Trader Talk

Behind the Weak Trading Start


Spreads of sovereign debt are wider in several peripheral European countries, and stocks are down in Ireland (down 4.6 percent), Greece (down 2.4 percent), and Spain (down 1.9 percent).

The S&P 500 is at a four-week low; the yield on the 10-year US Treasury note is back to the lowest yield since March 2009.

Payback time: analysts are expecting miserable numbers for July existing home sales, out at 10am ET this morning. Consensus is sales will drop to 4.72 million, down from the 5.37 million in June. That's because sales in June were still being held up by the contracts signed in April under the homebuyer tax credit.

Analysts/strategists still too optimistic. That's what Goldman Sachs' Jan Hatzius believes. In a note to clients this morning, Hatzius said that "substantial further downward revisions are coming" in GDP forecasts, and that these will trigger additional downgrades to consensus earnings forecasts.


1) Burger King saw its earnings top expectations ($0.36 vs. $0.34 consensus) despite poor same-store sales. Chainwide comps fell 0.7 percent, led by weakness in comps at its U.S. and Canadian fast-food restaurants (down 1.5 percent). Margins also fell from the year ago quarter due to pressure from rising meat costs in the U.S.

Sales have been weak for some time; this is disappointing given the $1 Whopper Jr. that has anchored their menu for some time.

2) Big Lots beats estimates by a penny as margins improved from effective cost controls. However, same-store sales growth of 3.8 percent was below expectations.

The discounter raised its full-year guidance for the second time to $2.82-$2.90 vs. $2.85 consensus.

3) Barnes & Noble reported a wider-than-expected loss (loss of $1.02 vs. loss of $0.80 consensus) as sales at its stores continued to struggle. Same-store sales at its retail stores fell 0.9 percent in the quarter, but one bright spot continued to be its online business, which saw comp sales rise 53 percent.

Looking ahead, the bookseller, which recently revealed it was exploring potential strategic alternatives, expects comps at its stores to fall 1 percent to 3 percent in the current quarter. For the year, it reiterates earnings guidance of $0.00 to a loss of $0.40, below current estimates for a profit of $0.06.

Yucaipa Group, led by Ron Burkle, currently owns approximately 19 percent of BKS shares.


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