Wednesday, August 14, 2013

Markets slide lower on Macy's earnings

Dow slumped 96, decliners over advancers 5-4 & NAZ lost 14.  The MLP index slipped a fraction to 439 & the REIT index was up pocket change to 271.  Junk bond funds were lower & Treasuries inched higher.  Oil pared losses after the Energy Information Administration said stockpiles decreased 2.8M barrels to 360M barrels last week.  Gold rallied & is up 100 from its recent lows.

AMJ (Alerian MLP Index tracking fund)

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Treasury yields:

U.S. 3-month


U.S. 2-year


U.S. 10-year


CLU13.NYM...Crude Oil Sep 13...106.31 Down ...0.52  (0.5%)

GCU13.CMX...Gold Sep 13.......1,326.80 Up ...5.50 (0.4%)

<p> FILE - In this Tuesday, July 16, 2013, file photo, a covered vehicle sits in part of the new paint shop at Chrysler's Sterling Heights Assembly Plant in Sterling Heights, Mich. The Commerce Department reports on wholesale prices for July on Wednesday, Aug. 14, 2013. (AP Photo/Paul Sancya, File)

Photo:   Yahoo

Falling energy prices kept a lid on US wholesale inflation in Jul after a jump in gasoline boosted prices in Jun.  The Labor Dept reported that wholesale prices showed no change last month compared with Jun, when they rose 0.8% (the most in 9 months).  Energy costs fell 0.2%, after a 2.9% surge in Jun.  Gasoline prices dropped 0.8%, & natural gas costs slid 3.9%.  Excluding volatile food & energy costs, core prices rose just 0.2%.  Core wholesale prices are up 1.2% over the past 12 months, the smallest one-year increase since Nov 2010.  Tame inflation has helped consumers increase spending this year despite slow income growth & higher taxes.  Aside from sharp swings in gas prices, consumer & wholesale inflation has barely increased in the past year.  Overall wholesale prices rose 2.1% in Jul compared with the previous July.  For the 12 months ending in Jun, overall consumer prices rose 1.8% & core prices 1.6%.  Those levels are below the Federal Reserve's (FED) 2% target for inflation.  At its last meeting in Jul, the FED added language to its policy statement to express concern that inflation persistently below 2% could pose risks to the economy.

Producer Prices in U.S. Little Changed as Car Costs Decline

Macy’s Profit Trails Estimates After Sales Unexpectedly Fall

Photo:   Bloomberg

Macy's reported a lower-than-expected profit for its Q2, with the department store operator citing shoppers' economic wariness for a slip in sales.  The company also cut its full-year earnings outlook.  EPS was 72¢, short of the 78¢ expected.  A year ago, EPS was 67¢.  Revenue slipped to $6.07B, short of the $6.26B expected.  Revenue at stores opened a year slid 0.8%.  CEO Terry Lundgren used promotions to clear inventory that had built up as a cool spring curtailed purchases of summer clothing & the bumpy economy restrained consumers’ spending.  EPS in the year thru Jan will be as much as $3.90 a share, down from a previous forecast for a maximum of $3.95, the company said.  Analysts estimated $3.95.  Macy’s “sales performance was softer than anticipated, and we are disappointed with the results,” Lundgren said.  “Our performance in the period, in part, reflects consumers’ continuing uncertainty about spending on discretionary items in the current economic environment.”  Same-store sales this year will rise 2-2.9%, more slowly than a previously projected increase of about 3.5%, the company said.  Macy's is the first of the major retailers to report second-quarter results, which should provide insight into how shoppers are spending for the crucial back-to-school selling period.  The stock sank 2.15.

Macy’s Quarterly Profit Trails Estimates

Macy's (M)

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The recession in the 17-country eurozone ended in Q2.  Growth is weak, however, & lags the rates of other major developed economies.  Here are the quarter-on-quarter growth rates for the world's largest economies:
Country Q2 growth vs Q1 Explanation
United States 0.4 Steady growth, though jobs gains still patchy
China 1.7 High growth but slowing as govt tries to rein in easy credit market
Japan 0.6 More government spending, weaker yen has boosted growth
Eurozone (17 countries) 0.3 Less focus on debt cuts, ECB support have ended recession but recovery seen weak
European Union (28 countries) 0.3 Recovering slowly as trade with eurozone improves slightly
Germany 0.7 Enjoying stronger exports, economic confidence
France 0.5 Improvements in consumer spending
United Kingdom 0.6 Increase in manufacturing activity and housing market
Italy -0.2 Financial crisis has forced steep spending cuts, but confidence stabilizing
Sources: Eurostat, National Bureau of Statistics of China

Stocks are having another nothing kind of day.  The bulls are on vacation, so prices are drifting lower.  The biggest decliners in the Dow are.  Home Depot, (HD), United Tech (UTX), Cisco (CSCO) & Boeing (BA), each down about 1%.  The table above with economic growth in Q2 for leading countries shows a drab recovery around the globe, not inspiring for stock buyers.  The yield sensitive stocks have been weak for about 4 months.

Dow Jones Industrials

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