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Wal-Mart And Kohl's Beat—But Cautious Outlook

The Mortgage Bankers Association said weekly purchases fell 11.7 percent to the lowest level since December 2000. Blame it on the homebuyer tax credit uncertainty, or maybe not. This, while 30-year fixed rate mortgages are below 5 percent.

Elsewhere:

1) Wal-Mart is down fractionally despite beating Q3 earnings estimates ($0.84 vs. $0.77 consensus). Sales missed expectations slightly ($98.7b vs. $99.9b consensus) as same-store sales (excluding fuel) at its U.S. Wal-Mart stores fell 0.5 percent.

Just as other global companies have reported recently, Wal-Mart saw greater growth outside the U.S. Overall sales overseas remained strong, rising 12.1 percent in the quarter - before taking into account the negative currency effects.

The discounter's outlook for the holiday season remains a bit cautious. Q4 earnings guidance of $1.08-$1.12 falls mostly below the Street's expectations of $1.12.

2) Kohl's reported Q3 earnings better than consensus ($0.63 vs. $0.61). Sales were up 6.5 percent, but inventories were up only 2.6 percent, so inventory control is excellent (3 percent lower than a year ago).

Kohl's is doing well: higher-margin exclusive brands ("Only at Kohl's") are now 45 percent of sales. They took over a bunch of Mervyn's stores in California, and they appear to be gaining market share in some markets, particularly against their rival JC Penney.

While Q4 guidance of $1.14-$1.24 seems a bit disappointing ($1.25 consensus), it is above prior guidance of $0.99-$1.06. Comp store guidance of negative 1 percent to positive 2 percent is also conservative; management gave very little color on the Christmas season in its release.

November comparable store sales will be interesting for retailers: last year, for example, Kohl's comps were down 17.5 percent.

3) United Technologies announced it is acquiring General Electric's security operations for $1.8 billion. The deal is expected to be accretive to UTX's earnings in 2011.

4) Anheuser-Busch InBev is down 3 percent after the brewer missed estimates ($0.72 vs. $0.76 consensus). Weak demand hurt results and offset benefits from its continued cost cutting measures. The world's biggest brewer saw total volumes fall 3.2 percent and beer volumes fall 3.3 percent.

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