Retailers, Restaurants Decline; Dollar Rises

123jump.com Staff
26 Aug, 2008
New York City

U.S. stocks edge higher after dollar gained in the international trading and new home sales rose. The home sales rose 2.4% to 515,000 units but declined 35% from a year ago. The dollar rose against all major currencies as economies around the world are expected to falter. The dollar rose sharply against the British pound, euro and Australian dollar. Restaurant stocks fell after Darden reported lower than expected earnings.

[R]1:00PM New York – U.S. stocks edge higher. Restaurant stocks traded lower on weak earnings from Darden Restaurants.[/R]

U.S. stocks edged higher in the morning trading on rising dollar, falling crude oil futures prices and a report on sale of new homes.

New homes sales in July rose to 515,000 from a revised 503,000 in June according to the latest data released from the Commerce Department.

The dollar rose sharply against the British pound, euro and Australian dollar. The currency traders are taking a view that economic slowdown in Europe and Australia on stronger currency is likely to accelerate. The current economic growth in the face of rising inflation and elevated currency cannot be sustained and interest rates in the euro zone and UK are likely to decline before the end of the year.

The dollar gained nearly 0.6% to $1.4654 against one euro and rose 0.2% against yen to 109.68 and ruble fell 0.7% to 24.7 to a dollar. The Australian dollar dropped 0.7% to 85.64 U.S. cents and dropped as low as 85 cents.

The dollar has rebounded between 4% and 10% against major currencies of the world in this month and further gains in the currency are less likely.

Apparel and restaurant companies were active after the release of earnings from several in the sector.

U.S. Stock Movers

American Eagle Outfitters, Inc ((AEO)) edged 46 cents higher to $14.20 after it reported second quarter sales decreased 2% to $688.8 million from $703.2 million a year ago. Net income in the quarter declined 22% to $59.8 million or 29 cents per diluted share compared to net income of $81.3 million or 37 cents per share, a year ago.

Chico’s FAS Inc ((CHS)) rose 11% to $5.51 after it reported second quarter sales decreased 7.1% to $405.2 million from $436.0 million a year ago. Net income in the quarter declined 83% to $6.7 million or 4 cents per diluted share compared to net income of $38.7 million or 22 cents per share, a year ago.

Big Lots, Inc ((BIG)) fell 4% to $31.75 after it reported second quarter sales increase of 2% to $1.1 billion and net income increase of 11% to $26 million or 32 cents a share compared to 22 cents a share.

Daktronics, Inc ((DAKT)) rose as much as 16% to $21.15 before settling at $18.16 after first quarter sales increased 33% to $161 million and net income rose 41% to $9.7 million or 24 cents a share compared to $7.1 million or 17 cents a share.

Darden Restaurants ((DRI)) reported second quarter earnings below estimates dragging the stock and the sector lower. Darden fell 13% or $4.24 to $28.04. On the news Cheesecake Factory ((CAKE)) fell 84 cents to $14.85, P F Chang’s China Bistro ((PFCB)) declined 92 cents to $24.70 and Chipotle Mexican Grill ((CMG)) dropped $2.60 to $76.53.

Thornburg Mortgage ((TMA)) jumped 11 cents to 50 cents after it reported second quarter net income in the quarter rose 80% to $412.3 million or 84 cents per diluted share compared to net income of $83.4 million or 66 cents per share, a year ago.