Thursday's market action was an unfortunate, yet familiar refrain of what investors have had to deal with far too long. Fears regarding Europe's ability to contain its sovereign debt crisis trumped some decent economic data points here in the U.S. and the result was an ugly trading day that saw the Nasdaq lose almost 2% and the S&P 500 drop almost 1.7%. The Dow Jones Industrial Average shed 1.1%.
As I mentioned yesterday, correlations are so elevated in this market that even gold can get whacked. Some days, it is apparent the yellow metal is indeed a safe have. Other days, Thursday being a prime example, it is obvious gold is nowhere to hide. Gold dropped the most in seven weeks today and silver, platinum and palladium went along for the ride.
Marcus Grubb of the World Gold Council said in an interview with Bloomberg that some investors may be moving out of gold ''to shore up losses in the rest of their portfolio.'' That is probably a valid thesis and one I believe we have seen come to pass several times recently. However, that does not make nasty sell-offs in gold, such as the one we saw today, any easier to stomach. Oh yeah, the U.S. dollar index is on a four-day winning streak.
Looking at some of those aforementioned economic data points, industrial production rose 0.7% last month, topping the consensus estimate of 0.4%. Capacity utilization rose up to 77.8% from 77.3%. That is the highest level since August. The November Housing Market Index showed a reading of 20, topping the October reading of 17. November's reading is also the best since May 2010.
On the jobs front,new claims for jobless benefits fell by 5,000 to 388,000 last week. That's good for a seven-month low and below the 395,000 new claims economists expected. There is a tug-of-war of sorts at play in the U.S. labor market right now. Layoffs are easing and that is certainly good news. However, new hires remain slack. In other words, do not always equate lower jobless claims with a strong gains in new jobs. Overall, the last few weeks have shown the claims picture is definitely improving.
On the surface, this would not appear to be the type of market environment in which to scramble to file and list an IPO, but the opposite may be true. Consumer-reviews site Angie's List (ANGI) made its debut as a public company today on the Nasdaq and saw its shares rise by more than 25%. Angie's List is kind of like Yelp meets Craigslist. If you want to find a new doctor, housekeeper or something along those lines, Angie's List is the place and the site has reviews.
Apparently there is something to modeling a business based on other people's opinions because Yelp filed for a $100 million IPO today. The company did not say on what exchange it will trade, but predictably, its ticker will be YELP. Goldman Sachs and Citigroup are leading the offering.
In earnings news, there was an avalanche of reports from retailers today. Starting with the bad one, shares of Sears Holdings (SHLD) plunged more than 12% after the company said its third-quarter loss widened to $421 million, or $3.95 per share, compared with a year-earlier loss of $218 million, or $1.98 per share. On an adjusted basis, Sears lost $2.57 a share. Analysts expected a loss of $2.29. Revenue fell to $9.57 billion from $9.68 billion. Analysts expected $9.63 billion. Same-store sales dropped 0.7%.
Eddie Lampert has been trying and trying to get the Sears ship headed in the right direction, but the stock has been almost cut in half since March 2010 and the chart is not pretty at all.
There is hope among discount retailers and the really deep discount ones at that. I have not been in Dollar Tree (DLTR) store, but the concept of a place that sells everything for less than a buck is interesting. Appar it is profitable, too. Dollar Tree actually finished higher today after saying said its fiscal third-quarter profit climbed to $104.5 million, or 87 cents per share, from $93.2 million, or 73 cents per share, a year earlier as sales rose to $1.6 billion from $1.43 billion. Analysts expected a profit of 83 cents per share on revenue of $1.58 billion. Dollar Tree expects a fiscal fourth-quarter profit of $1.50-$1.57 a share on sales of $1.89-$1.94 billion. Analysts are expecting $1.54 on revenue of $1.92 billion.
The company raised its full-year guidance to $3.94-$4.01 a share from $3.82-$3.95. Revenue guidance is $6.57-$6.62 billion. Analysts are expecting a profit of $3.95 on sales of $6.58 billion.
Dollar Tree Chart
In the tech world, Amazon (AMZN) is supposedly preparing another product that will intensify its rivalry with Apple (AAPL). Citigroup analyst Mark Maheny said Amazon is readying a smartphone that will go on sale in the fourth quarter of 2012. Maheny told Bloomberg that the Amazon smartphone would use chips from Texas Instruments (TXN) and Qualcomm (QCOM). Amazon shares were flat after-hours after falling 3.5% during regular trading.
One stock that was getting slammed after-hours was enterprise software maker Salesforce.com (CRM). The company reported a third-quarter loss of $3.76 million, or 3 cents a share, compared with a year-earlier profit of $21 million, or 15 cents a share, after the bell today. On an adjusted basis, Salesforce.com earned 34 cents topping the 31 cents Wall Street expected. Revenue climbed to $584 million from $429 million, beating the $572 million analysts expected.
Salesforce forecast an adjusted fourth-quarter profit of 39-40 cents, but as Barron's reported today, 20% of the company's revenue comes from Europe and that is not a good thing these days. After losing 4.3% during regular trading, the stock was down 6.3% after-hours.
Looking at the charts, this was a destructive day from a technical perspective. I mentioned yesterday that after the S&P 500 fell below 1240, next support would be 1225. Well, that area failed today and 1200 is beckoning. From there, 1185 would be next. Suddenly, there is a lot resistance facing the S&P 500 at 1225, 1240, 1255 and 1275 and that is assuming stocks move higher.
S&P 500 Chart
On Wednesday, 29 of 30 Dow stocks closed lower with one unchanged. The situation was barely better today with 28 falling and only VZ and WMT closing higher. Maybe the best thing that can be said of the Dow today is that support at 11,600 did not come into play, but I get the feeling it is only a matter of time. Old support at 12,000 did not hold, so that is probably next resistance for the Dow.
The Nasdaq is arguably the weakest of the three major indexes. Support at 2600 did not hold and we may be looking at how firm support at 2575 is as soon as Friday. CRM is not a Nasdaq stock, but it is one of the more important tech names. The Nasdaq is now almost 100 points below its 200-day moving average and it closed below its 50-day line on Thursday.
Here is what is extremely problematic about this market: There is nothing that even smacks of bailout support for Italy. Spain fell $600 million short of its target in a bond auction today. France is reportedly in danger of losing its AAA credit rating. All of that will continue to overshadow anything remotely positive the U.S. can offer up. Obviously, things change on a dime these days, but I am not feeling encouraged about a fourth-quarter rally.