Today's economic data continued to be mixed. Without a clear sign of economic direction the markets pulled back awaiting the non-farms payroll report tomorrow.
Economic data released early in the morning was mixed. The data, retail comparitive store sales did not affect the over all market but later reported weakness in manufacturing did. The major indexes were indicated to open a few points above yesterday's close, did and then held the level for the first half hour of trading until the ISM report came out.
Today was also a heavy earnings reporting day with over 300 companies reporting. Some big earnings misses sent some high profile stocks plummeting during the day's trading. At ten, ISM Manufacturing data tipped the scales and sent the markets into negative territory.
Initial jobless claims dropped for the first time in over a month as the previous weeks number was revised up. Initial claims for the week ending 4/28 is 365,000, down 27,000 from the previous weeks revised 392,000. This weeks claims number is far less than the 378,000 that economists had been expecting. Initial claims are now near the four year lows set in February. The analysts had predicted a spike in jobless claims associated with the Easter holidays that should be over now. The drop in claims helps counter concerns of further softening of the jobs markets sparked by the ADP report earlier in the week. The low ADP number suggests that hiring has fallen off. Tommorow's release of April non-farm job creation data will be an important data point. The estimate is for around 163,000 jobs, slower than the previous months but still a good number. The four week moving average of initial claims ticked up marginally.
The number of people seeking second of week of unemployment fell 53,000 to an adjusted 3.28 million. Continuing claims have been trending down all year and are near the lows set just last month.
Total claims, which lags initial claims by two weeks, also continued to decline. About 6.6 million Americans filed for some form of unemployment in the week ending 4.14. Total claims have been receding all year and are at the low for 2012.
Challenger, Gray and Christmas Inc released data on planned job cuts in the US market today. Firings are up 11% over last year at the same time but the pace is slackening. The report went on to say that there should not be any new spike in job cuts but also that job creation was not outpacing job losses. The reading for April was 11% higher than April last year but the seasonally adjusted pace of firings is less than the pace for all of 2011. The spike in job cuts in April could be related to the Easter holiday.
American productivity fell by a half percent in April. The loss of productivity led to an increase in labor costs. Rising labor costs are one thing hurting manufacturing. The ISM manufacturing survey came in at a weaker than expected 53.5, down from the previous 56. Economists had been expecting some slowing but not as much,the consensus estimate was for a reading of 55.5. This is the weakest reading of the year.
The European Central Bank left its key interest rate unchanged today. The rate is 1%. Bank President Mario Draghi stated that the current long-term-refinancing-operations, concluded earlier this year, needed â€œtime to workâ€. He called for banks to strengthen their â€œresilienceâ€ and to retain earnings. He went on to say that the economic risks were to the downside and highlighted by recent data. Critics are arguing the stimulus may not be enough as Euro zone unemployment rises to multi-year highs.
Spain managed to sell its debt to a welcoming market but faces higher interests rates. European markets ended the day mixed. The FTSE finished up 0.15%, The CAC ended the day down by -0.09% and the DAX closed down by -0.24%.
Asian shares also ended the day mixed as data from of China supports the continued weakness of the country. House prices in the country fell for an 8th month and the services PMI fell for. China is still bracing for a soft landing but there is no sign of the economy bottoming yet. The Hang Seng Index fell by -0.28%, the Nikkei gained +0.31% and the Shang Hei index gaines +0.07%.
Oil and gasoline plunged over 2% today as concerns of global demand and OPEC's statements of supply weighed on trading. Traders are fearing that the global demand will not meet current expectations and the economic data is mounting to support the fear. Added to that OPEC came out and stated that â€œthere is ample supplyâ€ of crude on the market. According to them the elevated prices are due to speculation.
Natural gas inventories continue to rise. In the past week injections have outpaced withdrawals by 28 billion cubic feet. This was less than the forecast 30-34 bcf and sent prices up. Natural gas climbed 10 cents to gain over 4% in today's trading.
The rates on thirty year bonds held steady today and traded in a tight range.
Thirty year bond rates, daily
Retail sales slowed in April. The decline is blamed on the early start to spring. There was expansion across the retail industry but gains failed to meet expectations. There is some concern that middle class consumers are starting to struggle. One notable retailer who is struggling to improve business is Gap Stores. The clothing retailer, who has been hurting, lost even more market share in the month. Same store sales declined 2%, a larger margin of loss than March's 0.9%. The stock opened lower on weak volume, traded higher throughout the day but still finished down by 1.6%.
Gap Stores, daily
TJ Maxx reported strong April sales growth, strong enough to raise first quarter and full year eps guidance. April sales are were up 7% over the same period last year. Sales for the quarter ended 4/28/2012 are up over 11% from last year. Comp store sales came in at 8% on strength in America, Canada and surprisingly, Europe. The release stated that sales growth is being driven by repeat business as shoppers take advantage of savings and value offered by the chain. Full year guidance was raised to a range of $2.26-$2.36 per share, above the previous range and well above last years earnings. The stock has already made an impressive run up this year and could reach new highs. The stock traded down today and but did make a new intra-day high. Long term the stock looks good and momentum is strong.
TJ Maxx, daily
Limited Brands also increased same store sales more than expected. The company reported comp store growth for the month up by 6% over last year and 7% for the quarter. The company went on to restate first quarter earnings guidance to the top of it's range at $0.38-$0.40 per share. Limited's stock has been trending up this year, but it has been a little choppy. The stock continued a bounce from the short term moving average after the announcement and made a new all time high. The technicals indicators are weak but suggest there is some room to move up.
Costco, Target and Macy's all missed their expected sales increases. Costco increased US sales by 4% and foreign sales by 3% in the month. For the quarter US and international comp store sales increased by 8%. The company stated that higher fuel prices and adverse foreign exchange impacted results for the month and the quarter. When fuel and exchange rates are factored in international sales looks better but total company sales is worse. Costco's next quarterly earnings statement is scheduled for May 24th. Shares of Costco stock dropped sharply on the news on moderately heavier trading volume. MACD is divergent from the recent decline in the stock which is currently trading near the middle of its 12 month range.
Target missed its mark as well. The company reported what should have been strong results but the gains did not meet up with what analysts had been expecting. The company increased sales for the quarter by 5.3% but expectations were for more than 6%. The 5.3% is the highest quarterly gain for Target in about 6 years. In the report management was pleased with the results but offered no insight into earnings or the future. The stock dropped sharply, moving below the 30 and 50 day moving averages. The move came on high volume but support held at $56.
Macy's comp store gains also were not up to expectation. The stock dropped in early trading but found support during the day. Total store sales for the month of April were only up 0.4% from last year, trailing the sector. On a comparable basis the company only did a slightly better 1.2%. Given the shift in Easter holiday and spring sales seasons the company was within it's range for the March-April period. For the quarter Macy's was able to increase sales by 4.4% over last year. Macy's is expected to release earnings next Wednesday.
In earnings news GM made the biggest headline. The automaker beat the street on revenue but missed on earnings. Losses in Europe are mounting and the company is struggling to stay on track with its goals of profitability in Europe as the region suffers its financial crisis. GM is still the worlds largest automaker but has lost market share to competitors like Ford and Toyota. North American sales led the company but were offset by losses in Europe. North American sales topped $1.7 billion and the company was able to widen the profit margin in the region. The stock dropped on the news but momentum indicators are divergent. GM has support between $20 and $22.
Green Mountain Coffee Roasters was one of today's most active stocks. After reporting earnings and revenues well below expectations the stock lost 40% of it's value. The price of coffee is down in the first quarter but it did not help the makers of the Kuerig K-cup coffee systems. The company's earnings for the quarter were up 37% from the previous year but the gain lags the previous years increase. The company is losing patent rights to the K-cup this fall and faces competition from Starbucks and other companies who are now licensing with Green Mountain for k-cup branding.
Green Mountain Coffee Roasters
Coffee house operator and merchandiser Caribou Coffee also missed big. The company reported after the bell but the stock had already tumbled around 13%.
Avon was shaking things up this morning with a share holder meeting that re-elected previous board member Andrea Jung. The company has been struggling with performance, bribery charges and an unsolicited bid from up and coming rival brand Coty. Avon has been trading down all week since releasing its earnings Tuesday.
Whole Foods Market made its investors happy. The companies ongoing growth strategy is paying off, helping the food distributor to increase quarterly earnings by 14%. The news sent the stock up over 6.5% heavy volume. The stock has been trending up since 2009 and is now at an a new all-time high.
In the report Whole Foods noted that Easter had shifted into the quarter this year and positively impacted earnings. On a same store basis earnings improved by 9% in the second quarter of fiscal 2012. One highlight of the report was an improvement to gross margins of 70 basis points to 36.3%.
Whole Foods Market, daily
Shares of Kraft traded down but steady today in anticipation of its release, scheduled for 4pm. The food giant posted net revenue growth of 4% and expects to see 5% growth for all of 2012. The results were less than hoped for and the stock traded down in after hours action.
Food maker Sara Lee reported a 3% gain in adjusted net sales for the third quarter of 2012. The company also restated earnings per share guidance to fall in the middle of the previously stated range of $0.89-$0.95 per share. The company is spinning off its coffee and tea segment and should close that deal by June 30th. Shares of the stock traded down today but found support at the 30 day moving average.
Sara Lee, daily
Value Click dropped over 20% today after it announced earnings news that beat analysts estimates. The company's outlook for the second quarter fell shy of expectations and sent the shares tumbling.
Value Click, daily
There were two IPO's today. The Carlyle Group and Pacific Trust Oil Group. The Carlyle Group opened at the low end of their range pricing at $22. The price was thought to be much higher because only 10% of the company was floated. The stock traded flat throughout the day.
Carlyle Group, one day
Pacific Trust also traded flat throughout the day.
Pacific Trust Oil Group
The concern of economic slowing weighed on the Dow today. Traders are waiting for tomorrows jobs report to get a better insight into how the labor market, and economy, is unfolding. The economy is still expanding, but how much the expansion is slowing is still unknown. The Dow is still trending up, but cautiously, as data unfolds. I don't think tomorrow is a turning point but it is a day with two key points of data, the non-farm payrolls number and the unemployment rate.
The S&P 500 came down to the short term moving average today where it stopped. Traders are looking to the jobs report for more direction to economic outlooks. The data has been mixed, making it hard to get a clear look at future expectations.
The VIX is below twenty and near one year lows.
The Volatility Index, VIX, daily
The Nasdaq fell below its short term moving average today. The index remains bullish in the long term but momentum is in decline.
Data and economic news continue to drive the markets. Tomorrows jobs report will be closely watched. The ADP report gave us a benchmark but it can be wildly off. A surprise either way could send the market moving in the short term.