Stocks Get Hit As Goldman Yells ‘Sell’ On Commodities (AA, FAST, EXTR, WMS, NBS, ARTW)
Stocks took a hit as Japan raised its nuclear crisis level from 5 to 7, the same level as Chernobyl, and Goldman Sachs came out and said it’s time to sell commodities as the risk-reward was no longer as favorable.
The firm said Brent Crude, which is trading at a wide gap to West Texas Intermediate (WTI) crude, could fall to $105 in the near term, writing: “Near-term crude oil price risk is becoming more symmetric. Although potential contagion risk in the Middle East and North Africa (MENA) remains elevated and has pushed prices above $125/bbl, at these price levels the risks are becoming more symmetric, which shifts the risk/reward of being long oil. Not only are there now nascent signs of oil demand destruction in the United States…but also record speculative length in the oil market, elections in Nigeria and a potential cease-fire in Libya that has begun to offset some of the upside risk owing to contagion, leaving price risk more neutral at current levels.”
Goldman’s call saw investors shift some money into retail and soft goods (food, apparel, personal products, etc), and overall, we think the drop in energy prices is likely good for the economy and market overall over the long run.
The Stem Cell Stocks Index was the top performing tickerspy Index on the day, led by Neostem (NBS) with a 7% gain. The Modular Building Stocks Index was the day’s worst performing tickerspy Index, with Art’s-Way Mfg Co. (ARTW) down -24%.
Stocks fell on the day, led lower by a -1.0%, or -27 point, decline in the Nasdaq to 2,745. The S&P lost -10 points to 1,314, while the Dow dropped -118 points to 12,264. Oil plunged -$3.67 to $106.25 a barrel, while gold fell -$14.50 to $1,453.60 an ounce.
In economic news, the U.S. trade deficit fell -2.6% to $45.8 billion in February, according to the Commerce Department. Exports slipped -1.4% to $165.1 billion while imports fell -1.7% to $210.9 billion.
In earnings news, Dow component Alcoa (AA), the largest U.S. aluminum producer, reported a first-quarter profit of $308 million, or 27 cents a share, compared with a net loss of -$201 million, or -20 cents a share, a year earlier. Revenue rose to $5.96 billion from $4.89 billion. Excluding one-time items, Alcoa earned 28 cents a share. Analysts were expecting a profit of 27 cents on revenue of $6.16 billion. The company is forecasting 12% growth in global aluminum demand this year. The stock fell -6.0%. Fourteen pros held Alcoa in their portfolios at the end of 2010, and nearly 1,800 tickerspy members own the stock in their portfolios.
Fastenal (FAST), the maker of industrial nuts, bolts, and related products, reported a first-quarter profit of $79.5 million, or 54 cents per share, compared with $56.0 million, or 38 cents per share, a year earlier. Revenue climbed to $640.6 million from $520.8 million. Analysts were expecting a profit of 51 cents a share on sales of $629.1 million. The stock fell -4.4%. Twenty pros held Fastenal in their portfolios at the end of 2010 and more than 200 tickerspy members own the stock in their portfolios.
Shares of Extreme Networks (EXTR) tumbled -14.8% after the network equipment provider said its fiscal third-quarter revenue will miss analysts’ estimates. The California-based company expects revenue for the period to be between $75.5-$76.5 million, well below the $84.1 million analysts were expecting. The company delivers its earnings report on April 28th.
Shares of WMS Industries (WMS) plunged -17.2% after the slot machines maker said demand for its products fell during its fiscal third quarter. For the quarter, Illinois-based WMS expects a profit of 40-42 cents a share on sales of $191-$193 million. Analysts were expecting a profit of 51 cents on revenue of $213.5 million. The company also forecast full-year revenue of $790-$800 million. Analysts were expecting $832.6 million. WMS is scheduled to deliver its third-quarter results on April 26th.
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