Today's Market: Earnings Beats And Misses

by: Matthew Smith

We came across an interesting article from MarketWatch (available here) about retirement which in many ways goes against conventional wisdom. Some of the points are better than others, however we wanted to bring it to readers' attention so that you could make your own decision about its merits.

Looking at world markets, it is apparent that the tapering talk is spooking markets again and that is not a good thing as the market action in the U.S. yesterday along with this morning's action in Australia and Japan display. Tapering is effectively a rate hike, and even though the stated funds rate does not change, the market rate does as it alters the supply/demand ratio in the market. The "Chart of the Day" shows the 10-year T-Note and its recent rate rise as the market moves to anticipate the beginning of the Fed's tapering.

Chart of the Day:

(Click to enlarge)

Source: Yahoo Finance

We have economic news due out today, and it is as follows:

  • MBA Mortgage Index (7:00 a.m. ET): N/A
  • Crude Inventories (10:30 a.m. ET): N/A
  • Consumer Credit (3:00 p.m. ET): $16.0 Billion

Asian markets finished lower today:

  • All Ordinaries -- down 1.80%
  • Shanghai Composite -- down 0.67%
  • Nikkei 225 -- down 4.00%
  • NZSE 50 -- down 0.59%
  • Seoul Composite -- down 1.48%

In Europe, markets are trading lower this morning:

  • CAC 40 -- down 0.07%
  • DAX -- down 0.44%
  • FTSE 100 -- down 0.88%
  • OSE -- down 0.05%

Oil Field Services

Yesterday McDermott International (NYSE:MDR) saw its shares fall $1.80 (20.62%) to close the session at $6.93/share after the company reported that sales were down almost 30% and that the company had a large loss for the most recent quarter (see press release here and the earnings call transcript here). The bad news did not stop there as the company also announced that Chief Operating Officer John T. McCormack would be retiring and would leave the company at some point in the fourth quarter of this year. All of that forced BB&T Capital Markets to downgrade the shares from a "Buy" to a "Hold." As the share price action yesterday indicated, it was a very rough quarter.


JC Penney (NYSE:JCP) continues to trend lower as investors worry about the future of the company and negative news seems to be following the name around like a shadow. After the CIT financing rumors last week, the company is now having to say that their CFO is not leaving the company as was reported by some news outlets. One of the senior people who works beneath the CFO will be leaving, but not the CFO according to Penny's management. The shares hit decade lows yesterday as shares fell nearly 4% to close at $13.28/share with volume hitting 25.8 million shares.

Yes, it is a very ugly chart. Notice we have once again broken to new lows and that the next milestone might very well be the lows set in the earlier years of this decade.

(Click to enlarge)

Source: Yahoo Finance

Although not having nearly the number of issues that JC Penney has, American Eagle Outfitters (NYSE:AEO) is having its own problems from an operational standpoint. To be fair here, many of the teen focused retailers are experiencing problems in luring the teen shopper on a consistent basis, which is most likely due to the high unemployment rate among the age group. Part of the reason we discussed investing in some of the broad sector retail ETFs yesterday was due to companies like American Eagle Outfitters, which currently are struggling as they stumble to get it right as it pertains to seasonal fashion. The failure to get that right leads to bigger discounts and lower margins.

Over the past year these two names have been strong performers and benefiting from not only a larger pie, but taking more of that pie for themselves.

(Click to enlarge)

Source: Yahoo Finance

The good names in retail continue to impress investors and beat analysts' expectations. Both Michael Kors (NYSE:KORS) and Fossil (NASDAQ:FOSL) had strong quarters and saw their shares rise strongly yesterday in a down market, by 3.70% and 17.81% respectively. These are two names, which we like, have liked and shall continue to like because they are in a market sweet spot. Both companies sell products, which for the most part have been pretty recession resistant and may have even benefited from the recession in that as people cut back overall spending on apparel, they did not do so for accessories. Handbags, sunglasses, watches and casual jewelry have been some of the segments doing quite well for the successful names in retail and it has lasted long enough to become a trend. Readers know our thoughts on trends, so that is why we remain bullish on these names and expect them to continue to surprise to the upside in future quarters.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.