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The writer is a long term value investor (over 10 years experience) seeking both value in long and short ideas. Besides stock positions, the writer likes to work with options to enhance the risk/return profile of the ideas. Disclaimer: This article provides opinions and information, but does not... More
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  • Wall Street Recap: Tuesday, June 6

    Stocks rallied right out of the gate today to end around the highs of the day at the close. The S&P 500 rose 2.30% ending at 1,315.13 points while the Dow Jones Industrial Average and the Nasdaq gained 2.37% and 2.40%, respectively.

    Europe

    The good news came from Europe for a change. The Euro Stoxx 50 ended the day 2.1% higher as stocks across the continent rose in tandem. The ECB's decision to leave interest rates unchanged provided a boost to the market, even as some economists were expecting a rate cut. ECB President Draghi said the bank is ready to add more stimulus to the European economy if needed. He did however specifically mentioned that some problems have nothing to do with monetary policy and can only be tackled in a political setting.

    Perhaps the most important news were reports came from the German newspaper Die Welt which suggested that Spain might receive a credit line from the European Financial Stability Facility fund. On the macro economic front the reports were not so favorable. German industrial production fell 2.2% in April on a monthly basis vs. an expected contraction of 1%. Industrial production in Spain fell an eye-dropping 8.3% on the year.

    Wall Street Opening

    Markets in the US opened about 1% higher and extended their gains throughout the session. Despite the fact that the ECB did not decide to cut rates, market were in an upbeat mood also as influential FED members said there might be room to provide more stimulus in case the economic recovery is slowing down as readings indicate softening inflation in the coming months.

    Furthermore the Beige Book, released by the Federal Reserve came in better than anticipated after macro-economic figures broadly missed their expectations last week. Manufacturing data, auto sales and construction were strong while consumer spending was flat or declining amidst little to no pay raises. The FED raised its growth forecast for 2012 to 2.7% and expects unemployment to fall to 7.8%-8.0%

    Corporate News

    Halliburton (HAL) the oilfield service company rose over 2% in the morning in line with the wider market to end the day with a loss of 3.5% after the company warned about the impact of higher fracking costs on the bottom line. Increased costs for guar gum, used in fracturing fluids, will impact margins by 5%-5.5% in the second quarter versus an earlier estimate of 2%-2.5%. The company seeks to mitigate the impact for the remainder of the year by charging its customers more and look for alternatives.

    Tempur-Pedic (TPX) saw its shares cut in half today after the manufacturer and distributor of premium mattresses and pillows forecast a bad second quarter and cut its guidance for the entire year of 2012. Rival product introductions and a competitive promotional environment are impacting the business. Investors ran to the door sending shares 49% lower in a single day. Other mattress companies fell hard as well. Mattress Firm (NASDAQ:MFRM) fell 20.7% and Select Comfort (NASDAQ:SCSS) fell 20.5%.

    Ancestry.com (ACOM) ended the day 10.7% higher after reports suggested that the online family history company is trying to sell itself and it has hired Qatalyst Partners LLC to find a buyer. The company declined to comment on the rumors.

    Chesapeake Energy (CHK) rose yet another day after the troubled natural gas company is reportedly in talks to sell pipeline assets in a transaction which could be as large as $4 billion. Just recently corporate activist Carl Icahn bought a 7.6% stake in the company which he is now trying to shake up. Earlier this week Icahn already replaced four board members of the company in an attempt to get the troubled natural gas producer back on its feet.

    Men's Wearhouse (MW) the specialty retailer for men suits and tuxedo rentals fell a whopping 19% after the close today. The company missed on its first quarter results and issued a weak outlook for the remainder of the year. The company reported earnings per share of $0.52 for the first quarter, below analyst consensus of $0.55. For the entire year of 2012 the company expects to earn between $2.70 and $2.78 per share.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Jun 07 8:44 PM | Link | Comment!
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