Thursday, January 10, 2019

Markets pause after holiday retail sales reports

Dow fell 46, decliners over advancers about 3-2 & NAZ lost 14.  The MLP index was off 3 to the 248s & the REIT index pulled back 1 to the 334s.  Junk bond funds inched higher.& Treasuries climbed with modest gains.  Oil slid lower in the 52s following recent strength & gold was about even at 1291.

AMJ (Alerian MLP Index tracking fund)

CL=FCrude Oil51.50
-0.86  -1.6%

GC=FGold   1,292.60
+0.60 +0.1%

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Stocks opened lower as big department store chains & airlines weighed on major indices & investors worried about the economic effects of what is now the 2nd-longest partial gov shutdown in history.  The shutdown entered its 20th day & an increasing number of reports of cash-flow problems for federal workers put investors on edge.  In Asian markets, China's Shanghai Composite fell 0.4% & Hong Kong's Hang Seng gained for a 5th day, adding 0.2%.  Japan's Nikkei ended the day down 1.3%.  In European trading, London's FTSE was lower by 0.3%, Germany's DAX was down 0.4% & France's CAC fell 0.8%.  The recent rally in stocks has been fueled by optimism over trade talks between the US & China.  Talks between the trade delegations got underway on Mon & were extended to an unexpected 3rd day yesterday, boosting optimism that a deal could be reached.  A member of the US trade delegation called this week's trade talks in China "a good few days."  The positive close yesterday marked the longest winning streak in 4 months for the S&P 500 & 2 months for the  Dow.

Stocks struggle as airlines, department stores weigh

Target (TGT), a Dividend Aristocrat, said comparable sales grew 5.7% during Nov-Dec, helped by higher customer visits & strong online sales during the holiday season.  Still, its shares fell on disappointing performance at its rivals.  The company expects same-store sales growth of about 5%  for Q4 thru Jan, while comparable sales had grown 3.4% in the Nov-Dec period last year.  All of the retailer's core categories grew during the holiday season, with toys, baby & seasonal gift items being the strongest.  TGT reaffirmed its full-year earnings & sales forecast, putting it on track for the strongest full-year comparable sales growth since 2005.  Robust sales numbers indicate consumer confidence has largely not been impacted by rising market volatility due to concerns over slowing global growth & a political deadlock in DC.  TGT said store pickup & drive-up surged more than 60% from a year ago & accounted for a qtr of the company's digital sales in the holiday period.  The retailer also expects 2018 to be the 5th consecutive year in which its online sales grew more than 25%.  The stock fell 2.68.
If you would like to learn more about TGT, click on this link:

Target posts strong holiday sales, maintains outlook

Macy's (M) stock tanked after the department store chain reported weak holiday sales & cut its 2018 earnings outlook.  While the holiday season started strong during Black Friday weekend, it "weakened in the mid-December period and did not return to expected patterns until the week of Christmas," CEO Jeff Gennette said.  Online sales in Nov-Dec as well as at stores operating for at least 12 months were up a combined 1.1%.  The news set off broader alarms across the retail industry.  Macy's didn't sell as much women's sportswear, sleepwear, fashion jewelry, fashion watches & cosmetics as execs had hoped.  He said that weakness overshadowed overall sales growth.  Macy's revised its sales forecasts for the fiscal year 2018, saying it expects no growth in net sales, instead of its previous projection of an increase of 0.3-0.7%.  It's now forecasting diluted EPS to fall to $3.95-$4, compared with a prior range of $4.10-4.30.  Analysts were calling for EPS of $4.23.  Macy's expects same-store sales to rise by roughly 2% in fiscal 2018, down from a prior forecast of 2.3-2.5%.  The stock sank 5.91 (19%).
If you would like to learn more about Macy's, click on this link:

Macy's shares crater 19% on weak holiday sales, pulls retail sector down

China's Commerce Ministry said the just-concluded round of trade talks with the US were extensive & established a foundation for the resolution of each others' concerns.  Both parties, the Beijing ministry said, agreed to maintain close contact.  The US side had issued its own statement earlier, noting a long list of outstanding issues, but also recognizing that China had pledged to purchase "a substantial amount of agricultural, energy, manufactured goods, and other products and services from the United States."  The talks lasted for 3 days in Beijing, one day longer than had been previously announced, which analysts said indicated the discussions were making some progress.  Gao Feng, a spokesman for China's Commerce Ministry, said that the length of the meeting indicated that both sides were serious & honest.  He added that the structural issues that made progress during the talks included forced tech transfers & the protection of intellectual property rights.  Another signal that experts cheered: China's top trade negotiator Liu He reportedly stopped by the negotiating room on Mon, which was unexpected given that the talks were just meant to be held at the vice-ministerial level.  During a Chinese foreign ministry briefing on Mon, spokesperson Lu Kang said that "China is sincere about properly resolving trade frictions on the basis of mutual respect, equality, mutual benefit and reciprocity."  He would not confirm a media report saying Chinese VP Wang Qishan will meet with US Pres Trump during the World Economic Forum's 2019 Annual Meeting in Davos, Switzerland.

Beijing says latest US-China trade talks were extensive, made progress on forced tech transfers

Market optimism is fading.  The retail reports were gloomy, indicating more headwinds for the US economy.  The initial reports from the US-China trade talks with only bland words are short of encouraging.  The market has had a 4 day wining streak & it needs a chance to rest & evaluate current events including the partial gov shutdown which shows no sign of ending.

Dow Jones Industrials

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