U.S. stocks opened lower on negative sentiment in Europe. The Shanghai Composite, however, closed up 1 percent to a three-year-high. There is considerable discussion about the potential increase in trading activity among mainland Chinese stocks when the Shanghai-Hong Kong stock exchange link goes active on Monday, which I discussed in my Trader Talk on Tuesday.
Elsewhere:
1) Macy's earnings of 61 cents were ahead of consensus of 50 cents. Sales trends were unchanged from the first half of the year. That was about the only good news. Comparable-store sales of down 1.4 percent were well below expectations, "Sales did not live up to our expectations." Those softer sales are expected to continue into Q4, with comp-store sales expected to be up 1.8 to 2.8 percent, below consensus. Full-year expectations were lowered, but since it is just the fourth quarter that is left, the outlook is for $4.25-$4.35, below previous guidance of $4.40-$4.50.
That lowering of guidance means this is more than just warmer weather.
Still, the constant sales are generating a loyal cadre of shoppers. They have a Buy Online Pickup in Store program that is up and running in all full-line stores. I would not count Terry Lundgren out.
2) IPO: Auto paint manufacturer Axalta (AXTA) priced 50 million shares at $19.50, the midpoint of the expected price range. At $975 million, it's the largest IPO of the week. This is the former auto paint unit of DuPont, a leveraged buyout by Carlyle Group two years ago; they still own 78 percent of the company. They are the No. 1 auto paint company with 25 percent market share, $4 billion in revenues.
3) Food distributor and manufacturer Pinnacle Foods (think Birds Eye, Duncan Hines, Hungry-Man, Mrs. Paul's) reported earnings much better than expected but became the latest food company to report higher-than-expected inflation: "Input cost inflation for the year is now expected to approximate 2.5 percent, versus the approximately 2 percent previously expected. This inflation increase largely reflects higher-than-expected protein and freight costs, the latter driven by constrained trucking capacity in the industry."
4) Another day, another ETF, this one for those who want to accumulate a portfolio of cybersecurity companies: PureFunds ISE Cyber Security ETF (HACK) begins trading Wednesday at the NYSE.
This is another niche strategy, and while many have not caught on, a few have been modestly successful. Examples: the First Trust ISE Cloud Computing ETF, which has gathered $350 million in assets, or the Robo-Stox Global Robotics and Automation ETF, which has gathered $103 million in assets.