CPK Rises on Better-Than-Expected Earnings

Shares of California Pizza Kitchen (CPK) rose this week when the restaurant chain reported a sales decline that was smaller than investors anticipated. In a preliminary second-quarter earnings release, CPK announced that revenues decreased by 4.6% to $163.1 million for the quarter. This compares with $170.9 million revenues for the second quarter of 2009.

The pizza maker's sales declined approximately 5.9% but this was an improvement when compared to the 6.5% sales decrease in the second quarter one year ago. These results were also better than the negative 6% to 7% that the company forecasted for the quarter in a June 21 press release.

Rick Rosenfield and Larry Flax, co-CEOs of California Pizza Kitchen, said that the company feared second-quarter results would be negatively impacted by the company's Thank You Card Program. The incentive program, rolled out in 2008, thanked customers by handing out cards offering restaurant discounts and cash prizes. Rosenfield and Flax indicated that the program improved restaurant traffic and will launch a similar program for 2010 on July 28.

During the second quarter, CPK said that it opened one new full service restaurant in Utah. The Company has continued to expand its airport restaurants through franchise partners with new franchises opened in two airports in Hawaii and the Fresno airport in California. CPK will release a full second-quarter earnings statement on August 5.

California Pizza Kitchen (CPKI) ended the week at $14.93.

Avon Announces Silpada Purchase Agreement

Avon Products, Inc. announced this week its plans to purchase silver wholesaler Silpada Designs, Inc. Avon said that the acquisition is consistent with its strategy to explore opportunities that complement its core beauty and direct selling business.

Silpada is the largest and fastest-growing direct seller of sterling silver jewelry with operations in the United States, Canada and the United Kingdom. With annual revenues of approximately $230 million, Silpada offers a range of approximately 450 sterling silver jewelry products. Silpada is currently sold through direct sales made by representatives.

Andrea Jung, Avon's Chairman and Chief Executive Officer, said, "This new partnership is an exciting opportunity to reach new consumers and representatives with a higher-tier brand and direct sales model that complements our existing business."

Avon is expected to acquire the assets of Silpada for an initial payment of approximately $650 million. Silpada will continue to operate as a standalone business where its sales representatives will be the exclusive sellers of Silpada products through its party-plan direct selling model.

Avon (AVP) ended the week at $28.69.

Alcoa Results Improve Despite Quarterly Loss

Alcoa reported another quarterly loss this week but attributed much of this loss to restructuring costs incurred by the company in an attempt to improve its bottom line. The aluminum giant reported a loss of $194 million for its fourth-quarter. These results compare to a fourth-quarter 2009 loss of $266 million and a first-quarter 2009 loss of $480 million.

Despite the loss, Alcoa said the company's earnings are improving. Double-digit price increases for aluminum and alumina over the quarter have increased revenue. Alcoa also said that efforts to streamline the company are paying off with productivity gains.

"Our performance continued to improve in the first-quarter thanks to higher realized prices and strong operational results," said Klaus Kleinfeld, Alcoa President and Chief Executive Officer. "Most of the special items we reported are non-cash and include proactive decisions to structurally improve the company's profit potential."

Alcoa also noted that improvement in the markets, policy trends and consumer sentiment bode well for aluminum demand. Aluminum is becoming more attractive as a strong yet recyclable material for a growing number of customers who desire sustainable products.

Alcoa (AA) ended the week at $10.41.

The Dow started the week at 10,380 and ended at 10,098. The S&P 500 started the week at 1,078 and ended at 1,065. The NASDAQ started the week at 2,266 and finished at 2,179.

Treasury Prices Rise

Treasury prices rose this week following a statement from the Federal Reserve (the Fed) suggesting that it would consider policy measures to fuel growth in the economy. Two-year note yields fell to a record low following these comments.

In minutes from the Fed's June meeting released this week, the Fed said that the economic recovery is proceeding while the labor market is improving gradually. Household spending is increasing but remains constrained by high unemployment, modest income growth, lower housing wealth and tight credit.

The Fed acknowledged that the recovery has been bumpy. "Financial conditions have become less supportive of economic growth on balance, largely reflecting developments abroad. Bank lending has continued to contract in recent months," said the Fed. Nonetheless, it anticipates a gradual return to stability, although the pace of economic recovery is likely to be "moderate."

The Fed left the target range for the federal funds rate at 0 to 0.25%. It continues to anticipate that economic conditions, such as low inflation, will permit the federal funds rate to remain at low levels for an extended period. The Fed said that it will monitor the economy and will employ its policy tools as necessary to promote economic recovery and price stability.

The 10-year Treasury note yield began at 3.05% and ended at 2.92%. The 30-year Treasury note yield began at 4.03% and finished at 3.94%.

Interest Rates Continue to Decline

Freddie Mac reported mortgage rates stabilizing this week. The 30-year fixed-rate mortgage (FRM) averaged 4.57%, unchanged from last week when it averaged 4.57%. Last year at this time, the 30-year FRM averaged 5.14%. This rate ties the all-time low reached last week in Freddie Mac's 39-year survey.

The 15-year FRM this week averaged 4.06%, down from last week when it averaged 4.07%. One year ago at this time, the 15-year FRM averaged 4.63%.

Frank Nothaft, Freddie Mac Vice President and Chief Economist stated, "Fixed-rate mortgages continued to hover at 50-year lows, thereby supporting homebuyer affordability and refinance activity. Over the past month, about four out of five conventional loan applications and more than one-half of FHA and VA loan applications were for refinance."

Nothaft said that when compared to the recent peak in 30-year fixed interest rates 13 months ago, current rates are a full percentage point lower. He said that homebuyers at today's rates would save about $1,500 in payments each year on a $200,000 loan compared to rates last June's rates.

The money market fund finished this week at 0.74%. The 1-year CD finished at 1.14%.

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