The Tail Wagging the Dog (NVDA, JCP, RRGB, MCP, JWN, CCME, BYI)
Stocks trended nicely higher, buoyed by solid retail sales numbers and a strong earnings report out of high-end retailer Nordstrom (JWN). That was somewhat tempered by falling consumer confidence, and therein lies the biggest risk to the market and economy, where the market and the media help alter the progress being made by the consumer. As we said previously, this would be a tail wagging the dog type of scenario. At this point, we still think the economic recovery is on track and that stocks are cheap, and while the market could remain volatile, we would use downside weakness to continue to accumulate shares of high-quality favorites.
The Chinese Advertising Stocks Index was the top performing tickerspy Index on the day, led by China MediaExpress Holdin (CCME) with a 187% gain. The Gaming and Slot-Machine Stocks Index was the day’s worst performing tickerspy Index, with Bally Technologies (BYI) down -14%.
Stocks rose on the day, led by a 126-point, or 1.1%, climb in the Dow to 11,269. The Nasdaq added 15 points to close at 2,508, while the S&P tacked on 6 points to close at 1,179. Oil edged down -34 cents to $85.38 a barrel, while gold slipped -$8.80 to $1,742.60 an ounce.
In economic news, the Commerce Department said July retail sales rose by 0.5%, in line with estimates. Stripping out gasoline sales, the July number increased 0.3%. The Thomson Reuters/University of Michigan preliminary reading of consumer sentiment for August showed a reading of 54.9, the lowest reading since May 1980, and well below the July reading of 63.7. Economists were expecting an August reading of 63.0.
In earnings news, graphics chipmaker NVIDIA (NVDA) reported a fiscal second-quarter profit of $151.6 million, or 25 cents a share, compared with a loss of -$141.0 million, or -50 cents a share, a year earlier. Revenue surged 25% to $1.0 billion. On an adjusted basis, NVIDIA earned 32 cents. Analysts were expecting a profit of 25 cents on revenue of $1 billion. The company is forecasting fiscal third-quarter revenue of $1.06-$1.08 billion, which tops the $1.05 billion consensus estimate. Shares of NVIDIA, however, fell -4.0% as the company projected slower-than-expected growth for its Tegra mobile processors.
Discount retailer J.C. Penney (JCP) said its fiscal second-quarter profit was flat at $14 million, or 7 cents a share, compared with $14 million, or 6 cents a share, a year earlier when it had more shares. Revenue slid to $3.91 billion from $3.94 billion. Same-store sales increased 1.5%. Analysts were expecting a profit of 10 cents on sales of $3.91 billion. The company forecast a third-quarter profit of 15-20 cents, below the 27 cents a share analysts were expecting. Shares of J.C. Penney fell -1.0%. Ten pros counted J.C. Penney among their top holdings at the end of Q1 and nearly 240 tickerspy members own the stock in their portfolios.
Shares of casual dining chain Red Robin (RRGB) jumped 4.4% after the company said its fiscal second-quarter profit soared more than 60% to $6.9 million, or 44 cents a share, from $4.3 million, or 28 cents a share, a year earlier. Revenue rose 7% to $215.8 million, while same-store sales increased 3.1%. On an adjusted basis, Red Robin earned 48 cents a share. Analysts were expecting a profit of 36 cents on revenue of $213.4 million.
Shares of Molycorp (MCP), the largest U.S.-based rare earths miner, surged 8.8% after the company reported a second-quarter profit of $48.8 million, or 52 cents per share, compared with a loss of -$23.3 million, or -47 cents per share, a year earlier. Revenue soared to $99.6 million from $1.9 million. Analysts were expecting a profit of 39 cents on revenue of $98.4 million. Molycorp produced 1,249 metric tons of rare earth oxides in the second quarter and forecast third-quarter production of 1,428-1,890 tons and fourth-quarter production of 1,468-1,946 tons. Seven pros counted Molycorp among their top holdings at the end of Q1 and more than 700 tickerspy members own the stock in their portfolios.
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