More Cautious Entering 2011 Than 2010 (DRWI, LEDS, WSM, MRO, CCME)
Stocks retreated just a bit, as the weekly jobless number came in weak. However, a brightened outlook from Fed Chief Ben Bernanke helped limit the overall losses. The Fed Chairman said he expects 2011 economic growth of between 3.0-4.0% versus an earlier forecast of between 3.0-3.6%. As of now, the economic recovery appears to still be on track, which we think continues to bode well for the markets. However, we are a little more cautious entering this year compared to last.
The Chinese Advertising Stocks Index was the top performing tickerspy Index on the day, led by China MediaExpress Holdin (CCME) with a 12% gain. The LED Stocks Index was the day’s worst performing tickerspy Index, with SemiLEDs (LEDS) down -34%.
Stocks slipped on the day, with the Dow off -24 points to 11,732. The S&P and Nasdaq both gave back -2 points to 1,284 and 2,735, respectively. Oil fell -46 cents to $91.40 a barrel, while gold rose $1.20 to $1,387.00 an ounce.
On the economic front, the Labor Department said initial jobless claims unexpectedly rose to 435,000 last week from 410,000 the previous week, good for the biggest jump in six months. Economists were forecasting a small decline to 405,000 claims. In a separate report, the Labor Department also said the Producer Price Index rose 1.1% in December after rising by 0.8% in November. Excluding volatile food and energy prices, core PPI rose just 0.2% for the month.
In earnings news, shares of DragonWave (DRWI) plunged -16.3% after the Canadian telecom equipment maker reported a loss of -$50,000, or zero cents per share, for its fiscal third quarter, compared with a profit of $11.6 million, or 34 cents a share, a year earlier. Revenue came in just over $27 million. Analysts were expecting a loss of a penny a share on sales just above $27 million. The company forecast revenue of only $15 million in fiscal Q4.
Shares of SemiLEDs fell -34.5% after giving bearish guidance and saying it recently lost a customer. The newly public Taiwan-based LED chipmaker said it earned $3.8 million, or 11 cents per share, in first quarter as a public company, compared with $400,000, or breakeven per share, a year earlier. Revenue almost doubled to $13 million. For the second quarter, SemiLeds expects to earn between $1.6-$2.6 million, or 6-9 cents a share, on sales of $10.5-$12.5 million.
Shares of Williams-Sonoma (WSM) slid -3.7% even thought the home goods retailer raised its fourth-quarter guidance. The operator of its namesake stores and the Pottery Barn chain said it expects to earn 92-94 cents a share in the fourth quarter, up from previous guidance of 88-93 cents a share. On an adjusted basis, Williams-Sonoma expects to earn 96-98 cents a share. The company raised its revenue forecast to $1.17-$1.19 billion. Analysts were expecting a profit of 94 cents a share on sales of $1.15 billion.
Shares of Marathon Oil (MRO) surged 6.0% on news the integrated oil producer will spin-off its downstream business to focus more on its core exploration and production business. Texas-based Marathon expects to spin off its refining business on June 30th. Interestingly, in a note to clients earlier this week, Deutsche Bank said Marathon should consider separating its refining and exploration and production businesses to unlock shareholder value. The company scrapped a similar plan in 2008 due to the financial crisis.
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