Today's Market: Something Amiss In Retail And Tech?

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 |  Includes: ATHN, FB, GPS, LULU, NKE
by: Matthew Smith

It is interesting that we are seeing many of these momentum growth stocks either report poor quarterly numbers or guide lower for future quarters. With some key names having done this in retail it makes us thankful that we discussed diversifying retail sector investments from a few names toward a basket of names via ETFs a month or two back and have stuck to that thinking. We say this because it seems to us that many of the retailers are projecting this holiday season to be rather weak, and with the number of companies guiding lower or issuing cautious statements it appears that something is taking place in the retail sector that just is not apparent on a wide scale yet. Obviously apparel has its issues, especially the teen sector, but in recent weeks we have seen the cautiousness move into non-apparel names in the retail sector. Needless to say, this is something we are paying attention to with great interest.

Chart of the Day:

As bad as many think that the retail sector is, retail sales month over month have been showing growth all year long with the exception of one month. Yes, one could argue that the growth has lagged but we were always told that 'up is up' and 'growth is growth'. So maybe the retail space is not as bad as many think it is, but then again nor is it as good as some had hoped it would be.

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Source: Briefing

We have economic news today and it is as follows:

  • Initial Claims (8:30 a.m. EST): Est: 315k Actual: 368k
  • Continuing Claims (8:30 a.m. EST): Est: 2750k Actual: 2791k
  • Retail Sales (8:30 a.m. EST): Est: 0.6% Actual: 0.7%
  • Retail Sales - Ex Auto (8:30 a.m. EST): Est: 0.3% Actual: 0.4%
  • Export Prices - Ex Ag (8:30 a.m. EST): Est: N/A Actual: 0.1%
  • Import Prices - Ex Oil (8:30 a.m. EST): Est: N/A Actual: 0.0%
  • Business Inventories (10:00 a.m. EST): Est: 0.3% Actual: 0.7%
  • Nat Gas Inventories (10:30 a.m. EST): Est: N/A Actual: -81 bcf

Asian markets finished lower today:

  • All Ordinaries -- down 0.82%
  • Shanghai Composite -- down 0.06%
  • Nikkei 225 -- down 1.12%
  • NZSE 50 -- UNCH
  • Seoul Composite -- down 0.51%

In Europe, markets are trading lower this morning:

  • CAC 40 -- down 0.12%
  • DAX -- down 0.40%
  • FTSE 100 -- down 0.59%
  • OSE -- down 0.72%

Technology

As we predicted only a few days ago, Facebook (NASDAQ:FB) has become the next stock added to the S&P 500 Index. Facebook will also be added to the S&P 100 Index. Shares are up strongly on the news, rising nearly 4% and putting the shares within striking distance of its all-time highs. The S&P Indexes will add Facebook on December 20th, so there should be accumulation in the shares leading up to the addition. The move will consolidate some of the float and be another driver for the share price moving forward, especially if the company can continue their rapid growth that has thus far fueled stock market gains.

athenahealth (NASDAQ:ATHN) shares were down sharply in after-market and pre-market trading, however the shares opened up with losses not nearly as bad as had been indicated, undoubtedly due to the company's comments this morning. The shares have gotten weaker during the early trading, however the 4% loss is much less than what we saw at around 8 a.m. today. The market was very disappointed in the company's guidance for 2014 as both revenues and EPS were guided well below the analyst consensus. athenahealth guided EPS to a range of $0.98-1.10 with revenues between $725-755 million while analysts were expecting EPS of $1.33 and revenues of $760.1 million.

Retail

With the disappointing guidance, Lululemon is now trading near its yearly lows. It has been a tough year for investors in this lifestyle apparel company.

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Source: Yahoo Finance

Lululemon (NASDAQ:LULU) has been under fire recently as new competitors have emerged such as retailer Gap (NYSE:GPS) and big athletic gear brand Nike (NYSE:NKE). As the business has come under fire, Lululemon has also generated some self-inflicted wounds. Those missteps, coupled with the changes at the top ranks of management has added uncertainty to what was once a great growth stock. The brand has taken a hit, but maybe more importantly Lululemon's credibility on Wall Street has taken a hit.

The issues with Lululemon were not over the current quarter, which was good, but rather over the outlook for the company's business going forward. Weak guidance is not what investors want to hear, especially with so many rivals trying to make inroads with the company's core consumer.

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.