U.S. stocks opened lower on negative sentiment in Europe. The Shanghai Composite, however, closed up 1 percent to a three-year-high. There is considerable discussion about the potential increase in trading activity among mainland Chinese stocks when the Shanghai-Hong Kong stock exchange link goes active on Monday, which I discussed in my Trader Talk on Tuesday.
1) Macy's earnings of 61 cents were ahead of consensus of 50 cents. Sales trends were unchanged from the first half of the year. That was about the only good news. Comparable-store sales of down 1.4 percent were well below expectations, "Sales did not live up to our expectations." Those softer sales are expected to continue into Q4, with comp-store sales expected to be up 1.8 to 2.8 percent, below consensus. Full-year expectations were lowered, but since it is just the fourth quarter that is left, the outlook is for $4.25-$4.35, below previous guidance of $4.40-$4.50.
That lowering of guidance means this is more than just warmer weather.
Still, the constant sales are generating a loyal cadre of shoppers. They have a Buy Online Pickup in Store program that is up and running in all full-line stores. I would not count Terry Lundgren out.
2) IPO: Auto paint manufacturer Axalta (AXTA) priced 50 million shares at $19.50, the midpoint of the expected price range. At $975 million, it's the largest IPO of the week. This is the former auto paint unit of DuPont, a leveraged buyout by Carlyle Group two years ago; they still own 78 percent of the company. They are the No. 1 auto paint company with 25 percent market share, $4 billion in revenues.
3) Food distributor and manufacturer Pinnacle Foods (think Birds Eye, Duncan Hines, Hungry-Man, Mrs. Paul's) reported earnings much better than expected but became the latest food company to report higher-than-expected inflation: "Input cost inflation for the year is now expected to approximate 2.5 percent, versus the approximately 2 percent previously expected. This inflation increase largely reflects higher-than-expected protein and freight costs, the latter driven by constrained trucking capacity in the industry."
4) Another day, another ETF, this one for those who want to accumulate a portfolio of cybersecurity companies: PureFunds ISE Cyber Security ETF (HACK) begins trading Wednesday at the NYSE.
This is another niche strategy, and while many have not caught on, a few have been modestly successful. Examples: the First Trust ISE Cloud Computing ETF, which has gathered $350 million in assets, or the Robo-Stox Global Robotics and Automation ETF, which has gathered $103 million in assets.