US Stocks Week Ended May 25, 2012

U.S. markets gained after three straight weeks of losses as European leaders quelled fears of a disorderly Greek exit. Market sentiment increased after Italian Prime Minister, Mario Monti, said Greece is likely to remain in the euro and that a majority of euro zone countries support a joint bond. In other global news, China vowed to support growth as Chinese banks may fall short of hitting loan targets for the first time in seven years. U.S. economic news was mixed as existing home sales increased 3.4% and new home sales rose to 343,000. However, durable goods, excluding transportation, increased less than expected and jobless claims declined only marginally. Turning to stock news, Facebook Inc. tumbled 16.5% for the week as investors balked at its sky high valuation coupled with its sequential decline in revenue last quarter. Dell Inc. did not fare much better as shares fell 15.5% for the week after missing earnings expectations due to weak PC demand. Hewlett-Packard Co. gained after earnings beat expectations and the company announced plans to reduce the workforce by 27,000 employees. The plan is expected to result in $3.5 billion in annual savings. PetSmart, Inc. jumped 13.9% after the pet-products retailer posted a strong rise in same-store sales and raised guidance. Costco Wholesale Corp. also beat expectations on increased profit from membership fees and a 5% increase in same-store-sales. Looking ahead, markets will continue to be driven by sentiment in Europe as euro zone contagion fears have sent equities down in the past month due to the market starting to price in a Greek exit. For investors looking longer term, equities continue to look cheap from a valuation standpoint. Additionally, lower market sentiment generally coincides with a good time to buy stocks.
Posted on Tuesday, May 29, 2012 @ 9:20 AM

These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.