Wednesday, November 11, 2015

Lower markets on disappointing Macy's earnings

Dow dropped 56, decliners over advancers 4-3 & NAZ was off 16.  The MLP index fell 5+ to the 313s on weakness in oil & the REIT index edged up 1 to the 316s.  Junk bond funds were a little lower& Treasuries, like stocks, retreated.  Oil sank to 43 (see below) & gold slid lower.

AMJ (Alerian MLP Index tracking fund)

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CLZ15.NYM....Crude Oil Dec 15....43.24 Down ...0.97  (2.2%)

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Macy’s reported unexpectedly weak revenue figures in Q3 thanks to a range of factors from the stronger US dollar to unseasonably warm weather across the nation.  However CEO Terry Lundgren said that this drop off in consumer spending was “absolutely not” comparable to the decline in spending the retailer saw after the collapse of Lehman Brothers in 2008.  Adjusted EPS was 56¢, topping expectations by 2 pennies.  Revenue of $5.87B came in under forecasts for $6.09B, a 5.2% decline from the $6.20B last year.  Moreover, comparable store sales on a year-to-date basis are down 1.7%.  For company-owned stores, comp sales fell 2.2% year over year.  The retailer also updated full-year guidance, now calling for EPS of $4.20-4.30, down from a previously-announced estimate of $4.70-4.80.  Meanwhile, 2015 comp sales of its owned & licensed stores is expected to decrease by 1.8-2.2%, compared to previously flat guidance.  Lundgren said the company is working to accelerate the steps needed to adapt to a changing consumer.  He said the goal is to restore annual comp sales growth to the 2% - 3% level.  “This includes building on our strength as a leading omnichannel innovator with consistent growth in online sales. No other retailer has our track record of mastering change and creating shareholder value with a model of consumer centricity,” he said.  The stock plunged 6.58 (14%).  If you would like to learn more about Macy's, click on this link:

Macy’s Shares Slammed, Execs Try to Quell Concern

Macy's (M)

Oil prices fell more than 2% to their lowest since mid-Sep on worries that US gov data will show a 7th weekly build in crude inventories.  Crude stocks jumped 6.3M barrels last week, powered by a big rise at the Cushing, Oklahoma, delivery point as higher imports offset increased refinery runs, according to the American Petroleum Institute.  Analysts are forecasting a more modest build of about 1M barrels. The Energy Information Administration (EIA) will issue official inventory data tomorrow, a day later than usual due to the Veterans Day holiday today.

Oil Near Two-Month Low on U.S. Stockpile Worries

McDonald's, a Dow stock & Dividend Aristocrat, corp credit rating was downgraded one notch to BBB+ from A- by S&P, which cited the fast food giant's plan to issue more debt to fund returns of cash to shareholders.  The outlook is stable, S&P added.  The new rating leaves its debt at 3 notches above "junk" status.  Additionally, MCD said it would finance about $10B in cash returns to shareholders by issuing debt, acknowledging that the announcement would likely lead to a credit downgrade.  "Overall, we believe this approach marks a significant and rapid shift in financial policy for the company," S&P said.  "We would lower the rating if the company increases its return of capital to shareholders beyond current planned levels while experiencing limited improvement in customer response (improved traffic and positive comparable sales in the U.S. for example) during the next year to 18 months."  The stock rose 63¢ on the news.  If you would like to learn more about MCD, click on this link:

McDonald's Credit Downgraded To Just 3 Notches Above Junk At S&P

McDonald's (MCD)

Dreary earnings from Macy's put stocks on defense.  This is one of the biggest retailers, so the signals it sends are chilling, not only for retailers, but the entire economy.  Dow is down more than 100 YTD.

Dow Jones Industrials

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