Higher open expected Thursday following drop in jobless claims and better than expected same-store sales data. Record high crude prices took a toll on stocks Wednesday, as did continued weakness in the housing sector. However, outside of housing, economic data has been better than anticipated.

Same-store sales results from the nation’s retailers have been mostly above estimates, including results from Wal-Mart (WMT). Estimates were for WMT to see a 2.1 percent rise in same-store sales in April, but the actual figure came in at 3.2 percent growth. The result was even stronger than Wal-Mart’s own forecast of growth between 1 percent and 3 percent. WMT shares look to move higher this morning by about one percent with the stock just a few dollars shy of a new 52-week high.

Other retailers seeing better than expected same-store sales included Costco (COST), BJ’s Warehouse (BJ) and Children’s Place (PLCE). However, disappointing results were released by Limited Brands (LTD), Pacific Sunwear (PSUN) and Target (TGT). Record high energy prices, a soft jobs market and falling home prices are not the best environment for retailers, but at least the sector is showing signs of life.

In earnings news, Toyota (TM) reported a 28 percent drop in profits partly due to the drop of the dollar against the yen. The world’s largest automaker continued to expand in many regions of the country, but experienced a slowdown in the U.S., Japan and Western Europe. The company also lowered its profit outlook and this is pushing the stock lower by three percent in pre-market trading.

Jobless claims for the past week fell by 18,000 to a level of 365,000, which was about 5,000 lower than expected. Nonetheless, the four-week moving average rose by 2,500 to 367,000 claims. This report supports the view of a soft labor market, but doesn’t point to a recession. Last week, the jobs data showed a better than expected decline of 20,000 nonfarm payrolls.

The ECB and BOE both decided to keep rates unchanged, while jawboning against inflation. Expectations are for the FOMC to also keep rates unchanged at their next meeting in June. Though the economy remains soft, inflation fears have been lifted of late, especially with crude rising more than 10 percent this week along. On Wednesday, oil closed at another record high at $123.53, but is up only slightly in early trading Thursday.  

Jody Osborne
Senior Writer & Options Strategist
Optionetics.com ~ Your Options Education Site

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