For the first time in two weeks, I'm hearing traders talk about stocks — and commodities — looking attractive. And why not? The S&P 500is down almost 3 percent from the multiyear high it hit at the end of April. The CRB Index is down almost 10 percent this month.
Other than cash, there are not many places to put money. Bond prices keep rising. People are buying 10-year Treasurysat 3.11 percent. You're kidding, right?
While some are clearly anticipating that the sluggish economy will bring the markets down much further, others are not so sure. "Looks to me like some people are betting on QE3," one trader said to me this morning. "There is no chance they are going to allow a double dip."
1) Target reported earnings of $0.99, above consensus of $0.94, though revenues were a tad light at $15.6 billion.
Credit cards are doing better, and that is helping the bottom line, but retail sales were weaker than expected. Comp store sales were up only 2 percent--they need comps to improve for the stock to improve. Gross margins are a bit lighter than previously.
2) Abercrombie & Fitch up 4 percent pre-open, reported earnings well above expectations. Comp store sales were strong, up 10 percent.
While they continue to expect margin pressure due to higher costs, they are executing well. "A great brand and their US promotional posture has just hurt American Eagle and Aeropostale big time. ANF International is the profit generator in the future," one retail trader told me.
3) Despite gaining market, Staples plunges 14 percent after missing Q1 estimates ($0.28 vs. $0.32 consensus) and providing Q2 guidance far weaker than the Street was expecting ($0.18-$0.20 vs. $0.25 consensus). Comps in North America fell 1 percent. The office supplies firm also cut its full year outlook, noting it expects "very little improvement in the economy."
4) BJ's Wholesale rises 1 percent after handily beating Q1 earnings expectations ($0.62 vs. $0.56 consensus) and providing stronger-than-expected Q2 guidance ($0.74-$0.78 vs. $0.73 consensus). With slightly higher traffic and average transaction amounts at its warehouse club stores, comps grew 6.3 percent in the last quarter on strong food and gasoline sales. Comps are expected to moderate to up 4-6 percent in the current quarter.
5) Still some tepid comments surrounding an economic recovery:
Deere is 1 percent lower after beating estimates ($2.12 vs. $2.06 consensus) on a stronger-than-expected 25 percent surge in sales. The growth mostly stems from strong demand out of the farm industry in North America and Brazil resulting in higher selling prices.
The agricultural equipment maker notes that it continues sees "lingering weakness" in U.S. construction markets and a still-recovering farm industry in Europe. The firm raises its equipment sales growth forecast to up 21-23 percent, with net income also growing more than it previously had expected.
6) Advanced BioHealing was supposed to raise about $200 million in an IPO at the NYSE today. But instead, after the close yesterday, British drugmaker Shire announced it was acquiring the skin-substitute developer (a product used for diabetic foot ulcers) for $750 million in cash.
7) Finally Chinese IPOs take a back seat: LinkedIn (ticker: LNKD) pricing tonight at the NYSE...7.84 million shares at $42-$45, well above initial price talk of $32-$35.
Speaking of IPOs: auto parts maker Delphi is planning an IPO in the third quarter...hedge funds led by Silver Point Capital bought them in 2009. Delphi was practically dead at the time, having filed for bankruptcy in 2005, but the investment may pay off handsomely.
8) Mortgage rates are at a 5-month high, and it's still not attracting buyers. Purchasers for homes fell 3.2 percent last week, according to the MBA, though refinancings were up 13.2 percent.
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