Surprise in Retailer Sales Lift Markets

123jump.com Staff
06 Sep, 2007
New York City

Same store sales overshadowed the trading sentiment in New York. Market averages gained as investors surmised that retail spending is likely to remain at elevated level despite higher energy cost and worsening lending crisis. Consumers kept shopping in August lifting the sales by 2.9%. However, record number of U.S. homes in foreclosure. Gold crossed $700, oil above $76. The rising metal prices and weak dollar helped European stocks. India, Korea, and Taiwan led Asian markets with a gain of 1%

[R]4:30PM New York, 10:30PM Frankfurt, 2:00 AM Mumbai[/R]

[R]Market averages in New York closed higher on better than expected same store sale in August. Subprime borrowers defaulted at growing rate according to a private report. European markets closed fractionally higher.[/R]

FTSE 100 Index in London increased 42.60 or 0.68% to 6,313.30, in Tokyo Nikkei 225 closed at 16,257.00, up 0.61% or 98.55, and in Brazil, iBovespa Index traded down 0.3% or 161.17 to 54,569.00.

Yields edged higher on 10-year U.S. bonds and closed at 4.50% and 30-year bond rose to close at 4.79%.

Crude oil increased 57 cents to close at $76.30 per barrel, natural gas closed down 22 cents to $5.58 per mBtu, and gasoline futures decreased 2.48 cents to close at 197.17 cents per gallon.

Gold gained $13.90 in New York trading to close at $704.60 per ounce, silver closed 18 cents higher to close at $12.53 per ounce, and copper for August month deliver in London fell $148 to $7,215.00 per pound in New York trading.

In New York trading averages managed to close higher on the back of same-store sales report. Market had anticipated a slowdown in spending leading to weak growth in retail same store sales. According to International Council of Shopping Centers same store sales gained 2.9%, lower than 3.5% in July.

Retail store sales generally rose across a variety of retail markets and chains but luxury retailers led the rise. Saks sales in August jumped 18% and sales at Nordstrom increased by 6.6%. Apparel retailers Limited Brands sales in the month increased 1.1% and sales at Gap fell 1%. Specialty retailers AnnTaylor reported a rise of 2.9% sales and at Chico’s sales fell 9.3%.

Teenage retailer American Eagle Outfitters sales increased 9% and Abercrombie & Fitch sales rose 6%. J.C. Penney sales increased 4% and said that it expects the sales to increase in at the same or higher pace for the rest of the quarter. Sales at Kohl’s fell 0.6% on the weakness in home accessories and apparel sales.

In other economic news, initial claims of unemployment benefit fell 19,000 to 318,000 at the end of last week. Nonfarm business productivity increased at 2.6% and unit labor costs increased 1.4%.


Bank of England and European Central Bank left interest rates unchanged. ECB left the rates at 4% and the BoE left the rate at 5.75%. ECB also added 42 billion euros into short-term money market. The Reserve Bank of Australia widened the kind of collateral it will accept for loans but central bank in China increased the reserve required from the banks to curb lending growth. The Federal Reserve Bank in the U.S. added $31.25 billion leading the overnight lending rate below its target rate of 5.25%. The infusion from ECB also lowered the rate to 3.7% from 4.68% in yesterday trading in the euro zone.

The central banks around the world in the last five weeks have added nearly $395 billion in liquidity.

Yesterday, the Bank of Canada did not change interest rates and left its target rate at 4.5% and the operating band for the overnight lending was left unchanged. The Bank of England increased the reserves that lenders need to keep wit the bank. Libor or London interbank rate jumped to 6.8%, nine-year higher.

Of the 30 stocks in Dow Jones Industrial Average listed, 7 closed lower and 23 closed higher. Honeywell led the gainers with a rise of 2.6% followed by gains in Merck and United Tech of 2.2%, Coca Cola of 1.8%, and 1.6% in General Electric. Home Depot led the decliners with a fall of 3.5% followed by 1.2% loss in AIG, and 0.7% in Citigroup.

Of the stocks in S&P 500, 162 stocks closed lower and 336 gained, 2 stocks closed unchanged. Of the index stocks 45 companies gained more than 4%. Biogen Idec led the gainers in the index with a rise of 5.8% followed by increases of 5.2% in Lexmark, 5.1% in Consol Energy, 4.9% in Peabody, and 4.7% in News Corp. Office Depot led the decliners with a fall of 6.3% followed by a losses of 4% in The Gap, 3.5% in Campbell, and 2.9% in MGIC and Tyson Foods.

In Latin Markets trading Argentina led the gainers with a rise of 0.9% followed by increase of 0.3% in Brazil, 0.02% in Mexico and a loss of 0.6% in Chile.

[R]1:00PM NY, 5:00 PM Frankfurt European markets closed higher as the ECB and BoE kept rates unchanged.[/R]

European stock markets finished in the positive territory Thursday, helped by strength among mining companies on the back of rallying metals prices, deal speculation and a decision made by the European Central Bank and the Bank of England to keep interest rates unchanged. Upbeat U.S. data also generated positive sentiment, helping to ease fears of a greater-than-expected slowdown in the U.S. economy. Across the region, the U.K. led advancers with a gain of 0.7%, followed by France, up 0.5% and Germany, rising 0.4%.

In Frankfurt gainers were led by Infineon Technologies and Merck KGaA after analysts recommended buying the shares. Semiconductor Infineon climbed 5%, while drugmaker Merck KGaA added 1.6%. Shares of SAP, maker of business-management software, increased 2.5%.

In Paris stocks advanced, paced by oil company Total which gained 1.6% as crude oil prices extended recent highs on warnings of a terrorist threat in Nigeria. Safran also climbed. Europe's biggest maker of aircraft landing gear gained 2.2% on merger speculations.

In London commodities stocks paced the gains. Mining giant Rio Tinto jumped 5.4% on speculations that it might receive a joint takeover bid from BHP Billiton and Brazilian miner Companhia Vale do Rio Doce. BHP Billiton rose 4%. Other miners, such as Antofagasta and Xstrata also gained as gold futures rallied to hit $700 an ounce. Oil companies also stood out among gainers, with Royal Dutch Shell, up 2%. However, banking shares posted weakness on continuous credit worries. Northern Rock dropped 3% and Standard Chartered fell 2.1%


[R]11:30AM Market averages turned lackluster. U.S. mortgage foreclosures hit a record high.[/R]

U.S. stock averages turned to a lackluster trading fashion, as ongoing credit market and housing worries offset upbeat sentiment generated by largely positive economic data and retail sales in August. On Thursday, the Federal Reserve injected another $31.25 billion through three repurchase agreements to help keep the markets liquid.

The Mortgage Bankers Association said in a report Thursday that the share of all U.S. mortgages entering foreclosure hit an all-time high of 0.65% in Q2, rising from 0.58% in Q1, The number of subprime borrowers making late payments rose 14.82% from 13.77%. The news sent housing stocks further lower. Tobacco, airline and financial stocks also moved to the downside.

Mortgage lender Countrywide Financial ((CFC)) fell 3.6% after it announced plans to cut another 900 jobs, following the elimination of about 500 positions last month. In the tech sector Apple ((APPL)) shares slid 1% after the technology products maker cut the price of its iPhone.

In late morning trading, the Dow Jones industrial average rose 12.27, or 0.09%t, to 13,317.74. The Standard & Poor's 500 index was up 1.20, or 0.08%, at 1,474.06, and the Nasdaq composite index rose 1.72, or 0.07%, to 2,607.67. Bonds were little changed. The yield on the benchmark 10-year Treasury note was at 4.47%, the same as late Wednesday.


[R]09:45AM Wall Street opened higher on lower initial jobless claims and robust productivity.[/R]

U.S. stocks bounced back into the positive territory at opening, boosted by a sharp drop in U.S. jobless claims and a stronger-than-forecast productivity report. Some better-than-expected retail sales reports also provided support. The Labor Department said initial claims for state unemployment benefits fell by 19,000 after five straight weeks of increases. Productivity in the U.S. nonfarm business sector was revised up to an annual rate of 2.6% in Q2 from 1.8% gain reported earlier.

Retailers were in focus Thursday, with most of them posting in-line or better-than-expected sales figures. Dow component Wal-Mart ((WMT)) gained 1%, as it posted a stronger-than-forecast 3% sales rise for August. Ann Taylor Stores ((ANN)) rose 4.5% after posting 2.9% same-store sales increase, beating the 1.9% sales decline projected by analysts.

On the side of the losers, Gap ((GPS)) dropped 2.8% after it reported a better-than-expected 1% sales drop. Stein Mart ((SMRT)) fell 2.6% after posting August same-store sales decline of 5.2%, worse than the 4% fall estimated by analysts. Limited Brands and J.C. Penney ((JCP)) lost about 1% each on disappointing sales results.

In global economic news, the European Central Bank and the Bank of England both held rates unchanged. In addition, the ECB on Thursday injected another $57 billion into the banking system. The Dow Industrials were 10.9 points higher at 13,316.4. The S&P 500 rose 0.3 points at 1,472.6, while the Nasdaq gained 1.1 points at 2,607.05.


[R]9:30AM New York, 7:00PM Mumbai – Deal making and expectations of strong industrial activities in the current quarter lifted the index.[/R]

Sensex in Mumbai trading closed up 170.16 or 1.1% to 15,616.31. CNX Nifty closed up 42.75 or 0.96% to 4,518.60.

Of the stocks traded on Bombay Stock Exchange, 1,698 closed higher 1,050 declined, and 74 were unchanged. The daily turnover on the exchanges was 4,646 crore rupees compared to 5,167 rupees in the previous session. The turnover on the National Stock Exchange declined to 9,937 crore rupees from 10,939 crore rupees a day ago.

The broad rally in the market was evident in oil and gas, consumer durables, auto, and banking stocks. Of the 30 stocks in the Sensex, 27 closed higher and 3 declined.

State Bank of India increased 2.6% to 1,635 rupees. The bank plans to raise 1,500 crore rupees in a bond issues.

Cement stocks led the rally. Birla Corporation jumped 3.6% to 317 rupees followed by 1.7% rise in ACC to 1,101 rupees, 1.6% gain in Ambuja Cement to 140 rupees, and 4% in India Cements to 274 rupees.

A day after Maruti warned that sales growth may be lower in the rest of the year, investors bid up auto stocks. Maruti Suzuki jumped 0.6% to 878 rupees followed by increases in Tata Motors of 2.1% to 712 rupees, Hero Honda Motors of 2.7% to 652 rupees and Bajaj Auto of 1.5% to 2,340 rupees.

Hindustan Unilever jumped 1.9% to 216 rupees on the news that its Assam personal care products plant has ended seven week long strike. The normal operations are expected beginning next week.

Welspun Gujarat lost 5.8% to 241 rupees and Raymond declined 0.6% to 273 rupees. Raymond is planning to launch women apparel group with a retail chain of 175 stores.

Saregma India soared 10% for the second day to 260 rupees. Yesterday Sonanta Investments purchased 10.6 lakhs or 1.06 million shares. Networth Stock Broking increased 5% for the second day after the company said that it is negotiating with several investors but failed to name them. Traders suggested Hiduja Group is likely to buy a stake in the company.

Hindustan Zinc added 3% to 724 rupees after the company lowered zinc price by 3.7% to 139,200 rupees to a ton and lead price was lowered by 6% to 139,100 rupees to a ton.

Hindoostan Spinning & Weaving Mills added 5% for the second day in a row after the news that the company has sold 8 acre land in Mumbai for 350 crore rupees to Akruti Nirman.


[R]09:00AM U.S. stock futures indicated a lower opening ahead of economic data.[/R]

U.S. stock futures pointed to a negative opening of Thursday trading session ahead of key economic data expected to show slowing growth in the services sector. The economic agenda included also data on weekly jobless claims, a final look at second-quarter productivity and weekly energy data.

Investors looked past a better-than-forecast performance from retailers in August, showing disbelief that the strong spending of the back-to-school season would continue into the coming months. According to the International Council of Shopping Centers same-store sales will increase 2.5% in August.

Wal-Mart Stores ((WMT)) advanced 2% in pre-market trading after reporting a stronger-than-forecast 3% sales rise for August. Among other retail companies, Limited Brands ((LTD)) posted 1% growth in same-store sales for August, while J.C. Penney ((JCP)) said its comparable sales dropped 4%.

On the earnings news front, Campbell Soup ((CPB)) dropped 5.3% in the pre-open after posting a 39% profit rise, while UTI Worldwide ((UTIW)) added 1% after it reported a 20% drop in Q2 earnings, citing slower revenue growth. S&P 500 futures dropped 4.6 points at 1,472.00 and Nasdaq 100 futures fell 6 points at 1,997.25. Dow industrial futures fell 21 points.


[R]8:00AM Retailers released August same-store sales. Wal-Mart, Saks beat expectations.[/R]

Wal-Mart Stores Inc. ((WMT)) posted 3.1% increase in August same-store sales, compared with estimates of 1.5% increase. Including the impact of fuel sales same-store sales rose 3%. Total sales climbed 9.3% to $28.22 billion. Looking ahead, the company expects U.S. September same-store sales to be between 1% and 3%.

Saks ((SKS)) said Thursday its August same-store sales jumped 18.2%, exceeding two times analyst expectations of a 9.2% increase. Total sales rose 19.9% to $213.5 million. The best performing categories for the month were women's shoes; men's apparel, accessories, women's designer apparel and modern collections; and fine jewelry. Due to the retail calendar shift and promotional adjustments, the company expects to see huge same-store sales growth in September and November and below-average same-store sales growth in October and December.

Nordstrom Inc. ((JWN)) posted 6.6% increase in monthly same-store sales, ahead of the estimate of 6.3%. The department store chain reported total sales of $582.3 million, up 12.6%.

Wet Seal ((WTSLA)), retailer of apparel and accessories, reported higher-than-expected 1.7% increase in August same-store sales. Analysts had anticipated 0.6% rise in comparable sales. Total sales rose 9.6% to $56.1 million from $51.2 million. For September, Wet Seal expects same-store sales to range from down 1% to up 3%.

Limited Brands Inc. ((LTD)) posted 1% increase in its August same-store sales, coming in slightly below estimates of a 1.4% rise in comparable store sales. Total sales fell to $565.2 million from $638.8 million.

Maternity-apparel retailer Mothers Work ((MWRK)) reported 3.7% decrease of its August same-store sales, while net sales for the month rose 1.6% to $47.1 million, helped by increased sales from the company's licensed relationship.

[R]7:00AM New York, 8:00PM Tokyo - Japanese stocks rebound in volatile trading Thursday on weak U.S housing market data. Japan digital camera exports jumped 35% in July. Nippon Steel lifts profit estimates.[/R]

Tokyo finished up 0.61% paring losses of as much as 2% in morning trade. Investors remain uncertain and concerned with the events in the credit markets. The continued volatility in the U.S. and unknown scale of exposure and losses emanating from sub-prime lending in its banking system keeps investors on the sidelines. Yesterday Nikkei 225 fell 1.6%, the heaviest since decline this week.

Of the 225 Tokyo shares, 122 stocks gained, 93 dropped while 10 remained unchanged. Of the index stocks, 32 shares gained over 2%.

Nikkei 225 in Tokyo trading ended up 0.6% or 98.55 at 16,257.00 recovering from early morning losses caused by reports U.S. homes sales plunged 12% in July. Technology shares rebound on higher exports. The yen gained sharply overnight before retreating to 115.3 per dollar from yesterday’s closing rate of 116.1.

The Japan Camera and Imaging Products Association announced Wednesday digital camera exports surged 34.7% to 7.3 million units in July from a year ago, driven by single-lens reflex models. Shipments in value terms rose 24.4% to 153.3 billion yen while exports of digital SLR cameras were up 35% to 580,000 units. Digital camera exports in July expanded 38.2% to 6.45 million units. Exports to Europe grew 39%, North America up 37.8% and rest of Asia soared 31%.

Of the Nikkei 225 stocks, Nippon Oil Corp led gainers rallying 9.1% helped by firmer global oil prices followed trading firm, Itochu Corp up 5.1%. Tosoh Corp finished higher 4.6%, Softbank Corp added 4.51% and Toray Industries rose 4.22%. Technology related stocks Minebea Co Ltd, Trend Micro Inc, KDDI Corp, NTT Data Corp rose 3.31%, 2.8%, 2.5% and 2.1% respectively.

Of the index shares, real estate, financial and industrial stocks dropped. Hitachi Zosen paced decliners slumping 11.5% while giant land developer Sumitomo Realty plunged 4.3% after stronger gains Wednesday. Tokyu Land Corp fell 4.23%, Daiwa Securities Corp down 3.64% and Kayima Corp lost 3.5%.

Steelmaker, Nippon Steel said Thursday it will pay a 5-yen per share dividend in the interim to September, up from 1-yen per share 12 months ago, according to its revised profit estimates. The group predicts net earnings in the half-year will climb to 170 billion yen, from earlier forecasts of 160 billion yen. Nippon Steel targets profit before tax will rise to 280 billion yen from 270 yen, as previously expected. The shares closed up 1.8% in Tokyo.

Marubeni Corp ended higher 1.43% after reporting Wednesday its U.S unit, Marubeni American Corp had acquired shares in Canadian trailer hiring firm, Train Trailer Rentals Ltd. No figures were released. Train Trailer has engaged in leasing business for dry and refrigerated freight trailers and container chassis for 35 years, according to Marubeni.

Nissin Food Products Co said Wednesday it will raise the prices of almost its entire instant noodles in January by between 7% and 11%, for the first time in 17 years, owing to rising international wheat prices. Already, there are concerns that firming world wheat prices will have a direct negative impact on domestic grain products.