Markets Higher, Closing News 8/30/11

Markets closed higher, after the FOMC minutes revealed a few Federal Reserve (‘Fed’) members, at the August 9th meeting favored more aggressive, clearly defined action to stimulate the economy and lower unemployment. More specifically, Chicago Federal Reserve President, Charles Evans, said on CNBC that the Fed may need to be even more aggressive in providing additional stimulus unless the economy shows significant improvement. Evans also said if the Fed did not provide the necessary accommodation in the form of QE 1 and QE2, the economy would have been in a worse shape than it is today. Evans pointed out, the current rate of unemployment of 9.1% is consistent with a recession and he is not too concerned with inflation. Evans went on to say the Fed needs to provide QE until the unemployment rate drops to about 7% and inflation gets to about 3%.  Overall, it is apparent that the central bank remains deeply divided, notwithstanding the compromise for keeping interest rates low until mid 2013.  Also, the agency held an emergency meeting on August 1 prior to S&P downgrading U.S. credit rating.

After the consumer confidence report was released, it put an end to the market rally over the last few trading sessions. A CNBC commentator appearing on said there is no convection in the rally and that we may retest the lows. Over all, there is no good news from the macro front and the Fed, ECB, and the IMF have painted themselves in a corner, with some Economists looking for a further down turn in the third quarter.

According to the S&P Case-Shiller index, residential real estate prices decreased for the year ending in June. It was a slower pace than the prior month. Property values in 20 cities fell 4.5 percent from June 2010, after a 4.6 percent drop in the 12 months ended in May, which was the biggest decline since 2009.

Pimco’s co-founder, Bill Gross told the Financial Times he “got it wrong” betting against U.S. treasuries. Gross reiterated his warning to avoid treasuries in June. However, this month, turmoil in equity markets caused investors to rush to the safety of government bonds. The 10-year treasury yield dipped below 2 per cent, a 61-year low.  The move has forced Gross to reassess his bearish position on U.S. debt in recent weeks.

Market Indices/Statistics:

  • Dow closed up 20.70 pts/+0.18% to 11,559.95
  • S&P closed up 2.84 pts/+0.23% to 1,212.92
  • Nasdaq closed up 14.00 pts/+0.55% to 2,576.11
  • 14 of the 30 Dow stocks closed higher /BA was the best performing stock
  • 9 of the 10 S&P 500 sectors closed higher
  • Energy and Industrial were the best performing sector
  • The VIX was up 0.61 points to 32.89
  • Oil is up $1.62 to $88.91
  • Nat Gas is up $0.075 to $4.030
  • Gold is up $50.50 to $1,841.70
  • Euro vs. Dollar up $0.0067 to $1.4448
  • Dollar vs. Yen up $0.1850 to $76.6700

Companies in the News:

Boeing Co. (BA) announced it is developing an upgraded 737 with more fuel-efficient engines that already has order commitments for 496 planes from five airlines. Boeing said the new jet will be powered by a modified Leap-1B engine from CFM International and offer 7 percent lower operating costs than competitors.  Boeing closed at $66.03, up $1.43.

CoreLogic (CLGX) announced it has formed a committee of independent directors to explore a wide range of options including evaluation of the Company's capital structure, possible repurchases of debt and common stock, the potential disposition of business lines, the potential sale or business combination of the Company and other alternatives. CoreLogic closed at $11.35, up $2.56.

BB&T Corp (BBT) was upgraded to neutral from underperform at Macquarie citing valuation. The new price target is $24.  BB&T closed at $21.71, down $0.03.

American Eagle (AEO) was downgraded to hold from buy at Citigroup Eagle citing competition in the teen landscape and its impact on margins. The new price target remains $12.  American Eagle closed at $10.87, down $0.02.


DSW Inc. (DSW) reported Q2 adjusted EPS $0.74 vs. consensus $0.63. The company also reported Q2 revenue of $476.3 million vs. consensus $459.44 million, Q2 SSS up 12.3%; gross margin 32.7%. DSW closed at $47.10, down $0.11.

Dollar General Corp. (DG) reported Q2 adjusted EPS $0.52 vs. consensus $0.48. The company also reported Q2 revenue $3.58 billion vs. consensus $3.54 billion and said revenue this year will increase more than it previously expected after second-quarter same-store sales accelerated. The company said sales this fiscal year will rise 12% to 14%, up from a previous forecast of 11% to 13%.  Dollar General closed at $35.76, up $1.97.

Barnes & Noble Inc., (BKS) reported Q1 EPS ($0.99) vs. consensus ($0.94). The company also reported Q1 revenue $1.4 billion vs. consensus $1.44 billion bookstore chain, rose the most in more than three months after posting a smaller loss in the first quarter and projecting revenue for its Nook e-reader to more than double this year. Barnes & Noble closed at $13.13, up $1.70.

Coming Wednesday:

Economic Reports: ADP Employment Report, Chicago PMI, and Factory Orders.

Earnings:  Brown-Forman, Hovnanian Enterprise Inc., Zale Corp., Cooper Cos., Greif Inc., and Oxford Indus Inc.


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