Trader Talk

Commodities Still In Correction Mode


Futures popped a few points as continuing claims for unemploymentrecorded its first weekly drop since January. While last week was a record high (about 6.8 m), this at least is a step in the right direction.


1) The commodity correction continues. Commodities are down fractionally again today;while commodities are only down single digits in the last week or so (copper down 9 percent, gold down 5 percent, aluminum down 4 percent, oil down 3 percent), commodity stocks are seeing much bigger declines--big commodity names like Potash ,Alcoa ,US Steel, & Consol Energy are down 13 to 17 percent.

The Russian stock market is down another 4 percent this morning; it has dropped 15 percent since hitting an 8-month high in the beginning of June.

The World Bank also raised its growth forecast for China in 2009 to 7.2 percent from a 6.5 percent forecast made in March.

Bear in mind that in the first quarter they grew only 6.1 percent, the slowest rate of growth since 1999. This is HALF the rate of growth China had in 2007.

  • China Could Buy More US Debt: Ex-C. Banker

What is not clear is whether the Chinese consumer can take up even a fraction of the slack from the decline in exports; if they cannot the LME warehouses full of copper and aluminum will back up quickly.

2) Winnebago Industries posted a bigger-than-expected Q3 loss amid a 62 percent decline in motor home deliveries, lower pricing, and higher production inefficiencies. Hit hard by weaker demand during the recession, the RV manufacturer sales of its vehicles fall 64 percent!

3) Q4 2009 earnings from J.M. Smucker handily beat estimates after the consumer foods maker saw a strong 16 percent rise in volume out of its recently-acquired Folgers coffee brand. This far exceeded the flat volumes from its other well-known consumer brands (Jif, Knott's Berry Farm, etc.), where sales still rose 5 percent due to higher pricing. Guidance for the current 2010 fiscal year was raised to $3.65-$3.80 from $3.62-3.72, above the analyst forecast of $3.37.

4) Pier 1 soars 24 percent (it's a $2 stock, bear in mind) in pre-market trading after its results surprised the Street. The home furnishings retailer posted a Q1 profit, but that was due to significant gains from the repurchase of debt. Sales are still weak: same-store sales declined 7.5 percent in the quarter.

5) Shares of Lions Gate Entertainment rise 7 percent pre-open after investor Carl Icahn boosted his stake in the entertainment studio to 16.9 percent from 3.7 percent.

6) Liz Claiborne lowered its guidance, expecting a bigger than expected loss this quarter.



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