Stocks are up but the rally isn't seeing much progress. Investors have a lot to digest today with a 30-year bond auction, a key earnings report, weekly jobless claims, record foreclosures, and more economic data. This morning traders were focused on Wal-Mart's earnings and the official retail sales numbers for July. This afternoon the focus was on the bond auction and its bid-to-cover ratio.
Foreign markets were higher today. Yesterday the Asian markets were gapping lower. Today they gapped higher in reaction to the Federal Reserve's positive comments for the U.S. economy. The Chinese Shanghai index gained 0.89% after yesterday's super sharp 4.6% decline. The Hong Kong Hang Seng gained 2.0% but both markets churned sideways following the opening pop. The Japanese NIKKEI rose 0.79% and is up five out of the last six sessions. Investors will be looking for Japan's second-quarter GDP report due out on Monday.
European markets have managed a two-day rally. Economists and investors alike were surprised to see France and Germany's second-quarter GDP numbers come in at positive growth. The first quarter of 2009 saw the French economy fall 1.3% and the Germany economy, Europe's largest, plunged 3.5%. It was somewhat shocking to see them both bounce back with a 0.3% rise in GDP. Technically this ends their respective recessions and raises hope that the GDP for the 16-country euro-zone will rebound just as quickly. The French CAC-40 index rose 0.49%. The German DAX gained 0.95%. The English FTSE rallied 0.8%.
The Commerce Department reported July retail sales figures came in worse than expected. Economists were looking for a gain of 0.7% but sales actually fell 0.1% in July. The Cash for Clunkers program really helped the auto sector, which saw a 2.4% jump in sales. Yet autos tend to be volatile and ex-autos retail sales fell 0.6%. This is the fifth monthly decline in a row for U.S. retail sales and confirms that the American consumer is still struggling and reluctant to open their wallets.
Wal-Mart (WMT) was the big earnings report today. Investors have been waiting to hear from the retail giant for days since the company has a unique look on the health of the consumer and the retail sector in general. The prevailing thought was WMT's numbers should be okay as more and more consumers cut back and start shopping at the discount chain to save money. Wall Street was looking for a profit of 86 cents a share. WMT delivered 88 cents thanks to cost cutting. Revenues were below estimates at $100 billion for the quarter. Same-store sales for the quarter fell 1.2%. WMT's president Mike Duke said consumers would continue to save more and spend less in what he called the "new normal". Shares of WMT spiked higher, breaking through resistance at its 200-dma but stalling at price resistance near $52.00. Tomorrow morning we'll get more retail earnings data from Abercrombie and Fitch (ANF) and J.C. Penney (JCP).
In a separate report the Commerce Department said that business inventories fell for the 10th month in a row. Economists were expecting June's inventory numbers to fall 0.9%. Corporations continue to cut back and inventories slipped 1.1%. Another disappointing economic report out today was the weekly initial jobless claims. Economists were expecting a drop to 545,000 new claims. The Labor Department said claims came in at 558,000. While new claims went up the continuing claims contracted from 6.34 million to 6.2 million. However, if you count workers on continuing claims and add the extended and emergency unemployment services the number of people collecting unemployment rises to 9.25 million.
Rising unemployment usually means rising foreclosure rates and that's exactly what we're seeing. RealtyTrac said there were more than 360,000 foreclosure notices sent out in July. This is a 7% jump from June and a 32% jump from a year ago. They've only been publishing this data for about four years and this is an all time high and accounts for one foreclosure filing for ever 355 homes in the U.S. I'll have to double check but this might be the fifth month in a row that foreclosure filings were more than 300,000 a month, which has never happened before.
Meanwhile the stronger GDP numbers in Europe gave the euro a boost. The U.S. dollar is rolling over again. This is helping commodities turn higher with gold, silver, copper and oil all rising. Investors did have one eye on the bond market this afternoon. The Treasury department sold $15 billion in 30-year bonds. Fortunately the auction was successful with a strong bid-to-cover ratio of 2.54 versus the recent average of 2.3. Currently the yield on the 30-year note is about 4.5%.
Currently the S&P 500 index is barely holding on to positive territory with a two-point bounce at 1,008. The NASDAQ composite is up about four points at 2,002. The Dow Industrials are edging lower and trading near unchanged for the session. The small cap Russell 2000 index is also fading from its highs with a less than a one-point gain near 573.
Let's take a quick look at charts for the major averages:
Chart of the S&P 500:
Chart of the NASDAQ:
Chart of the Dow Industrials:
Chart of the Russell 2000 index:
Scanning the OptionInvestor.com play list for movement I see that CHRW is pulling back to test the $55.00 level again. GDX is up 2.7% thanks to strength in gold and other metals. JCP hit our new stop loss at $31.90. Tobacco producer LO is contracting with a 1.6% decline. A broker upgrade for AAPL pushed the stock to new highs and the put play has hit our stop loss. GMCR continues to sink with a 1.9% loss. SNDA has broke down from its trading range with a 4.9% decline.