BetterTrades Stock Market Daily Report - August 14, 2008

In an unexpected turn of events, all the major indexes managed a positive day despite several economic reports which, in theory, should have sent the markets lower by the close. However, with oil retreating and the financial sector reversing their recent trend, the markets managed to all close in the green, albeit off of their highs from the day. By the sound of the closing bell, the Dow Jones Industrial average concluded the session up 82.97 points, or 0.72%, at 11,615.93, while the broader stock indicators finished day in the green as well. The S&P 500 index added 7.10 points, or 0.55%, to close at 1,292.93, while the NASDAQ composite index ended the session up 25.05 points, or 1.03%, at 2,453.67.

In yet another blow to the U.S. economy, the Labor Department released their findings in which consumer prices jumped virtually twice as much for the past month. July’s reading of 0.8%, was double market expectations of 0.4% which was lead by the ever increasing prices for energy and food products. Energy prices lead the way, climbing higher by 4% last month driven by a 4.1% increase in gasoline prices. In July, prices at the pump were almost 38% higher than they were a year ago. With an increase in the CPI, this in turn sent inflation higher as well.

Today’s reading market the third consecutive month in which inflation has advanced. Following May’s increase of 0.6%, and June’s reading of 1.1%, July’s figures add to the dismay of the economy and leaves inflation to climb at a 5.6% over last year’s totals. This equates to the largest gain in more than 17 years. Core inflation, that which excludes energy and food costs, advanced 0.3%, higher than the 0.2% increase anticipated. Similarly, core inflation has increased over the past year by 2.5% and now signals the Fed to possibly increase interest rates to off-set the rise in inflation. Core inflation was pushed higher by a 1.2% jump in clothing costs, the biggest increase since August of 1998.

In a separate report issued by the Labor Department, the number of recently laid-off workers declined by 10K in the prior week to 450K claims. The four-week average reached 440.5K, up 19.5K from last week's revised average of 421K, while a year ago, that number stood at 315.5K. Once again, this reading only reiterates that the labor market is under severe pressure within today’s economy. Additionally, the report also stated that the average weekly earnings, adjusted for inflation, slipped by 3.1% for July. It marks the largest year-over-year decrease since November of 1990.

With what appears to be a never-ending cycle of disappointing economic news, an additional report was released pre-market by RealtyTrac Inc. which showed that the foreclosure rate within the U.S. is still climbing. Nationally, more than 272K homes were placed into foreclosure, up 55% from this time last year when the number stood at 175K. That equates to being one in every 464 homes have a foreclosure notice placed on them last month. Even more alarming was the fact that some 77K properties were seized by lenders nationwide for the month of July. RealtyTrac also stated that the company had more than 750K foreclosed homes in their database for sale, which was equal to about 17% of the 4.5M U.S. homes that were up for sale in June.

Wal-Mart Stores, Inc. (WMT), the world's largest retailer is engaged in the operation of mass merchandising stores, which serve their customers primarily through the operation of three segments, Wal-Mart Stores, SAM'S Club and the International segment. Today, the company announced results for their 2Q as they confirmed that profits for the quarter increased nearly 17% as net income climbed to $3.45B, or $0.87 per share, compared to last year’s results of $2.95B, or $0.72 per share. Total revenues for the time period increased from $92B last year, to $101.6B this year, just over a 10% increase. With the decline in discretionary spending, many consumers are flocking towards discount retailers to stretch their dollar, which in turn, helped Wal-Mart boost same store sales by 4.5%. With current results being above market expectations, Wal-Mart has offered full-year guidance in which the company now projects yearly earnings between $3.43 and $3.50 per share, while analysts are expecting earnings towards the upper end at $3.49 per share. By the close of the trading session, shares of WMT gained a little, adding $0.22, or 0.4%, to end at $58.10 per share.

Estee Lauder Co. (EL), one of the world's leading manufacturers and marketers of quality skin care, makeup, and fragrance and hair care products, made it known early this morning that the company posted an increase in quarterly earnings. For the company’s 4Q, Estee Lauder recorded net income of $120.2M, or $0.61 per share, versus $88.6M, or $0.45 per share a year ago, which amounts to a 36% jump in profits. Revenues, meanwhile, surged as well, increasing just over 14% from $1.76B last year to $2.01B this year. Analysts were anticipating that the company post earnings of $0.56 per share based on $1.93B in total sales. Much of the success for the company’s increase in revenues and profits came on the heels of increased sales internationally, which jumped some 21% year-over-year. For the entire year, Estee Lauder posted net earnings of $2.40 per share, or $473.8M, compared to last year’s results of $2.16 per share, or $449.2M, a 6% jump. In light of a solid earnings release, the company issued guidance for the upcoming fiscal 2009 period and now is anticipating earnings per share between $2.57 and $2.72 on total sales between $8.39B and $8.54B. Analysts have a slightly different view for the company, predicting earnings of $2.66 per share on $3.38B in total sales. With a stellar 4Q and forward guidance, shares of EL surged 14% on the day, adding $6.29 to close out at $51.25 a share.

Flowers Foods, Inc. (FLO), one of the largest producers and marketers of a full line of frozen and non-frozen bakery and dessert products in the United States, acknowledged early this morning that the company recorded a higher 2Q profit compared to last year, due in large part to a higher pricing model and increased volume. For the quarter, Flowers Foods posted net income of $23.9M, or $0.26 per share, versus last year’s total of $22.2M, or $0.24 per share. During the same time frame, overall sales increased as well, climbing from $477.8M to $540.7M, a 13% gain. While all along, analysts were calculating a profit of $0.27 per share on $523.9M in sales. With impressive quarterly results, the company has increased their yearly predictions for full-year income and sales. Flowers Foods is now anticipating earnings per share to come in between $1.17 and $1.23, up from $1.15 and $1.23 per share. Sales were also adjusted upwards and are now expected to be between $2.4B and $2.43B, up from previously stated figures of $2.22B and $2.27B. Overall, analysts are looking for company earnings of $1.21 per share on $2.28B. Despite a positive earnings release and upward adjustments for full-year predictions, shares of FLO plunged more than 12% by the close, dropping $4.01 to finish at $27.96 per share.

The J.M. Smucker Company (SJM), headquartered in Orrville, Ohio is the leading marketer of jams, jellies, preserves, and other fruit spreads in the U.S. They are also the leader in dessert toppings, natural peanut butter, and health and natural juice products, and market a wide variety of other specialty products throughout the U.S. and in many foreign countries. Early Thursday morning, the company announced recent findings in regards to their 1Q performance in which they posted slightly higher earnings over last year’s results. In the quarter SJM recorded a profit of $42.3M, or $0.77 per share, up from $40.8M, or $0.71 per share, while revenues jumped over 18%, from $561.5M to $663.7M. For the past three months, experts were anticipating that J.M. Smucker post earnings of $0.77 per share on sales of $647M. With a solid earnings report, shares of SJM climbed more than 7% by the close of today’s session, adding $3.84 to close out at $54.34 a share.

Urban Outfitters, Inc. (URBN), which operates two business segments consisting of lifestyle-oriented general merchandise retailing segment and a wholesale apparel business, affirmed Thursday morning that the company posted a profit of $57M, or $0.33 per share, up from last year’s results of $31.9M, or $0.19 per share, nearly a 79% increase year-over-year. Additionally, revenues surged more than 30%, jumping from $348.4M a year ago, to $454.3M this year. During the quarter, analysts were calculating that the apparel retailer post earnings of $0.30 per share on $450.5M in total sales. Current results were bolstered by lowered expenses and increased same store sales which advanced 13% overall. By the sound of the closing bell, shares of Urban Outfitters were up marginally, higher by $1.33, or 3.9%, to close at $35.38 per share.

Briggs & Stratton Corp. (BGG), one of the world's largest producers of air cooled gasoline engines for outdoor power equipment is also involved in the design, manufacturing, and marketing and servicing of these products for original equipment manufacturers worldwide. Before the markets opened on Thursday, the company release their finding for the 4Q in which the company posted a loss based on a decline in overall sales, along with increased costs. During the recent time frame, BGG earned $479K, or $0.01 per share, compared to a gain of $18.1M, or $0.36 per share last year. In addition, the company’s revenues slipped from $677.6M a year ago, to current figures of $581.1M, a 14% decline year-over-year. On average, analysts were anticipating earnings for the engine maker to come in at $0.23 per share on total sales of $633.9M. despite a rocky 4Q, the company’s full-year results were higher than last years, as net income increased from $6.7M, or $0.13 per share, to $22.6M, or $0.46 per share, a 237% increase, even though revenues slipped 3% to $2.15B. That news didn’t help the stock out much today in trading, as shares fell more than 4%, losing $0.65 per share to close at $14.05.

With much of the world’s attention on the conflict in Georgia, oil prices pulled back today as demand for energy within the U.S. has been contracting. By the close of trade today, the price of light, sweet crude for September delivery slipped $0.99 to $115.01 as prices fluctuated for much of the day, in-and-out of positive and negative territory. In additional NYMEX trading, heating oil futures fell $0.0326 to $3.0991 a gallon while gasoline dropped $0.0203 to trade at $2.912 a gallon. Natural gas futures declined $0.32 to $8.136 per 1,000 cubic feet.

With many investors getting into the markets today, as all the major indices advanced, the Treasury markets advanced as well, as the benchmark 10-year note increased 8/32 to 100 24/32 as its yield slipped to 3.91% down from yesterday’s 3.94%. The 30-year note jumped 25/32 to 99 20/32 as its yield fell to 4.52%, from 4.57%, and the 2-year note inched forward 1/32 while yielding 2.46%, down from Wednesday’s percentage of 2.48%.

In a trend that has become more commonplace, the U.S. greenback resumed their stronger standing against major European currencies today. In late afternoon trading, the 15-nation Euro declined to $1.4811, down from Wednesday’s figure of $1.4934, while the British pound continues it’s slid, dropping to $1.8668 from $1.8730. The current price of the pound is now testing lows set nearly two years ago. In additional trading, the greenback reversed yesterday’s trend against the yen, advancing to 109.65, up from 109.54.

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