:25 p.m. EDT, the blue-chip index has fallen 85 points, or 0.58%, with many component stocks shedding 1% or more. With the market on a roll this year, investors have been looking for a correction, and today they got one.
Jobs can’t get a grip Payrolls added a mere 88,000 jobs in March — the lowest monthly gain in nine months and more than 100,000 short of analysts’ projections. That was also a huge drop-off from February’s gain of nearly 270,000 jobs. This report isn’t the end of the world: Many economists have predicted that the economy’s fast start to 2013 would slow down in the middle of the year, and the country still has years of growth ahead of it before it reaches pre-recession unemployment levels. However, it’s a disappointing blow to many who were encouraged by signs that the economy was accelerating its comeback.
The disappointment has hit Dow stocks hard, and none more so than American Express . The financial firm has lost 2.6% so far today. Lower employment translates to lower consumer spending as Americans tighten their wallets — an outcome far from ideal for American Express. The stock has still picked up more than 13.5% since the start of 2013, but a sluggish middle of the year could see shares drop off from their recent highs as credit card spending slows. If the economy bounces back soon, however, American Express will be poised to rise right along with it.
Home Depot is another stock that has done well this year — shares have risen more than 11.3% since the start of 2013 — and is being hit hard today. The home retail stock is down 1% so far. Although a sluggish economy is not good for anyone, Home Depot has less to fear: With residential construction on the rise and housing starts picking up fast, this company’s well-positioned to capitalize on the rebound in the housing market.
Big Oil‘s on the downswing as well today. Shares of Chevron and Exxon-Mobil have fallen 0.7% and 1%, respectively. Both companies are recovering from headaches. Chevron recently announced that it has finally finished repairing a damaged refinery in Richmond, Calif., that was hit by a fire last year — an incident that cost the company around $1 million in fines from state safety regulators. Still, that’s much better than Exxon’s current plight. The company pledged to cover the costs of cleaning up thousands of barrels of oil that spilled in Arkansas. This won’t hit Exxon’s pocketbook too hard, but it has left a smudge on the company’s reputation.
One stock has managed to beat the odds today, however: Aluminum manufacturer Alcoa …read more
