Wall St. Breakfast's Pre-Market Snapshot:
U.S. Futures As of 8:45 AM EST
S&P 500: +3.00; 1,502.20
NASDAQ 100: +2.75; 1,889.25
Dow: +32.00; 13,301.00
NIKKEI 225: -1.03%; 17,553.72 (-183.24)
HANG SENG: -1.34%; 20,468.21 (-278.06)
S&P/ASX 200: -0.91%; 6,297.40 (-58.10)
BSE SENSEX 30: +0.18%; 13,796.16 (+24.93)
FTSE 100: -0.04%; 6,521.70 (-2.40)
CAC 40: -0.49%; 5,983.06 (-29.70)
XETRA-DAX: -0.65%; 7,367.27 (-48.06)
Commodity Futures (Reuters/Jefferies CRB)
Oil: +0.71%; $62.25 (+$0.44)
Gold: +0.43%; $669.90 (+$2.90)
Natural Gas: -0.98%; $7.65 (-$0.08)
Silver: +0.27%; $13.175 (+$0.035)
U.S. Breaking News — see today's Wall Street Breakfast for earlier news
Friday's Economic Numbers: Prices Up, Sales Down
In economic numbers released Friday morning by the Department of Labor, the producer price index [PPI] for finished goods was up 0.7% in April, led by a 3.4% rise in energy prices. Wholesale gasoline was up 8.2%. Food was up only 0.4%. Economists were looking for a more moderate 0.5% jump. On the other hand core inflation (net of energy and food) was flat, while economists were calling for a 0.2% rise. The Commerce Department said Friday morning that U.S. retail sales (pictured, click to enlarge) fell 0.2%, where economists had been looking for a 0.3% gain. The drop was the biggest in eight months. After Thursday's surprisingly weak same-store sales numbers, in which 79% of retailers missed analyst forecasts, the 0.2% drop is not surprising. Economists are now concerned consumer spending is slowing, which could have significant ramifications on economic growth in coming quarters. Sales at building material stores fell 2.3%, their biggest drop in four years. Clothing sales were down 2.0%, leisure goods were down 0.8%, and restaurant sales fell 0.1%. Furniture sales gained 1.2%. Gas sales were up 1.7% on a cost basis, but considering gas prices were up 8.2%, actual gas purchased seems to have dropped off as a result of higher prices.
Sources: PPI release, Retail Sales release, MarketWatch I, II
Commentary: Market, Most Sectors Likely To Gain Following 1% Down Days • Alan Greenspan: Still a 33% Chance of Recession by Year-End • Monthly Budget Surplus Second-Highest Ever, But Trade Deficit Widens Over 10%
Stocks/ETFs to watch: S&P 500 Index (NYSEARCA:SPY), Diamonds Trust Series 1 ETF (NYSEARCA:DIA), iShares Lehman Aggregate Bond (NYSEARCA:AGG)
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Today's Market (via Sam Collins, ChangeWave.com)
Recap of Yesterday's Action
With about 80% of earnings for the S&P 500 stocks now in, yesterday's focus turned to economics -- and the view wasn't good. The consumer has been powering a great deal of the nation's growth, so when one retail chain after another announced disappointing same-store sales figures yesterday, stocks went into a tailspin.
And that wasn't the last of the bad news. The U.S. trade deficit for March had an unexpected jump of 10.4% to $63.9 billion -- the largest gap since last September. That was followed by a larger-than-expected increase in import prices.
All told, it was just one piece of bad news followed by another, and with no takeover deals to talk about or remarkable earnings reports to offset the poor economics, the market suffered its worst one-day loss since March 13.
At the close, the Dow Industrials were down 148 points at 13,215, the S&P 500 fell 21 to 1,491 and the Nasdaq gave up 43 to close at 2,534. The NYSE traded 1.54 billion shares and the Nasdaq exchanged 2.3 billion. Decliners exceeded advancers by 25-to-7 on the New York and 23-to-6 on the Nasdaq.
Crude oil (June contract) gained 60 cents, closing at $62.15 a barrel, but the Amex Energy SPDR (NYSEARCA:XLE) lost $1.16 and closed at $63.79. Gasoline futures were strong yesterday, closing at the highest level since August as a result of supplies reported at 52% below last year's.
Gold futures fell by $15.50 and closed at a seven-week low as the dollar hit a one-month high against the Euro. The June gold contract closed at $667 per troy ounce and the next chart support is at $660. The Philly Gold and Silver Index [XAU] closed at $137.62, down $4.18. The next XAU support is at the May 1 low of $135.
What the Markets Are Saying
Yesterday's tumble could be the prelude to the first correction that the market has seen since it began the remarkable 28-day run-up that started on March 29. An 80-year record of gains was equaled, and the market unequivocally confirmed that a primary bull market still exists.
Despite that, though, the public is still very skeptical, as shown by yesterday's American Association of Individual Investors' bull/bear numbers, which have the bulls exactly the same as the bears at 42.86%. That's a big jump from last week's reading of 54% bearish and 29% bullish, but hardly the reading that would tell us that a major top is forming. Instead, we'll most likely get a 50% correction of the March 28 low to the May 9 high, which would target the Dow at 12,827, with the possibility of a pullback to the breakout line at 12,800. And that equates to 1,460-1,463 on the S&P 500.
Today's Trading Landscape
Yesterday's selling will likely carry through to this morning's opening (watch the Japanese/European markets). After yesterday's sales numbers from leading stores, all eyes will be on the retail sales report (0.3% expected) at 8:30 a.m., along with the Producer Price Index (0.5% expected). Business inventories will be reported at 10 a.m.
Retail Metrics reported that retail sales were off 1.8% in April, and that was well below analysts’ expectations, with Wal-Mart Stores (NYSE:WMT) and Target (NYSE:TGT) being the hardest-hit. Look for earnings today from Alcatel-Lucent (ALU), Goldcorp (NYSE:GG), Volvo (VOLV) and others.
Asian Headlines (via Bloomberg.com)
• Asian Stocks Fall on Lower Metals, U.S. Growth Concerns; BHP, Canon Drop Asian stocks declined the most in more than two weeks after metals prices fell and U.S. retailers reported slower sales.
• China Lets Investors Buy Stocks Abroad for First Time to Cool Local Market China will allow the country's commercial banks to buy stocks abroad, in a move that may release some of the nation's 35 trillion yuan ($4.6 trillion) of savings on overseas equity markets for the first time.
• Babcock Agrees to Buy Alinta for $6.5 Billion, Beating Macquarie Bank Bid Alinta Ltd., Australia's biggest energy transmission company, accepted a sweetened A$7.9 billion ($6.5 billion) takeover bid from Babcock & Brown Ltd., rejecting a rival offer from Macquarie Bank Ltd.
• Singapore Air Reports Record Profit on More Passengers and One-Time Gains Singapore Airlines Ltd., the world's largest carrier by market value, said fourth-quarter profit more than doubled as an expansion of its fleet and Asia's economic growth boosted passenger numbers.
European Headlines (via Bloomberg.com)
• European Stocks Drop for Second Day, Paced by ABB, KarstadtQuelle, Fortis European stocks dropped, heading for the biggest weekly decline in two months, on speculation a slowing U.S. economy will hurt companies' earnings.
• VTB Bank Raises $8 Billion in Biggest Initial Share Sale of 2007 Worldwide VTB Group, Russia's second-biggest bank, raised $8 billion in the world's largest initial public offering this year, as annual loan growth of more than 30 percent attracts investors.
• RWE Shares Jump on Report That Electricite de France Plans Takeover Offer Shares of RWE AG, Germany's second- largest utility, rose the most in four years on speculation Electricite de France SA plans to buy the company, which has a market value of 45.8 billion euros ($61.7 billion).
• Deutsche Telekom's First Strike in a Decade Draws More Than 10,000 Workers More than 10,000 Deutsche Telekom AG (DT) workers across Germany walked off their jobs at the fixed-line division today, the first full-blown strike in more than a decade at Europe's largest phone company.
• Volvo First-Quarter Net Falls Less Than Analysts Estimated; Shares Climb Volvo AB (VOLV), the world's second-largest truckmaker, said first-quarter profit fell less than analysts estimated as rising eastern European sales helped offset a U.S. decline. The shares gained the most in 3 1/2 years.