Trader Talk
- Wall Street Fears Dodd Bill
- Have Loan Losses Peaked for European Banks?
- Dow Industrials at New Highs—But Other Indices Lag
- Risk Trade Is Back On
- HMOs Up Despite Looming House Vote
- What The Street Thinks of The Jobless Report
- Friday It's All About Jobs, Jobs, Jobs
- October Retail Sales—The Good, Bad and Ugly?
- When Good News = Good News
- Retail And Jobs Lift Mood
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Reporter
FedEx's earnings weigh on futures. Federal Express [FDX
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], considered a bellweather for the economy, caused a 6-point drop in stock futures pre-open. Guidance of $0.30-$0.45 for the current (first) quarter is well below expectations of $0.68 due to the runup in jet fuel prices and an "extremely difficult" operating environment.
While their fourth quarter earnings beat expecations ($0.64 vs. $0.52 expected), there were huge impairment charges of $1.2 billion (mostly Kinko's), and revenues were well below expectations ($7.85 billion vs. estimates of $8.38 billion).
The good news:
--they continue to gain market share in the parcel space
--cost controls are helping reduce losses
--CEO Frederick Smith said "There are signs that the worst of the recession is behind us..."
The bad news:
--volumes contracted almost across the board (Express package revenue down 21 percent, volume down 2 percent...)
--shipment weights were lower (manufacturing activity is weak)
--pricing remains competitive.
Elsewhere:
1) Retailers: the new short target? I noted yesterday that a change in sentiment is occuring toward retailers, as represented by what happened to Best Buy. Six months ago, any sign that earnings were better than expected--even if it's just cost-cutting--was welcomed, and we don't expect much from sales.
Best Buy [BBY
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] delivered earnings better than expected, but got hammered. That's because sentiment is now changing; traders were clearly unhappy with Best Buy's comp store sales of down 6 percent year over year and it's relatively downbeat assessment of May trends. They want sales trends to improve, even though most think it is still too early to expect much.
Mike O'Rourke at Miller Tabak has a parallel thesis: that traders looking for a sector to short have zeroed in on retailers.
Why? It's too risky to short banks, since they have proved they can raise capital, have the government behind them, and are in a healthier position today than they were 6 months ago. If you believe the consumer will remain weak, retail is the logical choice for a short.
2) Goldman Sachs [GS
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] is repaying the $10 billion it took in TARP money, in a letter to Reps. Barney Frank and Spencer Bachus, CEO Lloyd Blankfein said that "While we regret that we participated in the market euphoria and failed to raise a responsible voice, we are proud of the way our firm managed the risk it assumed on behalf of our clients before and during the financial crisis."
3) E*Trade [ETFC
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] falls 11 percent pre-open after announcing a $1.2 billion capital raise. The electronic brokerage firm said it would sell $400 million in common stock and issue at least $1 billion in debt.
4) Shares of Adobe Systems [ADBE
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] are off 2 percent in pre-market trading after reporting Q1 earnings inline with analyst expectations. During the last quarter, the software developer saw sales fell 21 percent amid weaker demand for its high-end computer applications, but has seen some signs of stabilization in the current quarter.
5) Successful secondary pricings this morning:
a) Insurer Lincoln Financial [LNC
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] is up 3 percent after pricing a 40 million share secondary offering at $15/share - just below yesterday's closing price of $15.06.
b) Coal producer Patriot Coal [PCX
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] trades up 3 percent following the pricing of its 12 million share common stock offering at $7.90 per share, slightly under yesterday's close of $8.01.
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Questions? Comments?
- Wall Street Fears Dodd Bill
- Have Loan Losses Peaked for European Banks?
- Dow Industrials at New Highs—But Other Indices Lag
- Risk Trade Is Back On
- HMOs Up Despite Looming House Vote
- What The Street Thinks of The Jobless Report
- Friday It's All About Jobs, Jobs, Jobs
- October Retail Sales—The Good, Bad and Ugly?
- When Good News = Good News
- Retail And Jobs Lift Mood
Data is a real-time snapshot *Data is delayed at least 15 minutes