Stocks sold-off early in the day but managed to almost make it back to the unchanged mark.
Before the market opened, April retail sales came in much better than expected. Excluding auto sales, the April reading was up 0.5% while the market was only looking for a 0.2% increase. Including auto sales, the number was in-line at -0.2% (Source: Briefing.com). This data gave the futures a bump higher.
However, stocks began to slide when Wal-Mart reported its earnings. Although WMT beat analysts’ estimates by one cent, its guidance was slightly below expectations. The company’s CEO said that “There are still uncertainties about the rest of the year.” WMT gave Q2 guidance of $0.78-0.81, which was just below the average estimate of $0.81. However, shares of WMT are up 20% year-to-date, significantly out-performing the major indices (see chart). Everyone is trying to figure out how the tax rebates are going to affect Wal-Mart’s sales the next two quarters, but I bet this is already priced into the stock.
Stocks also felt pressure from crude oil’s rally back to record levels. Energy and material stocks were the winners on the day. Crude traded as high as $126.98, but finished the day at $125.80 because the Senate voted by a veto-proof margin (97 to 1) to halt additions (~70,000 barrels per day) to the Strategic Petroleum Reserve until crude prices are below $75 per barrel. The House voted 385 to 25. 700,000 barrels is “less than 0.1% of global demand of 87 million barrels.”
Hewlett-Packard was in the news after it announced it was going to buy Electronic Data Systems for $13.9B. With this acquisition, HPQ will challenge IBM in computer services. The Wall Street Journal broke this news late Monday and shares of HPQ got hammered late Monday and it continued today (see chart).
HPQ also pre-announced its Q2 earnings of $0.87 per share, above the average estimate of $0.84. It raised its full-year EPS estimate by four cents (to $3.54 from $3.50) and it raised its revenue guidance to $114.2B, up from $113.5B.
Other noteworthy news:
- Fluor, an engineering company, soared 15% after beating analysts’ estimates by 24 cents ($1.50 vs. $1.24 per share). The company also raised its full year guidance about 21%.
- Treasuries sold-off big on the better-than-expected retail sales data; the dollar was also up off of this report
- The decoupling between oil and the dollar was evident again today as both oil and the dollar were up.
- Meredith Whitney cut earnings estimates at Goldman, Merrill, Lehman, and Morgan Stanley. She said these companies’ outlooks are “far more bleak than that reflected in the market.”
DJIA 12,832.18 -44.13 (-0.34%)
Nasdaq 2,495.12 +6.63 (+0.27%)
S&P 500 1,403.04 -0.54 (-0.04%)
NYSE Volume N/A
2-Yr Bond 2.47% +0.17
10-Yr Bond 3.90% +0.12
30-Yr Bond 4.62% +0.09
Crude Oil (June) 125.80 +1.57
Nat Gas (June) 11.422 +0.121
Gold (June) 869.60 -15.30
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