Economic data raises new fears of widespread global slowdown. PMI data from China and Europe has sparked fears of increasing global slowdown. The US markets traded down despite our own positive data.
Futures weakened this morning on news from China. Preliminary data from HSBC shows that Chinese PMI fell to 48.1 in February from January's final reading of 49.6. The data shows increased slowing among Chinese manufacturers and is the fifth straight month of declines. The number is due to weakening domestic demand, according to HSBC's chief economist. Employment in China also fell to new lows and marked the weakest data since March, 2009.
Fears of increasing Chinese slowing have eclipsed those of European slowing, at least for today. China has been a key factor among some recent growth stories, especially among food and beverage companies. McDonald's, Yum! Brands, Starbucks, Coca Cola and Pepsi have all been seeing increasing growth in the region. New estimates for Chinese GDP have it in the range of 7.5%-8.5% for 2012, nearly a full point below earlier estimates.
Yum! Brands(YUM) and Starbucks(SBUX) both made new highs today.
Yum! Brands, daily
Asia ended the day basically flat. The Nikkei average gained +0.4%, the Hang Seng index rose +0.22% and the Shanghai Composite lost -0.1%.
US data was light today and failed to inspire any confidence. Initial Jobless claims fell to a seasonally adjusted 348,000. This is the lowest number of new claims since February, 2008. Last weeks data fell 5,000 from the previous weeks revised number of 353,000 claims. Analysts had estimated that claims would hold steady at 353,000. The four week moving average of initial jobless claims fell 1,250 to 355,000.
Continuing claims for unemployment also fell. This number dropped by 9,000 claims to an adjusted 3.35 million.
The total claims for unemployment benefits fell as well to 7.28 million. This is a drop of 142,499 claims from the previous weeks data.
The recent drops in unemployment are good signs for the US economy. This trend is in line with the increases in GDP we have seen over the last three quarters. This is also in line with payroll data, which showed a strong gains in jobs in February (+227,000).
Home prices remained stable in January, according to the FHFA report released this morning. This is seen as a sign of further stabilization in the real estate market.
Conference Board's index of leading economic indicators rose 0.7% in February. This is a big gain from January's revised 0.2%. The reading shows signs of an economy gaining momentum. In the release Conference Board stated that â€œeconomic progress may could continue throughout the summer and possibly beyondâ€.
European markets closed down today on the discouraging news from Asia and its own poor prospects. The FTSE 100 closed down -.79%, the DAX index down -1.21% and the CAC 40 index down -1.14%.
European PMI also fell in March. The Markit Eurozone Composite PMI, which is a broad gauge of European manufacturing, fell to 48.7 in March from February's 49.3 and made a three month low. Citi (C ) Chief Economist Willem Buiter says the â€œworst is still to comeâ€. Bernanke also made statements this week to the effect that the European crisis is not over.
As Greece fades into the back ground of the crisis other PIIGS countries are coming back into the spotlight. Bond yields in Spain and Italy are rising to new highs, which some have speculated signal lack of confidence in economic recovery. The problem is starting to spread into bonds issued by the more stable European nations like Germany.
Con Agra (CAG) beat earnings estimates, reaffirmed 2012 guidance and traded lower on the day to finish down 0.5%. Profit rose 26% to $0.65 per share from the previous years $0.50 per share. Net sales increased by 7%. Con Agra earned $0.47 in the previous quarter, consensus estimates were $0.49. Commercial food sales,which accounts for 37% of business, rose by 14%. Consumer foods sales rose by 4%. The gains were also helped by favorable pricing actions including adjustments for inflation and commodity increase pass throughs. During the quarter the company acquired Del Monte Canada and repurchased $7 million in shares. There is $775 million left in the company's repurchase program. Con Agra also maintained its 2012 guidance.
Con Agra, daily
Dollar General (DG) impressed investors with its release today. Following the announcement the stock gained over 3% on heavy volume to close at $45.96. Fiscal fourth quarter profits for the discount retailer grew by 31% to $0.85 per share from $0.64 in the year ago period. Total sales in the period increased by 20%. The consensus estimate was $0.82 per share. Dollar General earned $0.50 in the third quarter.
Dollar General, daily
FedEx Corporation (FDX) dropped over 2% in premarket trading and fell over 4% for the day. The stock closed down by $3.32 at $92.50. The move came on high volume, over 300% of average. The company's earnings of $1.55 per share beat analysts expectations of $1.36 per share. Lowered expectations of global economic growth and expectations of fourth quarter profits were the cause of today's decline. FedEx issued fourth quarter guidance of $1.75-$2.00 per share, below analysts expectations of $2.00 per share. In the statement the company said that it expects â€œsolid performanceâ€ in the fourth quarter following the gains seen in the third. Analysts expectations were based on $10.6 billion in revenue. FedEx revenue was inline with expectations. Increases in profits are due to improvements in operations.
Lululemon (LULU) gained about 2.5% in today's trading after its earnings announcement. This move also came with a big spike in volume, over 300% of average. Net revenue for the fourth quarter increased over 50% with same store sales increasing 26% on an adjusted basis. Full year revenue increased to $1.0, a milestone for the company. Comp store sales rose by 20% for the year and gross profit increased by 44%. Updated guidance for 2012 includes continued expectations for growth. The company expects revenue to grow by around 30% for the year. Share were down in early trading because the guidance did not meet with some expectations. However, as the day progressed the stock traded up and closed at $75.83.
Strategic American Oil Corp (SGCA) is a micro cap oil and gas exploration company making headlines today with its earnings statement. Revenue is up 18% in the second quarter vs the first quarter. Assets increased to $24.3 million and debt has been reduced to zero. Cash flow is up significantly, reversing from ($83,710) in the first quarter to $816,805 in the second. The oil and gas driller is in initial operational phases of its two main projects, one in the Gulf of Mexico and one in Illinois. They have begun production and sales at one site and is nearing that stage with the other. The stock dropped over 7% today.
Strategic American Oil Corp, daily
Expectations of Micron Technologies (MU) earnings release caused the stock to drop 0.34% . The company, which suffered an unexpected change in leadership earlier in the year, reported a deeper than expected loss for the quarter. The stock lost 2.5% in after market trading.
Micron Technologies, daily
Shoe and apparel giant Nike (NKE) traded relatively flat today in anticipation of its announcement after the bell. Nike earned $1.00 per share in the previous quarter and was expected to post an increase of 16%. The stock has had a nice run up, gaining over 46% in the last twelve months. Today's trading kept the stock above the 30 day moving average. The announcement, which reported earnings of $1.20 per share versus $1.08 a year ago, beat expectations and sent the stock higher by close to 1% in after market trading.
The recent wave of IPO's continued this week. There were three today and two more are expected tomorrow. Today Caesar Stone (CSTE), Exact Target (ET) and Vantiv (VNTV) made their Wall Street debut.
Caesarstone (CSTE)is a California based manufacturer of engineered quartz surfaces. They are a leader in the industry of manufactured counter tops and surfaces. Caeserstone was expected to price 6.7 million shares between $14-$16 per share. Actual opening , $11, was significantly below expectations. The stock traded steady throughout the day and closed slightly up at $11.11.
ExactTarget (ET), makes SaaS applications that deliver marketing campaigns and customer communications tools to clients. The somewhat anticipated IPO priced 8.5 million shares at $20.00, well above the expected range of $15-$17. The actual opening price, $23.40, was another big gain for the stock. Since then the stock traded up to around $25 throughout the day and closed at $25.11, a 32% gain.
Vantiv Inc, (VNTV) is an integrated payment processor. The company has solutions for merchants and financial institutions. The stock opened today at $17.00, in the middle of its expected range of $16-$18. the stock climbed steadily up throughout the day and broke through the upper end of its expected opening range to close $2.50 higher than opening at $19.50.
Tomorrow look out for BATS Global Markets (BATS). BATS develops and operates online markets for trading securities and options. The company is expected to price 6.3 million shares between $16-$18 per share.
Also on the horizon tomorrow in IPO's is VipShop Holdings (VIPS). This is a China based online discount retailer. 11.2 million shares are expected to price between $8.50 and $10.50.
In other news Research in Motion fell from the top spot among Canada's smart phone manufacturers. This is another sign of the difficulties the Blackberry maker has been facing. Competition from Apple's iPhone and iPad lines as well as Google's Android operating system have been pressuring the stock. The stock lost 1.85% today and closed near 12 month lows.
Research in Motion, daily
McDonald's CEO Jim Skinner announced his retirement today after 41 years with the company. Current president, Don Thompson, will take over. The stock traded down today after the news and made a new four month low. The stock has been trading in a tight range over the last three months and appears to be building support between $95 and $100.
Apple (AAPL) faces some criticism over its iPad 4. Heat issues have sparked an investigation by a consumer watchdog agency. Heat produced by the units is reported to be 116f and capable of burning users. The cost of data is being viewed by some as a trap for users. The device burns up data when streaming high quality video and costs an additional fee per gigabyte once the standard plans are used up. The stock declined by around a half percent in today's trading to close just under $600 at $599.65.
Oil traded down sharply today, as much as $2.50 a barrel at barrel at some points in the morning. Weakening global outlook in China and Europe drove prices to the low levels. Natural gas inventories rose today, which helped pressure the energy market. Oil and gas prices remain at elevated prices despite today's declines. Lingering fears of supply disruption from Iran are keeping prices up.
Gold and the other precious metals fell on the economic news as well. Gold fell as much as 1% in intra-day trading but has recovered some since then, regaining more than half the early decline. The dollar index gained on the news but ended the day basically flat. The index is up over 5% on the year and look like it is gaining strength.
Rates on the 30 year bond fell today to a close of 3.362%.
30 year bond rates, daily
Expectations for growth are diminishing even though our own economy is heating up. The global economy is performing a little worse than previously estimated. The real extent of the European crisis and China's economic slowdown wont be know for some time. Futures on all three of the major US indexes were down sharply following the news from China and Europe. The Dow opened in negative territory and traded lower throughout the day. Volume was weak and the decline was halted near the days lows but above the 30 day moving average. This is the third day of losses in the broad market and brings the Dow less than .4% away from the critical 13,000 level. The trend remains up but is losing technical momentum.
Dow Jones Index, daily with MACD
Advancing and declining stocks leaned heavily to the declining side in early trading with a ratio of 1:5.3, advancers to decliners. By late afternoon the ratio declined by nearly half to 1:2.8.
The days declines brought the S&P below the 1,400 level. A look at the index tracking stock, SPY, shows weak volume here as well. The trend in this index is also still up. Momentum is weakening but is still bullish in the long term.
S&P 500 daily with MACD
S&P 500 Index Tracking Stock SPY, daily with volume
The Nasdaq closed down by 12 points but found short term support at 3050. The index is down from the weeks high but still above the high of last week. The trend is still up but also shows signs of weakening.
Nasdaq, daily with MACD
Nasdaq, daily with support
Economic data will persist as a weight on the markets. It is unclear just how much slowing the world economy is going through. Earnings will also be important, as well as any forward looking statements released. It is also nearing time for the bulk of traded companies to start announcing there earnings. This will provide a lot of much needed data.