Dow climbed 74, advancers almost 2-1 over decliners & NAZ added 13. The MLP index which little changed in the 462s & the REIT index lost a fraction in in the 282s. Junk bond funds were hardly budged & Treasuries slid lower. Oil was even & gold had modest selling.
The number of Americans filing
new claims for unemployment benefits fell last week, pointing to improving labor market conditions, despite 2 straight months
of weak hiring. Initial claims declined 3K to 336K, according to the Labor Dept. That was mostly
in line with expectations. Snow storms slammed parts of the country last week, which could
have kept some workers at home. Bitterly cold weather was blamed for a sharp slowdown in hiring in
Dec & Jan's marginal bounce back. Claims have been in a
325-348K range this year suggesting no fundamental shift in
labor market conditions.
A Chinese manufacturing index fell to the lowest level in 7
months, adding to challenges for Communist Party officials grappling
with risks to the financial system from trust defaults & soured loans. The preliminary Feb reading of 48.3 for a Purchasing Managers' Index released by HSBC Holdings & Markit Economics compares
with final figure of 49.5 in Jan & the 49.5 estimate. A number below 50 indicates contraction. Softening factory output increases pressure on policy makers to support
economic expansion that’s forecast to slide to a 24-year low of 7.4% in 2014. Today’s number contrasts with
better-than-forecast export & import numbers for Jan. Chinese data
in Jan & Feb are distorted by the weeklong Lunar New Year
holiday, which began on Jan 31 & last year on Feb 9.
Wal-Mart, a Dow stock & Dividend Aristocrat, offered a weak profit outlook,
signaling that it expects economic pressures to keep weighing on its
low-income shoppers around the world. The
retailer also said Q4 profit, which covers the crucial
holiday season, dropped 21% & the stores recorded their 4th consecutive qtr of declines in revenue at stores open at
least a year. The company will speed up growth plans for its smaller stores under
Neighborhood Markets & Wal-Mart Express to cater to shoppers looking
for more convenience. It will open 270-300 small stores during
the current fiscal year, double the initial forecast of
120-150 stores. The expansion of the smaller stores outpaces the growth of its supercenters, which had long been the company's growth engine. WMT
also promised it will sharpen its focus on everyday low prices at its
U.S. stores and further push that strategy abroad. "Customers'
shopping habits are changing more rapidly than ever before," said
CEO Doug McMillon. "We must be more nimble and
flexible as we operate our businesses to adapt to these changes." This report offers worrisome signs for the economy as WMT is considered
an economic bellwether. The company cited several factors that are weighing on shoppers. They've
been dealing with a 2 percentage point increase in the Social Security
payroll tax since Jan 2013. The discounter acknowledged that the
Nov 1 expiration of a temporary boost in food stamps is
also hurting customers' ability to spend. Excluding
the impact from the reduction of the food stamp program, revenue at
stores opened at least a year would have been unchanged from a year ago. On
top of that, a series of winter storms have also chilled sales as
Wal-Mart was forced to close some stores— or shoppers just didn't want
to venture out in the cold. Sales at stores open at
least a year fell in the first 2 weeks of Feb, the beginning of
its Q1, because of the severe weather. At the
height of the storms, it had more than 200 stores closed. Q4 EPS was $1.36, down form $1.67 a
year earlier. Excluding charges related to closing stores in Brazil & China, WMT had EPS of $1.60 & revenue was up 1.4% to $129B. Analysts were expecting $1.59 on revenue of $130B. Revenue
at stores open at least a year fell 0.4%, the 4th consecutive
quarterly decline. But the company said that the metric for its
Neighborhood Market stores rose 5%. The company
expects that EPS for fiscal Q1 will be $1.10-$1.20. For the full year, it expects EPS of $5.10-$5.45. Analysts expected $1.23 in Q1 & $5.56 for the year. After this glum report the stock slumped 1.55.
Stocks are crawling higher for no apparent reason. Weak earnings from WMT sends a chilling (no pun intended) warning for the entire economy. This company accounts for about 10% of US retail sales. The US economy is not as strong as many suggest & the cold weather is making matter worse. Then there is the unsettled Ukraine situation. China is not going to have a good year which will be felt around the world. Dow remains down 450 YTD.
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