Thursday, November 21, 2013

Dow rallies to go over 16,000 again

Dow shot up 109 to another record, advancers over decliners almost 3-1 (underwhelming all considered) & NAZ jumped 47.  The MLP index rose 4+ to 452 & the REIT index went up 1+ to the 268s.  Junk bond funds were mixed & Treasuries worked their way higher.  Oil finally had a good day but gold slid lower as the stock market rallied.

AMJ (Alerian MLP Index tracking fund)

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Treasury yieldsS

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CLF14.NYM....Crude Oil Jan 14....95.38 Up ...1.53 (1.6%)

Live 24 hours gold chart [Kitco Inc.]

Sears store in Peoria, Illinois

Photo:    Bloomberg

Sears Holdings posted a wider Q3 loss as CEO Edwrad Lampert works to sell more of the chain’s assets to drum up cash amid a 6 year sales decline.  The net loss for EPS was $5.03, worse than $4.70 last year.  The company said last month it would report a loss of $532-$582M for this qtr.  Sales fell 6.6% to $8.27B.  Lampert has been selling & spinning off assets as cash shrinks amid 27 straight quarterly sales declines.  The dwindling resources are making it harder for Sears to improve outdated stores that have contributed to its loss of customers.  SHLD said last month it’s considering separating its Lands’ End apparel & automotive service-centers units.  The retailer said today that it expects to generate $2B of liquidity in the current fiscal year, up from an earlier forecast of $500M.  While it spends less than competitors on store upkeep, the retailer has been pouring money into e-commerce initiatives.  “We have been investing hundreds of millions of dollars annually in our transformation and will continue to invest in the future of the Company,” Lampert said.  Separating businesses such as Sears Hometown and Outlet Stores, spun off last year, allows SHLD to “become a more focused company that is easier to understand and manage,” the company said.  Comparable-store sales in the US, which exclude new locations, fell 2.1% at Kmart stores, hurt by lower demand for grocery & drugstore items.  Sales fell 4% at Sears locations, amid decreases in appliances, electronics & clothing.  Total domestic same-store sales dropped 3.1%.  The stock fell 1.77.

Sears Loss Widens as CEO Lampert Examines More Asset Sales

Sears Holdings (SHLD)

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Abercrombie & Fitch reported a loss in its Q3, dragged down in part by charges related to closing its Gilly Hicks stores.  Adjusted EPS topped estimates, but the retailer's sales softened & it said sales weakness continues in Q4.  Earlier this month ANF announced it plans to close all of its stand-alone Gilly Hicks stores.  The company operated 28 of the intimate apparel stores in the US & abroad at the end of its Q2.  It will continue to sell its Gilly Hicks products thru its Hollister stores & website.  The loss per share was 20¢ which compares with a profit $1.02 last year.  Excluding costs tied to the Gilly Hicks store closings & some other charges, EPS was 52¢.  EPS results were helped by a 7% drop in the number of outstanding shares since last year.  Analysts predicted adjusted earnings of 44¢.  Revenue was down 12% to $1.03B from $1.17B.  Expectations were for revenue of $1.04B.  US sales, including online & catalog sales, declined 18% to $674.9M   Intl sales rose 2% to $358.4.  Sales at stores open at least a year, including online & catalog, dropped 14%.  The figure also fell 14% in the US & declined 15% internationally.  Online & catalog sales comparable sales rose 11%.  Of the brands, the weakest results were at Hollister, with a 16% sales decline.  Its namesake brand posted a 13% drop, while abercrombie kids reported a 4% decline.  The company maintained its outlook for full-year adjusted EPS of $1.40-$1.50.  Analysts predict EPS of $1.55.  The retailer said its forecast is based on a projected low double-digit percentage decline in Q4 sales at stores open at least a year.  The stock was about even.

Abercrombie & Fitch posts mixed 3rd-qtr resultsAP

Abercrombie & Fitch (ANF)

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Janet Yellen

Photo:   Bloomberg

A Senate committee backed the Janet Yellen nomination which seems certain to receive approval.  The Senate will likely vote next month.  Once confirmed, she will replace Big Ben when his term expires on Jan 31.  Her path to winning confirmation became even clearer as Senate Dems forced thru a rule change that lowered the votes needed to end procedural roadblocks on mostpresidential appointments to 51 from 60.  Dems control 55 of the 100 seats.  Once procedural hurdles are overcome, Yellen would need 51 votes to secure her confirmation.  She is viewed as a monetary policy dove more concerned about the costs to society of high unemployment than about the risk aggressive actions to lower it will ignite future inflation or fuel asset bubbles.  She will preside over a central bank that has taken dramatic & unconventional steps to spur economic growth.  The benchmark interest rates have been held near zero since late 2008 which has quadrupled the size of its balance sheet to $3.9T thru 3 massive asset purchase campaigns (currently buying $85B in bonds a month).  Both Yellen & Big Ben have emphasized in recent days that the Fed will keep interest rates low for some time even after it winds down its asset purchases, remarks that have bolstered expectations of policy continuity at the central bank.

Yellen’s Nomination as Fed Chairman Approved by Senate Panel

Stocks had another good day, helped when the nominated for Janet Yellen to take control of the Fed moved forward.  Throwing more money at the markets was the prime reason that Dow is up 2.9K YTD.  As I've said so many times, this is one of it's best years ever by any standard.  Sadly economic fundamentals are limited.  The recovery from the recession lows is the weakest in decades & the outlook for next year is more of the same.  Dysfunctional DC is going from bad to worse & that will get another significant test in a few weeks when those guys have to approve funding for the rest of FY2014.  NOTHING has been done so far!!  The change in the Senate today, which allows a simple majority to get things approved (rather than 60% & before that 2/3), has the Reps fighting mad.  Nobody knows what the unintended consequences will be.  But Dow is not concerned. at its new record.

Dow Jones Industrials

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