Tuesday, August 20, 2013

Markets nervously rebound after 4 days of declines

Dow lost 7, advancers 5-2 ahead of decliners & NAZ went up 24.  The MLP index jumped 5+ to the 439s & the REIT index was up 5+ to 262.  Junk bond funds were 1-2% higher & Treasuries rose for the first time in 4 days on speculation a withdrawal of stimulus by the Federal Reserve may hurt weakening emerging economies, stoking demand for the safety of US gov debt. Oil fell the most in 2 months amid speculation that the Federal Reserve will reduce stimulus measures next month.  Gold participated in today's rally.

AMJ (Alerian MLP Index tracking fund)

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CLU13.NYM...Crude Oil Sep 13....104.90 Down ...2.20  (2.1%)

Live 24 hours gold chart [Kitco Inc.]

<p> This Monday, Aug. 19, 2013 photo shows the entrance to a J.C. Penney store at a Hialeah, Fla., shopping mall. On Tuesday, Aug. 20, 2013, J.C. Penney reports quarterly financial results. (AP Photo/J Pat Carter)

Photo:   Yahoo

JC Penney reported its 6th straight qtr of big losses & steep revenue drops as it continued to face challenges related to a botched turnaround plan spearheaded by its ousted CEO Ron Johnson.  But the stock rose in an expression of confidence that returning CEO Mike Ullman has started to stabilize the business.  Since he retook the top job in Apr after having occupied it from 2004-2011, Ullman has been bringing back coupons, frequent sales events & basic merchandise like khakis & jeans that Johnson eliminated in a failed attempt to attract hipper, more affluent shoppers.  The latest report offered some encouraging signs that the move is beginning to pay off: Revenue improved from month-to-month during Q2, & the decline in online business slowed significantly in part due to the company's move to veer from Johnson's strategy & go back to operating its online businesses with its physical stores.  The chain also said it is seeing encouraging start to the back-to-school season, the 2nd largest selling period behind the winter holidays.  Ullman wouldn't promise that JCP would see a revenue gain in Q3, noting that Aug, the first month, will be difficult since business is being compared with a year ago when the chain drove customers in with free haircuts.  He also cited a challenging economic environment that has tripped up a string of retailers in Q2.  "As you can see in our results for the quarter, we aren't where we need to be yet," he said.  "This is, however, a journey. There are no quick fixes to correct the errors of the past. It is going to take time to get fully back on the right track across the company."  EPS was a loss of $2.66 which compares with a loss of  67¢ a year earlier.  Revenue was $2.66B, down 12% from $3.02B.  Analysts were expecting a $1.07 loss on revenue of $2.77B.  Revenue at stores open at least a year also dropped 11.9%, worse than the 8.3% expected.  That was on top of a 21.7% drop a year ago.  However, the sales drop in Q2 is smaller than the 16.6% decline in Q1.  The stock has a dismal chart, but rose 78¢ today.

J.C. Penney Posts Slower Sales Slide as Bass Bets on Revi

J.C. Penney (JCP)

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Barnes & Noble Inc. Founder Leonard Riggio

Photo:   Bloomberg

Leonard Riggio, founder of Barnes & Noble, suspended his efforts to bid for the company’s retail unit as losses widen at the bookstore chain.  “While I reserve the right to pursue an offer in the future, I believe it is in the company’s best interests to focus on the business at hand,” Riggio said in a filing with the SEC.  Riggio, said in Feb he intended to make an offer to buy the company’s website & almost 680 stores.  The bookseller, which has struggled to navigate the shift to digital content, today posted a wider Q1 loss than estimated amid a continued drop in Nook electronic-reader sales.  BKS has reversed an earlier decision that had planned to outsource the building of its Nook tablets to a manufacturing partner & will continue to make black & white e-readers & color devices, Michael Huseby, the company’s president, said.  The Nook’s issues weren’t the design of the devices, rather the company’s poor job forecasting demand, he said.  “If we want to be in the content business, we need to be in the device business and we believe our people can develop devices better than anyone else,” Huseby said.  The net loss per share in fiscal Q1 was $1.56, compared with a loss of 76¢ a year earlier. The loss excluding some items was 86¢, analysts projected a loss of 67¢.  Sales declined 8.5% to $1.33B, matching the projection by analysts.  Revenue at the Nook division fell 20% to $153M, the 3rd-straight drop.  The stock plunged 2.04 (12%).

Barnes & Noble Founder Riggio Pulls Retail Unit Purchase Bid

Barnes & Noble (BKS)

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In the back from the dead category, Kodak attorneys asked a federal bankruptcy judge to approve its plan to emerge from Chapter 11 protection as a smaller company.  Founded in 1880, Eastman Kodak filed for bankruptcy protection last year after struggling with increasing competition, the shift from film to digital photography & growing debt levels.  Since its filing, Kodak has sold off many of its businesses & patents so it can concentrate on commercial & packaging printing.  "Kodak is a different company that the one in the popular imagination and very different from the one that filed for bankruptcy," Kodak attorney Andrew Dietderich told the court.  If Judge Allan Gropper gives his approval, the storied company could emerge from court oversight within weeks.  Kodak has set Sep 3 as its target date.  Last week, a majority of the company's shareholders voted to approve its plan to emerge.  But some retirees, shareholders & other parties objected.  Although shareholders argued that they should be entitled for something in exchange for their stock, Gropper said he ruled at a previous hearing that they weren't.  He noted that the company's creditors will only receive 4-5¢ on the dollar for their investments & that they're entitled to be paid before shareholders are.  Generally, holders of common stock do not receive anything for their shares when a company emerges from Chapter 11.

Kodak seeks court approval for reorganization plan Associated Press

Today's rally was hardly a show of confidence.  Although Dow slid back, its stocks were generally higher with modest gains.  AT&T (T) had the 6th best showing & was only up 8¢.  Breadth was mediocre given a 450 slide in the last 4 days.  As expected, volume was light.  At least yield sensitive stocks which have taken a beating for several months found some brave buyers.  The markets should be fairly quiet until after Labor Day which is in Sep, the worst month for the stock market.

Dow Jones Industrials

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