By Carlos Guillen
Equity investors appear to be in a battle, with the bulls on one side trying to surpass the Dow's 14,000 level, while the bears sell off on any bit of disappointing economic data. At the moment it is the bears that are in winning territory and are profit taking as mixed economic data fails to inspire further impetus for buying more stocks.
Initial Claims data posted earlier today was somewhat of a disappointment but at least its direction brings a bit of a relief, as the result made a reversal from the huge spike last week. According to the Department of Labor, initial claims during the week ended February 2 totaled 366,000, decreasing from the 371,000 revised figure reported for the prior week and landing above the Street's estimate of 360,000. Perhaps from this point on there will be less volatility, which affected the data during the holiday period and at the start of quarter. The initial claims' four-week moving average was 350,500, decreasing from the prior week's average of 352,750. This metric has been encouraging as the overall trend has been decreasing; however, the improvements have been small recently. What is becoming apparent is that the jobs market is reaching a point of stagnation, which is that there are less layoffs but there is also less hiring.
Also a bit disappointing today was that labor productivity declined while unit labor costs climbed. According to the Bureau of Labor Statistics, worker productivity declined at an annual rate of 2.0 percent in the fourth quarter of 2012, dropping more than the Street's consensus estimate calling for a 1.2 percent decline. It is apparent that an unusually sharp reduction in government military spending affected the data, but this is expected to be transient, and this first quarter should demonstrate a rise in productivity. Certainly positive from a worker perspective, unit labor costs climbed at a 4.5 percent rate in the fourth quarter, landing higher than Economists' average estimate of 2.5 percent. The gain in unit labor costs was driven by a jump in compensation for workers, a reading that includes wages as well as employer contributions to social insurance and private benefit plans like healthcare.
So, the Battle at Dow 14,000 continues, and the bears are winning, with the Dow Jones Industrial Average currently losing over 80 points for today's trading session. This makes two up days and two down days this week, and considering that the Dow closed at 14,009 last Friday, the bears are also winning for the week as the Dow now stands at 13,890.
Market Reverses on Retail
By David Urani
Retail sales were on the menu this morning, as several companies posted their January same-store sales results. Retailers were mostly beating expectations but the market quickly turned south on the sector as trading progressed through this morning. What we're seeing here is an interesting situation where January of 2013 contained an extra fifth selling week versus January 2012. Several stocks seemed to gap higher at the open based on the headline comps (which mostly included the extra week) but then sold off as investors filtered out the results to account for the extra week.
Kohl's (NYSE:KSS) for instance posted a +13.3% January comp result and the stock opened approximately 3% higher, but when one reads further and finds that excluding the extra week comps were just 1.9% it's not nearly as impressive; the stock is trading negative now.
It was a similar story for Limited Brands (LTD), where a +9% comparable sales result included approximately $125 million from the extra week. That stock is down 3%
One Company that still managed to impress though was Macy's (NYSE:M), who posted a +34.6% comp that was still quite good at +11.7% after subtracting the extra week. Management noted, "Simply put, January was an outstanding month for Macy's."
Gap (NYSE:GPS) posted a +8% comp for January, besting the +4% consensus. However, the press release didn't specify about the extra week. That stock opened slightly higher but the Street has turned sharply negative on it, down 4%.
All in all, the retail sector is underperforming the market on the day as sales just weren't all that impressive compared to last year on balance. At the same time, how can you blame retail sales for not being super great, considering the average consumer must have experienced a bit of paycheck shock at the new year with that 2% payroll tax increase.