Stocks Succumb To Downward Pressure (NVDA, JCP, JWN, V, MA, NBS)
Stocks plunged to close out the week, and the volatility we said would remain present certainly was at the forefront today. We don’t think the U.S. market is headed for a big bear market, but more near-term downward pressure is certainly a good possibility, as excluding the “flash” crash anomaly, stocks still haven’t seen a -10% correction since the market started its powerful climb from its lows. Big-cap tech has been hit particularly hard recently and the sector looks attractive from a valuation standpoint, although tech stocks do tend to be seasonally weak heading into the summer.
Stocks fell on the day, with the Dow dropping -163 points to 10,620. The S&P lost -22 points to close at 1,136, while the Nasdaq plunged -48 points to 2,347. Oil continued its slide, falling -$2.79 to $71.61 a barrel, while gold dipped -$1.40 to $1,227.40 an ounce.
On the economic front, the Commerce Department announced that retail sales rose 0.4% in April, topping the 0.2% gain expected by economists. Excluding autos, sales moved up 0.4%, in line with expectations. According to the Thomson Reuters/University of Michigan’s Surveys of Consumers report, consumer sentiment rose to 73.3 in May from 72.2. Economists were expecting a reading of 73.5.
In earnings news, shares of NVIDIA (NVDA) dove -11.5% after the company’s Q2 outlook came in below estimates. For the period ended May 2nd, the company earned $137.6 million, or 23 cents a share, compared with a loss of -$201.3 million, or -37 cents a share, a year ago. Revenue surged 51% to $1 billion. Analysts had predicted EPS of 21 cents on revenue of $986.2 million. For Q2, the graphics chip maker guided for a drop in revenue of -3% to -5% from Q1 to $952-$972 million, less than the $991 million consensus. A total of eight pro investors counted the stock among their top 15 holdings at the start of Q1, while 580 tickerspy members included the stock in their portfolios.
Department store operator J.C. Penney (JCP) saw its shares dip -2.2% after it announced weak Q2 and full-year forecasts. For Q1, net income was $60 million, or 25 cents per share, which was in line with expectations. Last year, the retailer earned $25 million, or 11 cents per share. Sales rose 1% to $3.93 billion, while same-store sales moved up 1.3%. Looking forward, J.C. Penney said it expects Q2 EPS of 10-13 cents, compared to the 13-cent consensus, and full-year EPS of $1.64. Analysts are looking for full-year EPS of $1.65. The company forecast same-store sales during Q2 to grow between 2.5-3.0%, which is below its previous growth prediction of 5%.
Shares of Nordstrom (JWN) fell -3.7% despite the high-end retailer reporting strong sales during Q1 and boosting its full-year outlook. For the quarter, Nordstrom earned $116 million, or 52 cents per share, up nearly 44% from $81 million, or 37 cents per share, a year earlier. The Street was looking for EPS of 55 cents. Revenue climbed 17% to $1.99 billion, while comparable-store sales increased 13.7%. The retailer forecast full-year EPS of $2.50-$2.65, up from its previous outlook of $2.35-$2.55. The consensus is for $2.61. The company also expects same-store sales to rise 4-6% for FY10. A total of seven pro investors counted the stock among their top 15 holdings at the start of Q1, while nearly 120 tickerspy members included the stock in their portfolios.
Yesterday the Senate adopted an amendment that, if passed, would allow the Federal Reserve to limit what card network operators Visa (V) and Mastercard (MA) can charge through “interchange” fees on debit card transactions. The two companies currently earn fees every time a consumer swipes his debit or credit card to make a purchase. On the news, Visa fell -9.9% and Mastercard dropped -8.6%.
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