May 20, 2009

Better Trades US News

Sellers reentered the markets in Tuesday’s trading following a surge in buying from the previous session, as investors were dismayed over the government’s recent housing report that sent the indices lower by the close. Prior to the release of the housing data, the futures were positive, trying to add to Monday’s gains of nearly 3% on average. The Dow Jones, which jumped more than 235 points on Monday, also saw the S&P and NASDAQ each gain 3% or more. The Dow’s advance recouped nearly three-quarters of last week’s losses.

In a light day of economic news, the leading report that led the indices lower throughout the session was the Commerce Department’s revealing of April’s housing starts, which plummeted to its lowest level in more than 50 years. For the month, construction of new homes and apartments fell off by 12.8% to a seasonally adjusted rate of 458,000 units. Economists were stunned by the results, anticipating that housing starts would post a modest increase for the month, following March’s slight increase in construction of 0.3%.

In April, single-family home construction advanced by 2.8%, a potential sign that one portion of the housing industry may be stabilizing. However, the multi-family sector saw construction pitch lower by more than 46% to an annual rate of 90,000 units. The current reading follows March’s decline of 23%.

In more disappointing news, the government agency also revealed that applications for new building permits, a key measure for future economic activity, slipped 3.3% to an annual rate of 494,000, a new record low. Tuesday’s housing reports comes on the heels of the previous day’s report by the National Association of Homebuilders that released their findings that builder confidence increased for the second straight month in May, hopefully signaling optimism in the home building sectors.

A light docket of company earnings were scheduled Tuesday morning, which included one of the leading full-line sporting goods retailers in the U.S., Dick’s Sporting Goods Inc. (DKS). Reporting before the opening bell, Dick’s posted a profit of $10.2M, or $0.09 per share, in sharp contrast to the previous year’s earnings of $19.6M, or $0.17 per share, a decrease in profits of nearly 48% year-over-year. Meanwhile, the company’s revenues advanced during the 1Q, climbing from $912.1M to $959.7M, an increase of 5.2%. On average, analysts within the industry were looking for the retailer to post quarterly earnings of $0.07 per share on overall sales totals of $912.6M. For 2009, Dick’s raised the lower end of their earnings expectations and now is looking to post yearly earnings of $0.85 to $0.97 per share, up from the previous range of $0.77 to $0.97 per share. By the end of the trading session, shares of DKS slipped 5.6% at the close, losing $1.11 to finish at $18.67 per share.

One of world's largest home improvement retailers, Home Depot Inc. (HD), announced early Tuesday morning that the company’s 1Q earnings surged on lower charges incurred. For the recent period, Home Depot posted net income of $514M, or $0.30 per share, versus last year’s profit of $356M, or $0.21 per share, an increase of more than 44%. In the meantime, total revenues receded from $17.9B to $16.2B, a decrease in sales of nearly 10%. The key decline to quarterly sales was HD’s decrease in same store sales, which fell 10.2%. Analysts, on average, were looking for the home improvement retailer to post earnings of $0.29 per share on total sales of $15.86B. Amidst the current economic crunch, HD released their expectations for the year in which the company predicts a 7% drop in annual earnings and 9% decline in overall sales. Based on the previous year’s annual totals, Home Depot should post net income of $2.15B on sales of $64.9B. Analysts are looking for yearly earnings to come in at $1.35 per share on $65B in sales. At the closing bell, shares of HD were down more than 5%, slipping $1.39 to end the day at $24.63 per share.

As consumers continue to reel in their discretionary spending, luxury retailer Saks Inc. (SKS) confirmed Tuesday morning that the company posted a loss for the 1Q, albeit less than what analysts were anticipating. For the recent period, Saks booked a loss of $5.1M, or $0.04 per share, compared to a profit of $17.3M, or $0.12 per share. Quarterly sales plunged from $850M to $621.3M, a decrease in revenues of nearly 27%, while same store sales fell more than 27% during the quarter. On average, analysts were looking for the operator of Saks Fifth Avenue to post a loss of $0.26 per share on total revenues of $620M. Looking forward, Saks is expecting low double-digit declines in same store sales for the year. For the upcoming 2Q, same store sales are projected to fall by mid-teen percentages. By the sound of the closing bell, shares of Saks were up more than 17%, adding $0.73 to close out the session at $4.81 per share.

Throughout the crude markets, the price of oil surged towards the $60 mark by the end of Monday’s session, gaining nearly $2.70 a barrel to settle at $59.03 as a sudden oil refinery fire in Pennsylvania sparked the uptrend. During today’s trading, the crude markets were tamer, as investors took profits before mid-morning. By the close of trading on Tuesday, the price for a barrel of light, sweet crude for June delivery inched higher, up $0.62 to settle at $59.65. With June’s contract set to expire today, the focus on trading moved to the July contract, which added $0.51 to settle at $60.10 a barrel.

In additional NYMEX trading, gasoline for June delivery gained $0.0544 to $1.8125 a gallon and heating oil added $0.0109 to $1.4866 a gallon. Natural gas for June delivery slipped $0.235 to $4.03 per 1,000 cubic feet.

At the pump, the price for a gallon of gasoline advanced $0.003 overnight to a national average of $2.314 per gallon. Tuesday’s reading coming in $0.066 higher than this time last week, and $0.257 higher than a month ago. With last summer’s crude prices reaching $147 a barrel, gasoline currently sits $1.48 lower per gallon than this time last year.

In the bond markets, U.S. Treasuries traded mixed as investors reacted to weakened housing data while placing their capital in the safer, more-secure government-backed markets. By the close of trading, the benchmark 10-year note was flat at 99 2/32 with its yield remaining at 3.23%. Meanwhile, the 30-year note was slightly lower, down 1/32 to 100 25/32 with a yield of 4.19%, down from Monday’s rate of 4.20%. Finally, the 2-year note was up 2/32 to 99 31/32 with a yield of 0.88%, down from the previous session’s 0.92%.

Looking into the Forex markets, the value of the U.S. Dollar lost strength throughout Tuesday’s session after investors were disgruntled after the housing reports released early this morning. By late afternoon, the 16-nation Euro advanced versus the greenback, buying $1.3634, up from last night’s price of $1.3534, while the British pound increased in value against the Dollar as well, buying $1.5480, up from Monday’s price of $1.5320. Furthermore, the greenback slipped in trading against the Japanese yen, buying 96.05, down from the previous session’s price of 96.42.

In additional Forex trading, the Dollar reverted to 1.1095 Swiss francs from 1.1162 late Monday, while declining to 1.1561 Canadian dollars from 1.1635 the day before.

By the close of Tuesday’s trading session, the market wavered in and out of positive ground throughout much of the day, before finally ending the session mixed. At the sound of the closing bell, the Dow Jones Industrial average was down 29.23 points, or 0.3%, to close out at 8,474.85, while the broader market indicators concluded the session in positive territory as well.

The S&P 500 index was marginally higher by the close, falling 1.55 points, or 0.2%, to end at 908.15, as the NASDAQ composite index ended the day higher by 2.18 points, or 0.1%, to finish at 1,734.54.

2009 Better Trades Article

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BRIAN MULLIN