Thursday, August 22, 2013

Higher markets amid NASDAQ trading halt

Dow added 66, advancers over decliners 4-1 & NAZ climbed 38.  The MLP index was up 2+ to the 442s (below its AM reading) & the REIT index rose 1+ to the 262s.  Junk bond funds inched higher & Treasuries were lower, taking the yield on the 10 year Treasury above 2.9%.  Oil rose from a 2-week low as the fewest US workers in more than 5 years applied for unemployment benefits over the past month, bolstering optimism that fuel demand will accelerate.  Gold went up with its eyes back on 1400.

AMJ (Alerian MLP Index tracking fund)

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CLV13.NYM...Crude Oil Oct 13....105.00 Up ...1.15 (1.1%)

Live 24 hours gold chart [Kitco Inc.]

Leading Economic Indicators Index in U.S. Climbs 0.6%

Photo:   Bloomberg

A gauge of the US economy's health rose in Jul, pointing to stronger growth in H2.  The Conference Board said that its index of leading indicators increased 0.6% last month to a reading of 96.0, following no change in Jun & a 0.2% increase in May.  The index is comprised of several previously released data points & can signal economic conditions over the next 3-6 months.  The solid gain suggests economic growth is picking up after a weak start.  The economy grew at an annual rate of 1.4% in H1.  Many expect growth could improve to a 2.5% rate (still meager) in H2.  The pace of growth measured by the index over the last six months has nearly doubled, "pointing to a gradually strengthening expansion through the end of the year," said Conference Board economist Ataman Ozyildirim.  8 of the 10 components of the index were positive.  Higher stock prices, more requests for building permits & a decline in weekly applications for unemployment benefits made the biggest contributions.  The only measures to show decreases were average manufacturing workweek & orders for manufactured goods that signal business investment plans.

Leading Index Signals U.S. Growth to Pick Up Into 2014: Economy

Sears Holdings posted a wider Q2 loss as loyalty program members used more discounts & appliance sales fell.  The net loss per share expanded to $1.83 from a deficit of $1.25, a year earlier.  Excluding some items, the loss per share was $1.46.  SHLD has had over 26 consecutive qtrs of sales declines.  Sales fell 6.3% to $8.87B.  Domestic sales at stores open at least a year fell 1.5%, hurt by the decline in appliance sales.  Comparable sales fell 0.8% at Sears’s domestic stores, & retreated 2.1% at Kmart locations.  The company said it ended the qtr with cash, equivalents & restricted cash of $681M, down from $738M a year earlier.  The stock lost another 3.55 (8%).

Sears Posts Wider Loss as Loyalty Program Marketing Costs Increase

Sears Holdings (SHLD)

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Abercrombie Declines After Profit Trails Analysts' Estimates

Photo:   Bloomberg

Abercrombie & Fitch shares plummeted after it reported a 33% drop in Q2 & warned that business would get even worse in Q3, which includes the final stretch of the back-to-school selling period.  Results missed analysts' estimates & the Q3 earnings forecast came in well below expectations.  Teen retailers have struggled during Q2 because the customer base can be fickle, with constantly changing tastes in fashion & promotions causing shopper loyalty to wane.  In addition, many teens' clothing purchases are tied closely to how much their parents are willing to spend, lately that's not been very much.  Shoppers have been increasingly cautious as they continue to deal with uncertain economic conditions & absorb a 2 percentage-point increase in the Social Security payroll tax.  A shift in spending toward cars & home improvement is also leaving little left to spend on clothing & other purchases.  Moreover, teens are also facing scarce opportunities for summer jobs or part-time work during the school year, leaving them short of the extra pocket money to finance a new pair of jeans or leggings.  "The second quarter proved to be more difficult than expected due to weaker traffic particularly in July, and continued softness in the female business,"  CEO Mike Jeffries said.  "The reasons for the weak traffic are not entirely clear. Our best theory is that while consumers in general are feeling better about the overall economic environment, it is less the case for the young consumer."  The company has been paring back winter holiday orders over the last few weeks.  For Q2, EPS was only 14¢, down from 20¢ a year earlier.  Removing 2¢ in charges tied to its profit-improvement plans, EPS was 16¢.  Expectations were for EPS of 28¢.  Revenue dipped 1% to $945.7M from $951.4M.  US sales fell 8% including the direct-to-consumer business.  The forecast called for revenue of $997M.  While the US performance was soft, results were better elsewhere.  Intl sales including direct-to-consumer climbed 15%, & direct-to-consumer sales for the whole company increased 21%.  Revenue at stores open at least a year declined a very big 10% on softness worldwide.  In the US, revenue at stores open at least a year fell 11% & that figure was down 7% overseas.  Going forward, ANF anticipates Q3 EPS of 40-45¢, far below the $1.07 predicted by analysts.  The stock tumbled 8.27 (18%).

Abercrombie Plunges After Profit Trails Estimates on Drop in Store Traffic

Abercrombie & Fitch (ANF)

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Stocks had extra excitement when NAZ halted options trades & then that was extended to all stocks.  Computers have their problems when overworked, just like people.  Under pressure, trading was resumed, but this is one extra worry for traders.  Many of the earnings reports by retailers are in & they are largely unsatisfactory.  Yes, autos & home related businesses are doing well.  But most of the rest are seeing a very cautious consumer.  The back to school selling season, 2nd in importance to year end holiday season, is so-so at best.  A slow economic recovery continues to bite & growing worries about how much Obamacare will cost are weighing on everybody.

Dow Jones Industrials

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