Bears Squash Early Rally Despite Decent Economic News (DSX, AEO, TOL, SQM, HTM)

In a reverse of yesterday, the market gave back some nice gains, eventually ending in the red. The economic news today was decent, but the tail continues to wag the dog, with worries over Europe and the euro continuing to dictate the direction of the U.S. market. We expect the market to remain volatile in the short term, with a bearish bias. However, we generally think that accumulating positions on ensuing weakness will prove to be the correct move for the long term.

The Geothermal Stocks Index was the top performing tickerspy Index on the day, led by U.S. Geothermal Inc. (HTM) with a 13% gain.

Stocks fell on the day, with the Dow off -69 points to 9,974. The S&P lost -6 points to 1,068, while the Nasdaq slipped -15 points to 2,196. Oil jumped $2.76 to $71.51 a barrel, while gold rose $15.50 to $1,213.30 an ounce.

On the economic front, the Commerce Department said that durable goods orders climbed 2.9% last month, better than the 1.3% increase expected by economists. Excluding transportation, orders moved down -1%. Meanwhile, it was reported that new home sales jumped 14.8% to a seasonally adjusted annual rate of 504,000 units, ahead of analyst estimates and the highest level since May 2008.

In earnings news, shares of Diana Shipping (DSX) rose 0.8% after the drybulk carrier’s Q1 results beat estimates. For the quarter, net income was $28.8 million, or 36 cents per share, down from $34.8 million, or 47 cents per share, last year. Wall Street was expecting EPS of 34 cents. Revenue edged down to $62.2 million, topping the $57.9 million consensus, while fleet utilization increased to 99.7% from 98% a year ago. The company also said it authorized a share buyback of up to $100 million. A total of four pro investors counted the stock among their top 15 holdings at the start of Q2, while 947 tickerspy members included the stock in their portfolios.

Shares of American Eagle Outfitters (AEO) dove -16.6% after the company’s Q2 outlook came in significantly below analyst expectations. For the period ended May 1st, the teen apparel retailer earned $10.9 million, or 5 cents a share, compared with $22 million, or 11 cents a share, a year earlier. Adjusted EPS was 17 cents, matching estimates. Revenue grew 8% to $659.5 million. For Q2, American Eagle guided for a loss of -1 cent to a profit of 3 cents, compared to the much-higher consensus of 21 cents.

National home builder Toll Brothers (TOL) said consumer demand has increased and posted a smaller quarterly loss amid higher orders. The stock moved up 0.8%. For Q2, the company posted a loss of -$40.4 million, or -24 cents per share, versus a loss of -$83.2 million, or -52 cents per share, in the same period a year ago. Analysts were expecting a loss of -23 cents per share. Revenue dropped -22% to $311 million, while net signed contracts surged 41% to 820 units. The stock edged up 0.8%. A total of three pro investors counted the stock among their top 15 holdings at the start of Q2, while 171 tickerspy members included the stock in their portfolios.

Shares of Chemical & Mining Co. of Chile (SQM) fell -0.2% after the company’s Q1 profit topped expectations by two cents. For the first quarter, the fertilizer company earned $76.5 million, or 29 cents per ADR, down -13.5% from last year’s earnings of $88.4 million, or 34 cents per ADR. Revenue jumped 21% to $388.5 million. Analysts were expecting EPS of 27 cents on revenue of $404.99 million.

Tags: AEO, DSX, HTM, SQM, TOL