Risks Coming Home to Roost (HD, M, VFC, MHS, PWE, DCTH)

We’ve been advising investors to take a more cautious stance in recent weeks, arguing that the market has been ignoring several risks, and one of them came to fruition today: geopolitical risk. Libya was in focus today, and unrest continues throughout much of the Middle East. Today’s market action was more about investors de-risking than it was about what impact the unrest Libya will have on global commerce. Yes, the country is an oil producer and prices spiked, but it only accounts for about 2% of the world’s oil production. The bigger risk is that the unrest continues to spread in the Middle East, impacting other oil producing nations. Meanwhile, other risks still exist, including the impact of inflation, state budget shortfalls, China, and the deficit. We remain cautious in the near term.

The Canadian Energy Trusts Index was the top performing tickerspy Index on the day, led by Penn West Petroleum (PWE) with a 3% gain. The Cancer Stocks Index was the day’s worst performing tickerspy Index, with Delcath Systems (DCTH) down -38%.

Stocks slumped on the day, led lower by a -78 point, of -2.7%, decline in the Nasdaq to 1,315. The Dow dropped -178 points to 12,213, while the S&P lost -28 points to 1,315. Oil surged $5.71 to $95.42 a barrel, while gold rose $12.50 to $1,410.10 an ounce.

In economic news, the Conference Board said consumer confidence jumped to a three-year high in February as consumers started to feel more cheery about the direction of the U.S. economy. The Consumer Confidence Index rose to 70.4 in February, up from a revised reading of 64.8 in January. That beat the average forecast of 65.0. Despite the more positive outlook by U.S. consumers, the housing market remains troubled as the S&P/Case-Shiller index of housing values in 20 major U.S. metropolitan areas slumped -2.4% in December 2010. The number of families planning to buy a house in the next six months fell to 4.4% in February from 5.2% in January, according to the Conference Board.

In earnings news, home improvement retailer Home Depot (HD) reported a fourth-quarter profit of $587 million, or 36 cents per share, up from $342 million, or 20 cents per share, a year earlier. Sales climbed 4% to $15.13 billion. Analysts were expecting a profit of 31 cents a share on revenue of $14.81 billion. Sales at stores open at least a year rose 3.9% on a global basis and 4.8% in the U.S. The company projected 2011 EPS growth of 9.5% to $2.20 a share, up from a prior forecast of growth of 7%-9%. Home Depot also said it expects revenue to rise 2.5% to $69.7 billion. Previous guidance called for revenue growth of 2.0%-2.5%. Analysts had been expecting a full-year profit of $2.25 a share on sales of $69.28 billion. The stock fell -1.0%. More than 70 pros held Home Depot in their portfolios at the end of 2010 and almost 1,230 tickerspy members own the stock in their portfolios.

Shares of department store operator Macy’s (M) fell -1.2% after the company forecast fiscal 2011 earnings of $2.25-$2.30 a share on sales of $25.8 billion. Analysts were expecting a profit of $2.27 a share on revenue of $25.7 billion. In the fourth quarter, Macy’s earned $667 million, or $1.55 per share, compared with $445 million, or $1.05 per share, a year earlier. Excluding one-time items, Macy’s earned $1.59 a share while analysts were expecting a profit of $1.51 a share. Revenue rose 5% to $8.269 billion. Analysts were expecting sales of $8.277 billion. Same-store sales shot up 4.3%.

VF Corp. (VFC) shares surged 7.5% after the apparel maker said it expects to earn $7.00-$7.10 a share this year on sales of $8.31-$8.39 billion. Analysts had been forecasting a profit of $6.80 a share on revenue of $8.04 billion. In the fourth quarter, North Carolina-based VF earned $54.2 million, or 49 cents per share, compared with $66.9 million, or 60 cents per share, a year earlier. Excluding one-time items, the company earned $1.78 a share compared with $1.62 a year ago. Analysts were expecting a profit of $1.64. Sales surged 11% to $2.13 billion, above the $2.03 billion consensus.

Shares of Medco Health Solutions (MHS), the country’s largest pharmacy benefits manager, slipped -5.1% after the company forecast an adjusted first-quarter profit of 84-85 cents a share, while analysts were expecting a profit of 89 cents a share. For the fourth quarter, Medco said its profit jumped 11% to $378.5 million, or 88 cents per share, from $341.5 million, or 70 cents per share, a year earlier. Revenue increased 11% to $16.93 billion from $15.25 billion. Excluding one-time items, Medco earned 94 cents a share. Analysts were expecting a profit of 94 cents on sales of $16.62 billion. Nearly 40 pros held Medco Health Solutions in their portfolios at the end of 2010, and almost 420 tickerspy members own the stock in their portfolios.

Tags: DCTH, HD, M, MHS, PWE, VFC