Retail Numbers Help, But Freddie And Fannie "May" Dominate Again

Two pieces of positive news this morning: 1) Wal-Mart sales better than expected and raising guidance, and 2) Dow Chemicalbuying Rohm and Haas.Jobless claims lower than expected is also a help.

However, Freddie Macand Fannie Maemay again dominate the news. Comments overnight from former Fed President William Poole that both are insolvent are not helping; Freddie down 8 percent pre-open.

1) Dow Chemical paying a 73 percent premium for Rohm and Haas, $78 a share or $15.3 billion, which includes an equity investment from Berkshire Hathaway and the Kuwait Investment Authority.

This is a good fit for Dow and turns them into a broader company: Rohm and Haas (which has its HQ on Independence Square in Philadelphia, literally facing the Liberty Bell) is most famous for Morton Salt, but their biggest division makes paint and coating materials, as well as packaging and building materials. They also have a division that makes chemicals to make semiconductors and printed circuit boards. All this fits in well with Dow Chemical.

Of course, Rohm and Haas has the same problems with escalating raw material costs. They have raised prices to close the gap and it was anticipated they would keep raising prices. Remember, Dow Chemical raised prices 25 percent at the end of June.

They are also not immune to the economic slowdown, and you can be sure their paint division, as well as their packaging and materials division, is seeing slower demand.

2) June same store sales were not bad. Wal-Mart's sales were up 5.8 percentwithout fuel, better than their own estimates of a rise of 2 to 4 percent, and better than 3.8 percent expected from analysts. They raised Q2 EPS forecast to $0.82-$0.84 (from $0.78 to $0.81), expectations $0.82. Flat panel television sets continuing to run high double-digit comparable store increases.

Other discounters were also strong: BJ's Wholesale was up 16.5 percent, Costco was up 9 percent.

TJXalso raised their earnings guidance.

Nordstrom sales' were down 18.6 percent; believe it or not that is better than expected.

Also better than expected: Gap(down but not as bad as expected), Aeropostale.

Worse than expected: Limited,Abercrombie.

Men's Wearhouseone of the only retailers to cut their earnings guidance; one problem was slower tuxedo rentals.

3) Marriott reported earnings below expectations on slower business in the U.S., though they pointed out that business outside the U.S. was still strong. They also expect weakness in the U.S. to persist into 2009.

4) Ruby Tuesdayreported upbeat guidance.

Questions? Comments?