Capital Spending Cutbacks: Gainers and Losers

Includes: AMZN, JBLU, WMT
by: SA Eli Hoffmann

Excerpt from our Wall Street Breakfast, a one-page summary of this morning's key market-moving and stock-moving stories:

AHEAD OF THE TAPE: Spend or Thrift [Wall Street Journal]

Summary: "Advice for companies looking to jump-start their stock price: Stop spending." This strategy has worked for: (1) Wal-Mart, whose stock leapt after it downsized its store expansion from 15-20% to 2-4%. (2) JetBlue whose shares jumped on its plan to slow expansion despite poor earnings. (3) said Tuesday it expects less money going into new initiatives, and shares gained. This may be good news for investors, but not encouraging for manufacturers who make the equipment that companies buy. But Bruce Kasman of J.P. Morgan Chase & Co. sees spending picking up in Q4 due to trucking companies buying more trucks before new environmental regulations make them pricier, and increasing from 6-8% next year on a strong global economy, in his words, "Solid, but not booming." WSJ has this to say, "If other companies, seeing what has happened to the shares of Wal-Mart, JetBlue and Amazon, decide that cutting into spending is a surefire way of getting their stock prices higher, there could be tough times coming for the equipment makers."
Related links: See today's Wall Street Breakfast's summary on the downsizing of the airline industry, and why JetBlue may find it harder to cutback than some of the legacy carriers • Oil majors are one group that have not yet found the impetus for capital spending cutbacks
Potentially impacted stocks and ETFs: Wal-Mart Stores Inc. (NYSE:WMT), JetBlue Airways Corp. (NASDAQ:JBLU), Inc. (NASDAQ:AMZN)

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