The Republican led House of Representatives passed a bill delaying the debt ceiling stand-off for another three months … so investors can expect a barrage of debt ceiling news reports in roughly 3-3½ months (depending on how long they plan to drag this out). The S&P 500 and Dow Jones Industrial Average finished at 5 year highs, however regarding the Dow most of its gains were the result of IBM's (IBM) share price movement and the S&P was helped by IBM and Google (GOOG). This makes it a bit hard to really get behind the excitement behind the closes yesterday because it was less about general market bullishness and more so about individual, company specific bullishness but such will always be the case when you have high priced stocks in the Dow and they have strong movements (this is due to how the Dow is calculated as an index and a greater weighting being afforded to the higher priced stocks.
Chart of the Day
We ran across this chart from collegeinsurrection.com which shows the rise in cost of college tuition as compared to other items since 1978. We were somewhat blown away by the fact of where college tuition ranked but even more so by the fact that it was so much higher than medical inflation - which is what everyone usually talks about.
Chart courtesy of collegeinsurrection.com
We have economic news due out today, and it is as follows (these are the consensus estimates):
Initial Claims (8:30 AM EST): 355k
Continuing Claims (8:30 AM EST): 3200k
Leading Indicators (9:00 AM EST): 0.5%
Natural Gas Inventories (9:00 AM EST): N/A
Crude Inventories (9:00 AM EST): N/A
Asian markets finished mixed today:
All Ordinaries - up 0.45%
Shanghai Composite - down 0.79%
Nikkei 225 - up 1.28%
NZSE 50 - up 0.05%
Seoul Composite - down 0.80%
In Europe markets are mostly higher this morning:
CAC 40 - up 0.27%
DAX - down 0.05%
FTSE 100 - up 0.24%
OSE - up 0.21%
It looks like Cree (CREE) got its mojo back yesterday as investors pushed shares higher by over 22% on extremely high volume after the company reported quarterly results which exceeded analysts' expectations and provided guidance moving forward which blew analysts' estimates out of the water. Looking at the most recent quarter the beat was small, but looking at the upcoming quarter is where the excitement resulted from. Before yesterday analysts were expecting the company to report EPS of $0.28/share on revenues of $322.6 million for the third quarter but the company stated that they believe they will earn between $0.30-0.35/share and have sales between $325-345 million. Personally we love when companies move their guidance range for EPS and revenues above the analyst and/or company projections as it indicates that the business is doing far better than predicted.
One of the top performers of last year picked up right where it left off, as US Airways (LCC) beat analysts' expectations by $0.07/share on the EPS number as the company reported $0,26/share versus the analyst consensus of $0.19/share. The company said that revenues for the quarter rose to $3.28 billion, for top line growth of 3.9% however not all was rosy. Looking behind the numbers operating expenses rose by 3.5% with labor rising 10%, however the company did note that Hurricane Sandy did have an effect on business and results would have been better had it not been for that event. Transports have led the way higher in recent months, and for many investors their strength has been all of the confirmation required to believe that the market shall move higher (based on transports being a leading indicator). The stock was up sharply midday and setting new highs before selling off a bit into the close as it faded, but the shares still finished above $15/shares as the company traded 15.8 million shares. You can read the company's earnings call transcript here.
We discussed Whirlpool (WHR) last Tuesday and stated that we were still bullish on the shares even after the already impressive run as we still thought there was room to run with housing turning a corner and gaining strength and consumers beginning to start to require new appliances due to this. Yesterday, shortly after 11:00 AM EST a U.S. trade panel slapped anti-dumping duties on South Korean and Mexican residential washing machines. This is another win for Whirlpool as prices will be rising across the board as the entry point on many of the wares imported just went up. Investors appreciated the news as volume was about 2x normal and shares rose $3.78 (3.64%) to close at $107.70/share.
Coach (COH) had a very rough day yesterday, as investors reacted to news that their issues in North America continue. The performance of their North American retail operations have been disappointing enough to force the company to become a bit more cautious in their outlook, with their new forecast for comps in North America being flat and sales growth in the upper single digits (which is down from lower double digit growth expectations). Although the company is still the leader in the woman's handbag category with 30% market share, they did announce that their growth rate in this segment is now below that of the overall category which could either be the result of the law of diminishing returns or worse, an indication of changing consumer tastes. As shares fell $9.93 (16.36%) to close at $50.75/share, it is obvious which way investors are leaning in their thinking.
Valero (VLO) is a stock we would normally cover in our commodities market commentary, but today we want to focus less on the commodity side of the business and more on the dividend, which the company announced they were raising. The company's Board of Directors approved raising its quarterly dividend to $0.20/share from the previous rate of $0.175/share. This moves the annualized dividend to $0.80/share and provides an increase in the quarterly dividend of 14.3%. Investors wanting to receive this dividend need to remember that it is paid to holders of record at the close of business on February 13. 2013 (and always one must remember just how important ex-dividend dates are). The company's press release can be found here regarding their dividend increase and information on upcoming events (such as earnings and their conference call).