June 11, 2009

Better Trades US News - Banks Pay Back TARP Loans

Following a late-day rally in Monday’s trading session, Tuesday’s session struggled to mount a charge into positive territory by the closing bell. Investors seemed to shrug off economic news earlier in the day as well as government reports that gave some insight to the nation’s banking environment.

The Treasury Department confirmed early Tuesday morning that the government has permitted 10 of the nation’s largest banks to repay more than $68B in government TARP funds. Those included in repaying the bailout funds are Goldman Sachs (GS), JPMorgan Chase (JPM), BB&T Corp. (BBT), Morgan Stanley (MS), U.S. Bancorp (USB) and American Express (AXP), all of which passed last months “stress tests.”

Banks have become increasingly fervent on repaying the loans, in order to break away from the government’s restrictions within the program that includes compensations caps on company executives.

Shortly after the opening bell, the Commerce Department released their findings in which wholesalers reduced their inventories at a more-than-expected pace for April, as businesses continue to coordinate supplies with falling sales. For the month, wholesale inventories dropped 1.4%, more than the 1.1% drop expected, marking the eighth consecutive month in which supplies were reduced.

Meanwhile, sales at the wholesale level slipped 0.4% in April, following a 2.4% decline in March. Over the past ten months, wholesalers have seen their sales slip in nine of those months. An increase in supplies has led to factories and businesses slashing production as demand continues to wane.

Talbots Inc. (TLB), a leading specialty retailer and cataloger of women's classic apparel, announced on June 9 that the company booked a quarterly loss and will implement a program to reduce the company’s workforce by 20% in the coming months. For the period, Talbots posted a loss of $23.6M, or $0.40 per share, versus a profit of $1.6M, or $0.03 per share a year ago.

Sales for the 1Q slipped from $414.8M to $306.2M, a decline in revenues of more than 26%. Analysts, in the meantime, were looking for the apparel retailer to record a loss of $0.49 per share on total sales of $313.2M.

With the job cuts in place, Talbots is looking to save nearly $21M with the reductions. In the upcoming 2Q, the company is predicting a loss between $0.50 and $0.58 per share, while analysts are projecting a loss of $0.68 per share. By the sound of the closing bell, shares of TLB were flat, ending the session at $5.00 per share.

Titan Machinery Inc. (TITN), representing a mix of agricultural, construction, and consumer products dealerships throughout the Midwest, made it known early Tuesday that the company’s profits for the 1Q dwindled as increased expenses outpaced higher revenues. During the most recent quarter, Titan posted net income of $1.8M, or $0.10 per share, in contrast to last year’s tally of $3.4M, or $0.24 per share, a decrease in earnings of more than 47% year-over-year. However, revenues for the period increased over last year’s totals, climbing from $152.6M to $166.3M, a jump in sales of nearly 9%.

Within the industry, analysts were looking for Titan to post quarterly earnings of $0.13 per share on overall sales totals of $160.11M. Looking forward, Titan reaffirmed their outlook for fiscal 2010, with revenues expectations between $750M and $790M and net income coming in between $16.6M and $18.7M, or $0.92 to $1.04 per share.

Analysts expect yearly earnings from Titan to come in at $0.96 per share on overall revenues of $734.56M. Tuesday’s trading session was unkind to Titan, as shares slipped more than 1% by the close, losing $0.21 to end the day at $14.83 per share.

In business as a designer, manufacturer and distributor of quality watches with prominent brands, Movado Group Inc. (MOV) confirmed before the opening bell on June 9 that the company recorded a loss in the 1Q as luxury purchases have been curbed due to the current economic environment. For the quarter, Movado booked a net loss of $9M, or $0.37 per share, compared to a profit of $1.2M, or $0.05 per share from a year ago. Quarterly sales figures slipped as well, falling from $101.4M to $67.6M, a drop of more than 33%.

In the meantime, analysts within the industry were looking for the maker of fine watches to post a loss of $0.48 per share on overall revenues of $67.6M. For fiscal 2010, Movado is looking to post annual earnings per share of $0.50, with analysts looking for a yearly loss of $0.09 per share. Movado booked yearly earnings of $0.09 per share for fiscal 2009. By the end of trading, shares of MOV were up more than 26% on the day, gaining $2.14 to conclude the session at $10.24 per share.

Over the course of a week or so, crude oil has hovered around the $70 per barrel mark, cautious on exceeding the psychological barrier of that price level. With an overall surge in the equity markets over the past several months, the price of oil has followed suit. Should crude eclipse the $70 mark, it will be at prices not seen since last October. At the sound of the closing bell, the price for a barrel of light, sweet crude oil for July delivery jumped $1.92 to settle at $70.01 per barrel. During the day, oil reached a new annual high of $70.18 before retreating.

In additional NYMEX trading, gasoline for July delivery gained $0.011 to $1.947 a gallon, while heating oil advanced $0.029 to $1.797. Natural gas for July delivery slipped $0.031 at $3.70 per 1,000 cubic feet.

As the equity markets traded relatively flat for the most part, investors were in search of a safer haven for their capital. In doing so, the Treasury markets advanced throughout the day in lieu of the government selling $65B in debt this week. By the conclusion of trading, the benchmark 10-year note gained 4/32 to 93 30/32 as its yield slipped to 3.86%, down from Monday’s rate of 3.88%. Meanwhile, the 30-year note declined 21/32 to 93 15/32 as its yield advanced to 4.65%, up from the previous session’s 4.62%. Lastly, the 2-year note inched higher by 6/32 to 99 4/32, while its yield dropped to 1.31% from 1.42%.

Within the Forex markets, the U.S. Dollar traded lower versus the global currencies today, as the 16-nation Euro was valued at $1.4076, up from last night’s $1.3891. Against the British pound, the greenback slipped as well, as the Sterling was priced at $1.6325, up from Monday’s price of $1.6045. In additional currency trading, the Dollar retreated against the Japanese yen, buying 97.36, down from 98.40 the day before. Meanwhile, the greenback retreated versus the Swiss franc, buying 1.0776, down from 1.0917, and against the Canadian dollar as well, falling from 1.1183 to 1.1031.

As the markets struggled to stay out of negative ground, sellers were persistent in controlling the direction of the major indices. At the sound of the closing bell, the Dow Jones Industrial average slipped 1.43 points to end the session at 8,763.06, while the broader market indicators were mixed at the close.

The S&P 500 index traded just above breakeven on the day, adding 3.30 points, or 0.4%, to finish the session at 942.45, while the tech-heavy NASDAQ composite index advanced 17.73 points, or 1%, to end the June 9 session at 1,860.13.

2009 Better Trades Article

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BRIAN MULLIN