Benchmarks Finish Mixed As Markets Approach Technical Ceiling (FDX, DBRN, PIR, BHP, POT, MOS, CCME)
The market digested an improvement in weekly jobless claims with relatively cautious guidance and a layoff announcement from FedEx (FDX) to trade in a tight range before eventually ending near breakeven. Overall, the data still is coming in mixed, although we think FedEx could be intentionally taking a guarded approach and low-balling a bit. From a technical perspective, the market is coming up against a ceiling, and investors are waiting to see if stocks will break out or return to oscillating mode.
Stocks ended the day mixed, with the Dow up 22 points to 10,595 and the Nasdaq advancing 2 points to 2,303. The S&P, meanwhile, was off fractionally to close at 1,125. Oil fell -$1.45 to $74.57 a barrel, while gold added $5.20 to $1,271.90 an ounce.
On the economic front, the Labor Department said that new unemployment claims dropped by -3,000 to a seasonally adjusted 450,000 last week, hitting its lowest level in two months. Separately, the Labor Department also announced that wholesale prices (PPI) grew 0.4% in August, while core PPI, which excludes food and energy costs, rose 0.1%. Economists were expecting growth of 0.3% and 0.1%, respectively. Meanwhile, the U.S. trade deficit gained 12.9% from Q1 to $123.3 billion in Q2, the Commerce Department reported.
In earnings news, shares of FedEx sank -3.8% after the package delivery company said it plans to eliminate 1,700 jobs. Its fiscal Q2 outlook was also weaker than expected. For fiscal Q1, net income was $380 million, or $1.20 a share, a penny shy of estimates. Last year, the company earned $181 million, or 58 cents a share. Revenue jumped 18% to $9.46 billion. Looking forward, FedEx guided for Q2 EPS of $1.15-$1.35, below the $1.36 consensus, and for full-year EPS of $4.80-$5.25 versus the $5.24 consensus. Previously the company had forecast full-year EPS of $4.60-$5.20. A total of 42 Pro investors counted the stock in their top-15 U.S.-listed equity holdings at the start of Q3, while 341 tickerspy members held the stock in their portfolios.
Clothing retailer Dress Barn (DBRN) reported that its Q4 EPS missed expectations, but said its sales for the quarter were strong. For the quarter ended July 31st, the company earned $42 million, or 52 cents per share, up from $25.6 million, or 40 cents per share, a year earlier. Adjusted EPS was 47 cents, which came in below the 49-cent consensus. Sales, driven by the company’s teen chain, Justice, spiked 78% to $710.9 million. Analysts were looking for $689.8 million in revenue. For FY11, Dress Barn expects adjusted EPS of $2.05-$2.15, bracketing estimates of $2.09. The stock fell -4.7%.
Shares of Pier 1 Imports (PIR) rose 6.5% after the home goods chain topped quarterly estimates by a cent. For Q2, Pier 1 posted a profit of $14.4 million, or 12 cents per share, compared with a loss of -$15.8 million, or -17 cents per share, a year ago. Analysts were expecting EPS of 11 cents. Sales climbed 8.1% to $309.9 million, while comparable-store sales increased 11.2%. Merchandise margins grew to 58.3% of sales from 52.0% last year. A total of 3 Pro investors counted the stock in their top-15 U.S.-listed equity holdings at the start of Q3, while 156 tickerspy members held the stock in their portfolios.
In response to BHP Billiton’s (BHP) $38.6 billion hostile bid, Potash Corporation of Saskatchewan (POT) is trying to create a consortium, led by China and possibly including rival Mosaic (MOS), to back a management buyout to exceed BHP’s offer, Toronto’s Globe and Mail reported. A source told the newspaper that the plan is a viable option, but “it is still a big check to write…and it is a challenge to manage multiple parties.” Reuters notes that any and all bids will face scrutiny with Canadian regulators, but Agriculture Minister Gerry Ritz said, “I’m not going to second-guess anybody’s bid,” and the interests of Saskatchewan will be kept in mind. Shares of Potash moved up 0.9% on the news.
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