How Much Should We Worry About Greece? (WWW, VTSS, PPDI, YHOO, EDV, USU)
The calendar may have flipped, but stocks left off where they ended the quarter, in the dumps. Europe’s woes were once again the culprit, overshadowing some better-than-expected U.S. economic data. Greece said it would miss its deficit target despite the austerity measures the country has taken. The International Monetary Fund, EU, and European Central Bank now have to decide whether to approve the next round of bailout funds for the struggling country. EU banks, meanwhile, may have to write off more Greek debt. We still think that, as a member of the EU and without its own currency, that the problems with Greece will not be able to be properly addressed until it gets kicked out and has its own currency deflate, that the EU is basically just kicking the can down the road, and making the problem worse. However, we still don’t think the problem of Greece is big enough to send the U.S. into a painful double-dip recession at this time.
The Bond ETFs Index was the top performing tickerspy Index on the day, led by Vanguard Extended Duration ETF (EDV) with a 4% gain. The Uranium Stocks Index was the day’s worst performing tickerspy Index, with USEC (USU) down -24%.
Stocks fell on the day, with the Dow falling -258 points to 10,655. The S&P lost -32 points to close at 1,099, while the Nasdaq tumbled -80 points to 2,336. Oil slipped -$1.59 to $77.61 a barrel, while gold climbed $35.40 to $1,657.70 an ounce.
In economic news, the Institute for Supply Management’s factory index rose to 51.6 last month from 50.6 in August. Economists had expected a September reading of 50.5. Elsewhere, the Commerce Department said construction spending climbed 1.4% in August following a -1.4% drop in July. Economists were expecting a drop of -0.5%. Private construction increased 0.4% in August while residential building jumped 0.7%.
In earnings news, shares of shoemaker Wolverine Worldwide (WWW) jumped 4.1% after the company reported a third-quarter profit of $40.4 million, or 82 cents a share, up from $34.1 million, or 70 cents a share, a year ago. Revenue rose 13% to $361.6 million. That topped the profit of 75 cents on revenue of $358.1 million analysts expected. Wolverine Worldwide forecast a full-year profit of $2.46-$2.52 a share on sales of $1.40-$1.43 billion. Analysts were expecting EPS of $2.49 on revenue of $1.42 billion.
Shares of Vitesse Semiconductor (VTSS) plunged -18.6% after the company pared its fiscal fourth-quarter margin and revenue guidance. The company now expects product margins of 57-59% on revenue of $29.0-$30.5 million. Vitesse previously forecast margins of 59-61% on revenue of $21.5-$23 million.
Shares Pharmaceutical Product Development (PPDI) surged 25.8% after private equity firms Carlyle Group and Hellman & Friedman LLC agreed to buy the provider of development services to drug and biotech firms for $3.9 billion. The private equity firms will pay $33.25 a share for Pharmaceutical Product Development, a 30% premium to where the shares closed on Friday. Seven pros counted Pharmaceutical Product Development among their top holdings at the end of Q2 and nearly 100 tickerspy members own the stock in their portfolios.
Chinese e-commerce giant Alibaba may consider buying Yahoo (YHOO), the second-largest provider of Internet search services in the U.S. Over the weekend, Alibaba founder Jack Ma told an audience at Stanford University that he would be “very interested in Yahoo,” adding “the whole piece.” California-based Yahoo currently owns 40% of Alibaba. Shares of Yahoo rose 2.7%. Nearly 40 pros held Yahoo in their portfolios at the end of Q2 and more than 1,400 tickerspy members own the stock in their portfolios.
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