Monday, August 20, 2012

Markets drift lower on euro debt nervousness

Dow fell 3, decliners over advancers 3-2 & NAZ was off pocket change despite another good day for Apple (AAPL). The Financial Index gained a fraction in the 203s, a high since May 2. The MLP index fell a fraction to 296 & the REIT index lost 1 to the 264s. Junk bond funds were mixed to higher & Treasuries were off a tad. Oil & gold did little.

AMJ (Alerian MLP Index tracking fund)

Click below for the latest market update:

Treasury yields:

U.S. 3-month	0.086%
U.S. 2-year	0.282%
U.S. 10-year	1.812%

CLU12.NYM

Crude Oil Sep 12

96.06

0.05 (0.1%)

Lowe’s Profit Misses Analyst Estimates as Comparable Sales Slip

Photo: Bloomberg

Lowe's cut full-year-earnings & revenue forecasts after posting a 10% drop in Q2 net income & revenue at stores opened at least a year declined 0.4%. Results were hurt in part by a timing shift in how it reported the qtr & a charge tied to job cuts. But the latest performance also shows the company's efforts to revamp its merchandise & prices isn't working. In particular, its return last summer to offering permanent low prices in many items across the store, instead of offering fleeting discounts, hasn't yet resonated with shoppers who have been accustomed to seeing big sales signs. In fact, it said that it will take until middle of next year, instead of year end for the chain to reap the benefits of its transformation as it had originally predicted. "We knew it would take time to see the full benefits of our actions," CEO Niblock said. "The team is making progress on these initiatives but frankly, the benefits are accruing at a slower rate than I had expected." EPS was 64¢ which compares with 64¢ a year ago. Fiscal 2012 has one less week than last year & the timing shift lowered EPS by about 3¢. Removing a charge tied to previously announced job cuts & the impact of the timing shift, EPS was 68¢. Revenue fell 2% to $14.25B from $14.54B. The timing shift accounted for 1.8 percentage points of the decline. Analysts expected EPS of 70¢ on revenue of $14.44B. For fiscal 2012, LOW now expects EPS of about $1.64 & revenue to be about flat with 2011's $50.2B. It previously predicted EPS of $1.73-$1.83, with revenue rising 1-2%. Analysts are forecasting EPS of $1.80 on revenue of $50.58B. The stock dropped 1.61 (6%).

Lowe’s Net Misses Analyst Estimates as Comparable Sales Slip

Lowes's (LOW)

Photo: Yahoo

Apple's surging stock propelled the market cap to $623B, beating the record for market caps set by Microsoft (MSFT), a Dow stock, in the heady days of the internet boom when its market cap reached $620B. After a 4-month dip, the stock has hit new highs recently because of optimism around what is believed to be the impending launch of the iPhone 5, & possibly a smaller, cheaper iPad. It's market cap is now worth 53% more than #2 Exxon Mobil (a Dow stock & Dividend Aristocrat). Analysts are still in love with AAPL with an average price target of $745. Apart from the iPhone & "mini iPad," analysts are speculating that AAPL plans to make a TV set to complete its suite of consumer electronics products. The stock surge has made it a major part of many investment portfolios. The company makes up 4.7% of the value of the S&P 500 index. The stock closed at $655.15, up $17.04.

Apple Market Value Reaches Record U.S. High Amid Optimism Over Next IPhone

Apple (AAPL)

Best Buy Says Schulze Declined Board Offer on Due Diligence

Photo: Bloomberg

Best Buy tumbled after it named Hubert Joly as its new CEO. He will take over in next month & BBY plans to keep operating as a public company. Founder Richard Schulze is trying to acquire BBY, but the board has declined to give him access to confidential financial information. Schulze said he was still working on an acceptable agreement with BBY & was “shocked” by the company’s statement. The board has “insufficient information to make a reasonable conclusion” on Schulze’s bid partly because of his failure to disclose financing and equity partners, BBY said. Q2 results will be reported tomorrow. While Joly is “an accomplished executive,” Schulze said “Best Buy continues to face enormous challenges and needs a clear path and a proven leadership team with deep retail experience and knowledge of Best Buy.” The stock fell 2.11 (10%) in this confusing situation.

Best Buy Appoints Hubert Joly CEO as Schulze Rejects Due Diligence Offer

Best Buy (BBY)

Stocks continue to mark time in what is traditionally a slow time in the markets with many away on vacation. AAPL had another fantastic day, but that was not good enough to lift the stock averages (of which it is the largest component). All eyes are on Europe. In addition, on Fri Big Ben will make a speech from Jackson Hole which has the potential to bring excitement. The next 2 weeks could bring fireworks to the markets. But nobody knows what to expect.