Briefing.com's Weekly Wrap
| Additional signs that the strength of the global recovery is waning sparked selling pressure, resulting in sharp losses for the major indices. The S&P 500 declined four consecutive sessions, with the bulk of this week’s loss occurring on Wednesday (-2.8%). Losses were broad-based and trading volume was light, with the NYSE not surpassing 1 million daily shares for the 20th consecutive session. Nine of the 10 sectors declined, with tech (-5.6%), industrials (-5.0%) and financials (-4.9%) coming under the most selling pressure. Defensive- oriented sectors outperformed on a relative basis, with the telecom gaining 0.6%. Risk aversion was also seen in the relative underperformance of smallcap shares, with the Russell 2000 tumbling 6.3%. The FOMC meeting Tuesday marked one of the major events of the week. The Fed held rates unchanged at 0.00% to 0.25%, as expected, and also announced plans to use proceeds from its more than $1 tln holdings in agency MBS and debt to buy longer term Treasuries. The news was not unexpected after last week The Wall Street Journal reported that the Fed would be considering the action. But it is a clear sign that Fed is concerned about the economic recovery effort. The news helped drive the 10-year note yield down to 2.64%, marking the lowest level since April 2009. In corporate news, Hewlett-Packard (HPQ) dropped 12.5% for the week after company reported that its CEO was stepping down due a violation of HP’s standards of conduct related to expense reports. At the same time, the company reported upside preliminary third quarter EPS of $1.08 versus the $1.07 Thomson Reuters consensus and raised its Fiscal year 2010 EPS forecast. A total of 18 S&P 500 companies reported earnings as second quarter earnings reporting season enters its final stretch. Of those that reported, 13 topped EPS estimates. Cisco (CSCO) reported quarterly results that were slightly ahead of estimates. But the company’s outlook stoked fears of a slowdown, with the CEO saying customers were sending “mixed signals”, sending shares down 11% for the week. Walt Disney (DIS) posted a strong quarter, benefiting from advertising sales at ESPN. The company reported a 16.4% y/y rise in revenue to $10.0 bln, topping the $9.4 consensus. Earnings per share came in at $0.67, easily topping the $0.58 consensus. Despite the beat, shares fell 4.0% for the week. A handful of retailers reported quarterly results. JCPenney (JCP), Kohl’s (KSS) and Macy’s (M) reported better-than-expected EPS, while Nordstrom (JWN) posted in-line results. Only Macy’s stock managed to post a gain for the week, up 3.9%. In economic news, overseas data that supported the notion of a slowdown in the global recovery weighed on U.S. stocks. China reported weaker-than- expected retail sales and the Bank of England lowered its economic outlook. Back in the U.S., weekly new unemployment claims rose to a six month high of 484,000, which was worse than the Breifing.com consensus of 465,000. Initial claims have remained between 450,000 and 500,000 since the middle of November 2009. Retail sales rose 0.4% in July, slightly below the Briefing.com consensus of 0.5%. Almost all of the gain can be attributed to increased demand for gasoline and motor vehicles. Core sales -- which excludes sales from auto dealers, gasoline stations, and building materials and supply stores -- declined 0.1%. As a result, Briefing.com economist Jeff Rosen reduced his third quarter GDP forecast to 0.7% from 1.0%. On a related note, the trade deficit expanded by a greater-than-expected amount which will negatively impact the second estimate to Q2 GDP. Earnings report season continues to wind down in the upcoming week, but there are some potentially market-moving names slated to report. Dell (DELL), Lowe’s (LOW), Home Depot (HD), Wal-Mart (WMT), Deere (DE) and Target (TGT) are among the 14 S&P 500 companies confirmed to report on Briefing.com’s economic calendar. Index Started Week Ended Week Change % Change YTD % DJIA 10653.56 10303.15 -350.41 -3.3 -1.2 Nasdaq 2288.47 2173.48 -114.99 -5.0 -4.2 S&P 500 1121.64 1079.25 -42.39 -3.8 -3.2 Russell 2000 650.68 609.40 -41.28 -6.3 -2.6 |
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