Stocks Retreat As Economic Fears Return (CAG, DFS, MKC, NKE, OSIR)
Stocks took it on the chin today as economic fears have once again have crept back into investor minds. The fear mongering is yet again reaching high levels, with some economists and pundits comparing the economy and market to the early years of the Great Depression. Without doubt, the economy and jobs market is rebounding at a measured pace. However, during the Great Depression people weren’t lined up around the block to get expensive iPhones, they were lined up to get bread. At this time, the economic signals remain mixed, but just as two years ago when the comparisons to the Great Depression were a huge stretch, they are so now.
Stocks fell on the day, with the Dow losing -146 points to 10,153. The S&P fell -18 points to 1,074, while the Nasdaq lost -37 points to 2,217. Oil edged up 16 cents to $76.51 a barrel, while gold climbed $11.40 to $1,245.50 an ounce.
On the economic front, the Labor Department said that new jobless claims fell by -19,000 last week to a seasonally adjusted 457,000. The drop sent total initial claims to their lowest level in six weeks. Economists were expecting a decrease, but were looking for a drop to an annual rate of 460,000 claims. In a separate report, the Commerce Department said that orders for durable goods were down -1.1% in May from a month earlier. The decline, which was largely the result of a huge -26.9% drop in civilian aircraft orders, was the largest since last August. Still, the report came in better than expected, as economists were anticipating a -1.4% drop in orders.
In earnings news, shares of ConAgra Foods (CAG) slipped -1.9% after the firm reported Q4 earnings that just missed analyst estimates. The food distributor said net income in the fourth quarter plunged -48% to $90.6 million, or 20 cents per share; that’s down from $174.7 million, or 39 cents per share, in the same quarter last year. Excluding items, the company earned 39 cents a share, missing estimates by a penny. Total revenue fell -5% to $3.06 billion. The firm remained positive about its outlook saying it will focus on continued cost control, product innovation and recently announced additions to help drive business. A total of 13 Pro investors counted ConAgra in their top-15 U.S.-listed equity holdings at the start of Q2, while 228 tickerspy members held the stock in their portfolios.
Shares of Discover Financial (DFS) rose 0.5% after the financial services firm announced an impressive quarterly profit that topped estimates. The company returned to profitability as consumers spent more with their credit cards. For the fiscal second quarter ended May 31st, the company earned $184.6 million, or 33 cents a share, compared to a loss of -$148.9 million, or -31 cents a share, a year earlier. Discover says its net income was cut by -13 cents per share in the latest period because it redeemed $1.2 billion of preferred stock, bringing adjusted EPS to 46 cents. Analysts were expecting EPS of 11 cents on revenue of $1.62 billion. In the quarter, Discover’s credit card charge-off rate was 7.97%. The company expects the rate to fall to between 7.5% and 8% in the next quarter. A total of six Pro investors counted Discover in their top-15 U.S.-listed equity holdings at the start of Q2, while 136 tickerspy members held the stock in their portfolios.
McCormick (MKC) saw its shares slip by -0.5%, despite issuing a better-than-expected earnings report. In the second quarter, the spice maker posted a profit of $66.2 million, or 49 cents per share, up 31% from $50.7 million, or 38 cents per share, last year. Revenue climbed 5% to $798.3 million. The results exceeded analyst expectations of EPS of 45 cents on revenue of $788 million. Looking forward, McCormick expects to post full-year EPS at the high end of its previous forecast of between $2.49-$2.54, bracketing analyst estimates of $2.50. However, the company noted several headwinds, including a higher tax rate, increased cost for benefits and for certain raw materials, and a stronger dollar.
Elsewhere in the market, clothing and footwear giant Nike (NKE) reported Q4 earnings that matched Wall Street’s view. However, the firm failed to grow revenue as quickly as profits, and investors sent shares lower by -4.0%. Nike recorded net income of $521.9 million, or $1.06 per share, up 53% from $341.4 million, or 70 cents per share, a year ago. Revenue grew 8% to $5.08 billion, but missed analysts’ sales goal of $5.15 billion. The company’s emerging markets revenue leaped 47% to $556 million and revenue for soccer-related gear was up 39% during the fourth quarter. During the conference call, CEO Mark Parker added commentary to the results by saying, “And that’s before the first goal was scored at the World Cup.” Looking ahead, Nike said it now expects fiscal 2011 revenue, excluding the impact of currency exchange, to grow at a high-single-digit rate. A total of 42 Pro investors counted Nike in their top-15 U.S.-listed equity holdings at the start of Q2, while 372 tickerspy members held the stock in their portfolios.
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