Stocks Dealt One-Two Punch By Jobless Claims, Manufacturing (SPLS, SHLD, PETM, INTC, MFE, HSFT)

Stocks got hit with a double whammy of poor economic news today, with a rise in jobless claims and poor Philadelphia area manufacturing report sending stocks lower. The economic data otherwise soured a day that was highlight by more big news in the M&A market. Right now a lot of big corporations are flush with cash, and acquisitions are one way for them to use this money while stock prices are depressed. While the economic data dominated today’s market action, we think the M&A theme could prove to be the more important one down the line.

The Chinese IT Stocks Index was the top performing tickerspy Index on the day, led by HiSoft Technology (HSFT) with a 23% gain.

Stocks fell on the day, with the Dow off -144 points to 10,271. The S&P slipped -19 points to 1,076, while the Nasdaq dropped -37 points to 2,179. Oil fell -99 cents to $74.43 a barrel, while gold rose $4.10 to $1,233.80 an ounce.

On the economic front, the Labor Department said that jobless claims rose by 12,000 last week to 500,000, the highest level in nine months. Meanwhile, the Philly Fed Index, which measures manufacturing activity in the Philadelphia region, unexpectedly fell to -7.7 this month from 5.1 in July. Economists were expecting a reading of 7.

In earnings news, shares of Staples (SPLS) sank -3.6% after the company lowered the top end of its FY10 forecast. For the period ended July 31st, Staples earned $129.8 million, or 18 cents a share, up from $92.4 million, or 13 cents a share, a year ago. Adjusted EPS was 20 cents, in line with expectations. Revenue was nearly flat at $5.53 billion, while same-store sales were also flat. For the full year, Staples said it now expects adjusted EPS of $1.25-$1.29, versus its prior outlook of $1.25-$1.33 and below the $1.33 consensus. For Q3, the company guided for EPS of 39-41 cents. Analysts were expecting Q3 EPS of 43 cents. A total of 19 Pro investors counted the stock in their top-15 U.S.-listed equity holdings at the start of Q2, while 140 tickerspy members held the stock in their portfolios.

Owner of Sears and Kmart, Sears Holdings (SHLD), posted a wider-than-expected Q2 loss, causing its shares to fall -9.2%. For the quarter, the retailer lost -$39 million, or -35 cents per share, better than last year’s loss of -$94 million, or -79 cents per share. Adjusted EPS came in at -36 cents, or -19 cents excluding pension expenses. Revenue dipped to $10.46 billion from $10.55 billion, while comparable-store sales slipped -2.2%. Analysts were looking for EPS of -18 cents on revenue of $10.62 billion. A total of 15 Pro investors counted the stock in their top-15 U.S.-listed equity holdings at the start of Q2, while over 300 tickerspy members held the stock in their portfolios.

Shares of PetSmart (PETM) jumped 8.9% on news the company’s quarterly profit surged 24% on higher sales. For Q2, net income was $48.4 million, or 41 cents a share, up from $39 million, or 31 cents a share, a year earlier. The Street was expecting EPS of 36 cents. Revenue rose to $1.4 billion from $1.31 billion, and same-store sales grew 4.6%. Looking forward, the company forecast full-year EPS of $1.91-$1.99, above estimates of $1.90. For Q3, PetSmart expects EPS of 35-39 cents, bracketing the 37-cent consensus.

In M&A news, chipmaker Intel (INTC) announced that it will buy computer security software maker McAfee (MFE) for $7.68 billion in cash. Intel will pay $48 a share, a 60% premium over McAfee’s closing stock price of $29.93 yesterday. Shares of Intel fell -3.5% on the news, while shares of McAfee soared 57.1%.

Tags: HSFT, INTC, MFE, PETM, SHLD, SPLS