February 23, 2010

Markets Slip More Than 1 Percent Each

Following a relatively breakeven day in the markets to start the week, Tuesday’s trading session saw the markets slip more than 1% each, as investors were unpleased by several economic reports released this morning.

In economic news, the Standard & Poor's/Case-Shiller 20-city home price index was released on Tuesday and showed a 0.3% gain in December, rising to a seasonally adjusted reading of 145.87. Despite posting a minimal gain from November’s reading, the current reading remains more than 3% off last December’s showing.

The reading also revealed that only five of the 20 cities surveyed showed a decline in home prices from November to December. The index sits more than 3% higher than the industries bottom last May, but is 30% below its all-time high reached in May 2006. On a quarterly basis, U.S. home prices have fallen 2.5% during the 4Q of 2009 compared to the same period in 2008.

A report from the Conference Board stated that confidence from shoppers took a surprising dip in February, marking the first time in three months that the monthly poll showed a decline. During the month, the consumer confidence index slipped nearly 11 points to a reading of 46, well below the revised reading in January of 56.5. On average, analysts were looking for the index to post a more modest decline to a reading of 55.

Another reading showed that consumers’ assessment of current economic conditions plunged from 25.2 in January to a reading of 19.4 in February. Another gauge, which measures the outlook for the next six months, also declined, falling from 77.3 to 63.8.

The Federal Deposit Insurance Corp. (FDIC) announced on Tuesday that the nation’s banks posted a minimal profit during the 4Q, despite more than 700 banks being classified as troubled. During the quarter, the financial institutions posted a gain of $914M, in sharp contrast to the same period a year ago in which the banking industry posted a $37.8B loss.

In corporate news, Target Corp. (TGT), which operates large-format general merchandise and food discount stores in the U.S., announced before the opening bell that the company’s profits surged during the 4Q, as a bump in holiday sales and streamlined inventory helped the company’s bottom-line.

For the recent period, Target posted net income of $936M, or $1.24 per share, in sharp contrast to last year’s quarterly profit of $609M, or $0.81 per share, an increase in earnings of nearly 54%. Overall revenues advanced as well, climbing from $19.56B to $20.18B, an increase in sales of more than 3%.

On average, analysts within the industry were looking for the discount retailer to record a quarterly profit of $1.16 per share on $20.16B in total revenues.

Gregg Steinhafel, Chairman, President and CEO at Target, commented on the company’s recent performance, "We're very pleased with our fourth quarter and full year 2009 financial performance, which reflect substantial innovation and disciplined execution by teams across the company. Fourth quarter retail segment performance was well above our expectations due to stronger-than-expected holiday sales, combined with well-controlled inventories and disciplined expense controls."

For the year, Target managed to post an annual profit of $2.49B, or $3.30 per share, versus net earnings of $2.21B, or $2.86 per share, an increase in year-over-year profits of nearly 13%. Yearly revenues advanced as well, inching higher from $64.95B to $65.36B, an increase of 0.6%. Analysts were looking for a yearly profit of $3.32 per share on $65.36B.

Despite the positive quarterly earnings report, shares of TGT slipped more than 1% by the close of Tuesday’s trading, giving up $0.58 to end the session at $50.06 per share. Throughout the past year, the stock has managed to trade as high as $52.46 per share and as low as $25.00 per share.

Operating as one of world's largest home improvement retailers, The Home Depot Inc. (HD) made it known early this morning that the company posted a profit during the 4Q, as home improvements picked up. During the quarter, Home Depot recorded a net profit of $342M, or $0.20 per share, compared to last year’s net loss of $54M, or $0.03 per share.

Sales throughout the three-month period slipped, falling from $14.61B to $14.57B. On an adjusted basis, net earnings were affected by a $163M write-down related to its HD Supply investment. If excluded, the company would have posted a quarterly profit of $443M, or $0.26 per share.

Analysts, who typically exclude one-time charges, predicted Home Depot to post a 4Q profit of $0.17 per share based on $14.07B in overall sales.

On a yearly basis, the company reported net income of $2.66B, or $1.57 per share, compared to a yearly profit of $2.26B, or $1.34 per share in 2008. Annual sales came in at $66.2B, down more than 7% from 2008, when the company saw $71.3B in total sales.

Looking ahead to fiscal 2010, Home Depot is expected to post an annual profit of $1.79 per share, representing an almost 16% increase over 2009’s yearly earnings. Yearly sales are projected to come in 2.5% higher than the $66.2B in overall sales in 2009.

By the sound of the closing bell, shares of HD were up more than 1%, adding $0.43 to end the day at $30.75 per share. Within the past 52 weeks, the company’s stock price has slipped to an annual low of $17.49 per share, while reaching a high of $31.03 per share, which was established during intraday trading.

Engaged in the retail sale of trade books, mass-market paperbacks, children's books, off-price bargain books and magazines, Barnes & Noble Inc. (BKS) affirmed early Tuesday morning that the company’s profits during the 3Q slipped year-over-year, despite a surge in overall sales.

The recent quarter saw Barnes & Noble post a net profit of $80.4M, or $1.38 per share, compared to last year’s net profit of $85.2M, or $1.42 per share, a decrease in earnings of just under 6%. Quarterly revenues advanced from $1.63B to $2.17B, a jump in sales of more than 33%.

Analysts within the industry were looking for the bookseller to record a net profit of $1.34 per share during the period based on total revenues of $2.16B.

Heading into the 4Q, BKS has seen its year-to-date net income fall more than 12%, slipping from $78.14M, or $1.35 per share, to $68.71M, or $1.18 per share. Sales throughout the first three quarters increased from $3.97B a year ago to $4.49B, a jump in revenues of more than 13%.

Looking ahead, Barnes & Noble is expecting an upcoming loss in the 4Q, ranging between $0.85 and $1.15 per share. Analysts are looking for a 4Q loss of $0.61 per share based on quarterly sales of $1.28B. For the year, the company is looking to post an annual profit between $0.23 and $0.53 per share, with analysts expecting a profit of $0.58 per share for the full-year.

Following a bleak yearly and quarterly outlook, shares of BKS plunged 6% by the close of the February 23 trading session, falling $1.28 to end the day at $20.23 per share. Over the course of a year, the stock has traded as high as $28.78 per share, while dipping to a yearly low of $15.28 per share.

Energy prices reversed their upward trend on Tuesday, snapping a three-week run in oil prices. By the close of trading, the price for a barrel of light, sweet crude for April delivery slipped $1.45 to settle at $78.86. The current contract added $0.25 to settle at $80.31 a barrel on Monday.

In additional NYMEX trading, heating oil slipped $0.0465 at $2.0323 a gallon, while gasoline fell $0.0502 to $2.0656 a gallon. March natural gas futures slipped $0.117 to $4.778 per 1,000 cubic feet.

Despite a strengthening Dollar, Treasury prices were higher Tuesday, as investors were taken-aback by a lackluster consumer confidence report. With the day’s trading complete, the benchmark 10-year note was higher, adding 29/32 to 99 15/32, with a yield of 3.68%, down 0.11% from the day before.

Meanwhile, the longer maturing 30-year note was up on the day as well, gaining 1 19/32 to 99 29/32, as its yield declined to 4.63% from the previous session’s 4.73%. Lastly, the shorter maturing 2-year note was marginally higher, adding 3/32 to 100 2/32, while its yield decreased by 0.05% to 0.83%.

The Forex markets saw the Dollar trade higher versus the majority of the world’s currencies, as the 16-nation Euro declined against the greenback, buying $1.3507, lower than the previous session’s price of $1.3608. The British pound also decreased versus the Dollar, as the Sterling slipped from $1.5489 to $1.5407.

However, the Dollar did decrease in value against the Japanese yen, buying 90.21, down from Monday’s value of 91.18. In additional trading, the Dollar climbed to 1.0839 Swiss francs from 1.0758 and rose to 1.0557 Canadian dollars from 1.0417 Canadian dollars.

By the sound of the closing bell on February 23, the Dow Jones Industrial average plunged 100.97 points, or 1.0%, to end the day at 10,282.41, while the broader market indicators concluded the session in the red as well.

The S&P 500 index was lower, falling 13.41 point, or 1.2%, to finish at 1,094.60, while the tech-heavy NASDAQ composite index declined as well, slipping 28.59 points, or 1.3%, to 2,213.44.

2010 Better Trades Article

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BRIAN MULLIN