Retailers Cheer up Markets

Elena
06 Oct, 2005
New York City

All Asian markets finished in the red, following the sharp declines on Wall Street, led by the Nikkei falling 2.4%. European stocks traded down at mid-day ahead of interest-rate decisions with the German DAX 30, down 1.2%. Costco, retailer, posted Q4 19.5% earnings rise of 73 cents a share on higher revenue, beating estimates. Wal-Mart, the world's largest retailer, posted a rise in September comparable sales of 3.8% from last year.

U.S. MARKET AVERAGES

U.S. stock futures point to a Thursday opening near the flat level, showing only little hope for rebounding to the upside after stock markets closed sharply down on Wednesday.
Falling oil prices do not seem able to cheer the market sentiment. Oil slid for a fifth straight day on Thursday and touched its lowest level in two months. U.S. crude futures for November were down 63 cents at $62.15a barrel, having earlier traded as low as $61.90.

Nation’s largest retailers report their September sales Thursday and early figures paint a mixed picture as a good number of them have reported declines in their monthly same-store sales. Limited Brands revealed a 2% decline in September comparable store sales, Sharper Image ((SHRP)) announced a 21% drop, Factory Card & Party Outlet ((FCPO)) reported a 0.4% slide and The Buckle ((BKE)) posted a 1.4% decline. Talbots ((TLB)) reported lowered 2005 earnings outlook and a 5.1% decline in its September comparable store sales. New York & Co. ((NWY)) cut its full-year guidance and posted 0.4% in comparable store sales
Yet, another retailer, Costco ((COST)) posted Q4 20% earnings rise of 73 cents a share on higher revenue, beating estimates. Wal-Mart ((WMT)), the world's largest retailer, revealed that its September comparable sales rose 3.8% from last year. For October, Wal-Mart projected comparable store sales growth of 2%-4%. The company reaffirmed its Q3 earnings guidance of 55 to 59 cents per share.

A weak outlook from contract electronics manufacturer Solectron Corp. ((SLR)) painted the picture of the tech sector in dark colors. The company posted quarterly earnings rise, but a revenue drop.

S&P 500 futures were down 0.8 point, a bit below their fair value. Dow Jones industrial average futures were down 10 points, while Nasdaq 100 futures were down 3.5 points.

ECONOMIC NEWS

Thursday morning, the Department of Labor released its report on initial jobless claims in the week ended October 1, showing an unexpected increase. The report may raise some concerns about the strength of the monthly employment report due to be released on Friday.

The Labor Dept. said that jobless claims rose to 390,000 from the previous week's upwardly revised figure of 369,000. Economists had expected jobless claims to decline to 350,000 from the 356,000 originally reported for the previous week.

The report also showed that the 4-week moving average rose to 404,500 from the previous week's upwardly revised average of 388,750. This marks the eighth consecutive increase for the less volatile 4-week moving average.

Additionally, the Labor Dept. also said that continuing claims in the week ended September 24 rose to 2.905 million from the preceding week's revised level of 2.787 million.

As mentioned above, the Labor Dept. is due to release its September employment report on Friday, with economists expecting the report to show that the U.S. economy lost 150,000 jobs in September. The decrease is expected to reflect the impact of Hurricanes Katrina and Rita.

INTERNATIONAL MARKET NEWS

All Asian-Pacific benchmarks closed in the red, posting heavy losses on sharp declines of U.S. equity markets. The Japanese Nikkei was the biggest decliner, down 2.4% with Kyocera, Honda Motor and Fanuc among the leading losers. Across the region, South Korea’s Kospi fell 2% with decliners including Samsung Electronics and Posco. Hong Kong’s Hang Seng tumbled 2.1%, and Australia’s All Ordinaries was down 2.1%. The dollar bought 113.97 yen.

European markets fell deeply in the negative territory at mid-day, dragged down by sharp declines on Wall street, inflation concerns , prospects of higher interest-rate, and a slowdown in economic growth. The expected interest-rate decisions of Bank of England and the European Central Bank also weighed on markets. The German DAX 30 lost 1.2%, the French CAC 40 fell 1.2%, and London’s FTSE 100 slipped 1%. Among the losing stocks were automakers Volkswagen, Daimler Chrysler, and oil majors like BHP and Total.

ENERGY, METALS, CURRENCIES

Oil prices dropped to a two-month low on oil inventory report, showing declines in crude and gasoline stocks. Light sweet crude for November delivery lost 89 cents to trade at $61.90 a barrel on the Nymex. Gasoline futures slid 3 cents to $1.8780 a gallon. London Brent lost $1.03 to $59.09.

Gold prices climbed in European trading on the back of a weaker dollar. In London the precious metal traded at $466.30 per troy ounce, down from $464.10. In Hong Kong gold fell 50 cents to close at $466.15. Silver opened at $7.42, down from $7.33.

In European trading the U.S. dollar declined against its major counterparts. The euro was quoted at $1.2054, up from $1.1954.The dollar changed hands at 113.78 yen, down from 113.93.The British pound was trading at $1.7674, up from $1.7630.

EARNINGS NEWS

Costco Wholesale Corp. ((COST)), retailer, reported a Q4 profit rise of 19.5% to73 cents a share on 10.3% revenue growth and announced its intentions to buy back another $1 billion in shares. The company said the quarter included 7 cents in tax benefits; apart from those benefits, its earnings of 67 cents topped analysts’ forecasts of 64 cents a share. Comparable sales increased 11% in September, with overall sales up 13% to $5.14 billion.

Marriott International Inc. ((MAR)), lodging industry operator, reported 12% Q3 net income rise to 65 cents per share, beating the analyst estimate by a penny, and up from 56 cents per share in the year-ago period on revenue growth at the company's hotels, boosted by higher room rates. The latest quarter incorporated a charge of 5 cents per share for writing down the value of the company's investment in a Delta Air Lines leveraged aircraft lease. Excluding the charge, net income was 70 cents per share.

ATI Technologies, Inc. ((ATYT)), graphics chipmaker, reported a Q4 loss of 41 cents a share on revenue decline from $60 million from the Q3 to $470 million, missing the analysts’ forecasts for a loss of 30 cents a share. Excluding one-time items, the company reported a loss of 12 cents a share.

International Speedway Inc. ((ISCA)), motorsports promoter, announced Q3 net profit dropped 46% to 69 cents a share despite 7.5% revenue growth. Its result in the same period last year was boosted by a 68 cents a share gain from the sale of North Carolina Speedway's assets, and the company stock beat the analysts’ forecasts of 65 cents a share.