Trader Talk

The Gold Rush Is On

It's official, the gold rush is on: the Republic of Mauritius has purchased 2 metric tons of gold from the IMF. That is one-hundredth the amount of gold that India just bought, but then again with 1.3 million people Mauritius has one-thousandth the population of India.

The dollar is stronger this morning, which means stocks are a bit weaker. The Reserve Bank of Australia, Australia's central bank, released minutes from their November 3rd meeting last night. The RBA raised interest rates by 25 basis points in November to 3.50 percent, the highest in the Western world. The minutes indicate that the pace of interest rate increases was an "open question," which caused the Australian currency to fall, and the U.S. dollar to rise.

Elsewhere, while retailers' earnings tended to top estimates in the third quarter, guidance remains quite cautious in the current quarter:

1) Home Depot down 1 percent despite Q3 earnings handily topping the Street's expectations ($0.41 vs. $0.36 consensus). Declining traffic and a 7.1 percent decline in average ticket sales led to continued sales declines, although same-store sales fell a slightly less-than-expected 6.9 percent.

While the strong Q3 earnings beat allowed the home improvement giant to raise full-year forecast ($1.55 vs. $1.53 consensus), Q4 earnings of $0.15 look to be just shy of the $0.16 expected by analysts.

2) Target is down fractionally after reporting stronger-than-expected Q3 earnings ($0.58 vs. $0.50 consensus). Same-store sales were slightly weaker, falling 1.6 percent in the quarter, but margins were up slightly.

Pressure on the discounter's top line may still be felt as the retailer remained "cautious" on the fourth quarter, expecting a "highly promotional holiday season."

3) TJX is down 2 percent pre-open. Although Q3 earnings beat estimates by a penny, cautious Q4 guidance of $0.65-$0.71 falls below the Street's consensus estimate of $0.71.

Some good news though: "traffic has continued to accelerate" as Q3 same-store sales rose 7 percent and Q4 comps are expected to rise 5 percent to 7 percent.

4) Jacobs Engineering falls 9 percent after Q4 earnings and revenues fell short of estimates. Backlog fell $320 million in the quarter as project cancellations continued to hurt the company primarily due to one oil & gas related project being called off.

Guidance for 2010 is also disappointing, as the engineering firm sees earnings of $2.00-$2.60, well below the Street's $2.83 consensus estimate.

5) Smith International is down 7 percent after announcing an $800 million stock offering. The oil services firm is issuing 28 million shares (about 13% of outstanding shares) in a secondary offering for general corporate purposes and to help pay down debt.

6) Time Warner announced a date for its planned spin-off of its AOL online service business. On December 9, investors will get 1 AOL share for each 11 shares of Time Warner they hold. The new spin-off will begin trading on the NYSE under ticker "AOL" the following day. 



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