Strong earnings and a better forecast from Wal-Mart is giving a boost to stocks this morning after a mixed picture in overseas markets. The dollar is weaker this morning and gold is recovering some ground after yesterday's selloff.. Asian stock markets were mixed, with Tokyo closing about a half a percent lower. European markets were moving lower.
Yasuo Fukuda, Japan's prime minister, said in an interview with the Financial Times that the yen is rising too fast and warned speculators "to be careful." The yen is firming against the dollar this morning, after gaining nearly 1% yesterday. Fukuda meets with President Bush in Washington Friday.
Wal-Mart's net rose 7.9% to $265 billion, benefiting from early markdowns and cost cutting. Earnings topped analysts' forecasts and Wal-Mart raised its guidance for 2008. Home Depot, meanwhile, said profits fell 27% to $1.09 billion and its per share number missed Wall Street estimates. Hit hard by the declining housing market, Home Depot cut its earnings guidance for the fiscal year.
BlackRock's Chief Investment Officer Bob Doll said on "Squawk Box" that he hasn't owned Wal-Mart for a year but the earnings report and other signs of improvement at the retailer could change his mind. "We don't own Wal-Mart now but we're looking hard," he said. If Wal-Mart continues to perform, it would provide predictability to his portfolio, a desirable attribute in the current market environment.
Oil continues to move lower this morning. The International Energy Agency today cut its forecast for world oil demand growth because higher prices have already reduced consumption.
The U.S. Department of Energy's top forecaster now sees gasoline prices climbing another $0.20 per gallon by December and sees prices rising further if OPEC doesn't move to pump up production. OPEC meets this weekend and Saudi Arabia's oil minister said it would take no action at that meeting. Its next meeting is Dec. 5.
Small Business Sentiment
Optimism about the economy among small businesses fell last month. The National Federation of Independent Business Small Business Optimism index showed showed a decline of 1.1% to 96.2% in October. The NFIB's chief economist Bill Dunkelberg said "things were looking good until the Fed warned that the economy was sinking. The logical response: cut hiring, capital spending and other growth related activities."
Safety in Cash?
Legg Mason and Sun Trust Banks indicated in regulatory filings that they are putting new funds into money market funds to make up for possible losses on debt from structured investment vehicles. According to Bloomberg, Legg said it invested $100 million in one of its money funds and arranged for $238 million in credit for two others. Money markets are the cash safety zone in many portfolios and some have been exposed to SIV investments, potentially reducing the value of the assets.
CNBC's Jim Cramer has been pretty good calling the important trading plays in the market this year and he's calling one now. On Monday's "Mad Money," he called the stock market "difficult and brutal" and said its time to play defense.
Cramer said it is important to avoid losses and investors should ride out the market turbulence by raising cash: "There are times when you want to focus on capital appreciation. This is not one of them. There are times when you want to find stocks that can deliver massive gains. This is not one of them. There are times when people should be full throttle in the market. This is not one of them. This is not one of those times. This is a capital preservation moment," said Cramer.
Cramer said the Dow could have another 200 to 300 points decline to go before a bounce, and investors should avoid what he called the "untouchables." those are stocks dependent on mortgages, consumer spending or a strong U.S. economy. But investors should also not panic or "blow out of the market."
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