Morning Watch, Nov. 13
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November 13, 2009
Stocks higher Friday as traders digest earnings in the retail sector. The bulls have to be pleased with the week's results, which should end with solid gains baring a huge decline today. Earnings results have been heavy with reports from Dow component Walt Disney (DIS) and a number of retailers. Economic news picked up Friday as well with data on import and export prices, international trade and consumer sentiment. Overall, despite the end of a six session winning streak Thursday, the bulls have won the battle this week.
Disney shares are higher by more than 4 percent after the entertainment giant reported better than expected earnings. Earnings per share came in at 46-cents, 5-cents above estimates with revenues rising 4.5 percent. The company continues to be concerned about the economy and expects to continue cost cutting measures. DIS shares are trading near $30.25, which is a new 52-week high for the stock.
Retail stocks are getting a lot of attention Friday following the release of earnings from several retailers. Shares of J.C. Penney (JCP) and Abercrombie & Fitch (ANF) are up more than 5 percent. JCP missed earnings expectations by a penny, but the department store is seeing strength on in line guidance for the important holiday shopping season. JCP shares are trading near $31 with a 52-week range from $13.71 to $37.21.
Shares of ANF are trading at a new 52-week high above $38.25 following its report. ANF beat earnings estimates by 10-cents a share, although profits fell 39 percent and revenues were down 15 percent. Traders are definitely trading off expectations for ANF given that same-store sales fell 22 percent. This hasn't occurred for Nordstrom (JWN), which is seeing its shares fall 5 percent despite raising its full year guidance. However, JWN does have a 52-week low at $6.61 with the stock currently trading just below $33. Overall, the Retail HOLDRs (RTH) are flat on the session.
In economic news, the international trade deficit widened more than expected, but economists are pleased with rise in exports. Export prices in October rose 0.3 percent with import prices up 0.7 percent with both figures higher than expected. The report getting the most attention has been the consumer sentiment release from the University of Michigan. This sentiment index came in at 66.0 in mid-November, down from 70.6 in October and off the consensus for a reading of 71.0. This is a concern because low sentiment can lead to weak consumer spending.
Jody Osborne
Senior Staff Writer & Options Strategist
Optionetics.com ~ Your Options Education Site
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