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Wall Street Strategies has been providing independent stock market research since 1991 to individual, retail and institutional clients through a balanced approach to investing and trading. Charles Payne, our founder and chief analyst, is routinely sought after for his stock market, political,... More
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  • Even When It Looks Easy... It's Not That Easy By: Charles Payne 0 comments
    Oct 8, 2009 2:15 PM | about stocks: AA, KATE, AEO, ZQK, BEBE, ARO, PSUN, ANF, HOTT, URBN, GES, LB, GPS, BKE, PLCE, WTSL, VLCM, ANN, ZUMZ, JCP

    The casual observer will say this is easy, that anyone could be making money in the market but the fact of the matter is, anyone isn't making money in the market. First off, you have to be in it to win it and then you have to have a modicum of conviction. Today, for example, I bet a lot of people were shaken out of the market after it opened with some strength but mostly drifted lower. There is going to be a point when most of the news is good news but the market doesn't react the way it's supposed to act. It could have been today but it wasn't but there was some angst early in the day. I like the action in retail (more on it below from our Retail Analyst Brian Sozzi who was on CNBC this morning and will be on Fox Business in a few minutes) and not just the winners but the fact the deep discounters are treading water. That tells me people are moving back upstream (that is backed up by higher guidance from Target) and that's a good thing.

    Wholesale Inventories

    Stocks got a boost from this report this morning as inventory rebuilding will be a key cog in the overall recovery of the market.


    Sidebar
    By: Brian Sozzi, Research Analyst

    The deal that Liz Claiborne (LIZ) struck to license its namesake apparel line to JC Penney (JCP) is flat out a strange thing to see. Here you have it, a once proud retailer established by a fashion icon now having to sell the rights to its company name in order to generate cash. So what lays in store for the company? I have been receiving many calls on the topic and here is my take:

    • A stake in Juicy Couture is sold to alleviate partial debt
    • All of Juicy Couture is sold to wipe away all debt

    I am impressed by the trading activity in retail stocks post the same-store sales releases this morning. However, it is buyer beware as I am seeing valuations for specialty apparel becoming rather frothy. A prime reason why I note frothy valuation is that I am unsure where the sales are derived for the holidays and 2010. There are only so many costs a company can extract from the operating model without damaging the business. From my viewpoint, retailers have slashed and burned on the cost side of the equation, placing a greater importance on the top line to meet heighted EPS estimates for 2010.


    Alcoa's Surprise
    By: David Silver, Research Analyst, Wall Street Strategies

    During the second quarter, Alcoa broke a string of five consecutive quarters of delivering earnings per share results that were below the Street's expectations and during the quarter, Alcoa reported a profit (and beat on the top line). Earnings season from the first two quarters have been littered with so-so earnings releases as companies were able to beat on the bottom line by cutting costs (think slashing production and jobs) but have fallen short on the top line. This quarter, Alcoa started the ball rolling with a beat on the top line and bottom line. Aluminum prices are up about 50% from the lows back in March, but have pulled back in recent weeks. The Company said that it saw a 18.2% increase in the average price per metric ton to $1,972 per metric ton from $1,667 per metric ton in the second quarter.


    So Alcoa broke the string of so-so earnings, but can other companies pick up where Alcoa left off? Eventually, the market is going to need to see better results for the rally to continue. Companies are going to need to start to show demand growth, some pricing power, and that any improvements is more than just inventory replenishing. On top of that, management's expectations for the next six to twelve months are important (just as always). Companies have been able to side step the "normal" fundamental hurdles as a result of the weaker economy, but that won't work forever. For a full copy of the article, refer to our website at wstreet.com.

    On the Energy Front

    On the energy front, the fact that the dollar is at its weakest level for the day is having a positive impact on oil and the entire commodity and energy complex due to the inverse relationship. Oil is subsequently up substantially for the session with the upside momentum appearing to be in the commodity's favor. Furthermore, the fact that the broader market is advancing is serving as a positive upside catalyst for black gold. At this point, key technical levels appear to be $72.30 when represents the next level of resistance. Beyond that the price is likely to reach the upper band of the trading range. Light sweet crude was trading at about $72.08 per barrel in early afternoon trading on the New York Mercantile Exchange.

    Written by Charles Payne, CEO and Principal Analyst of Wall Street Strategies (wstreet.com) providing independent stock market research to over 30,000 subscribers, in more than 60 countries. Mr. Payne is a regular contributor to the Fox Business and Fox News Networks. For more information about Mr. Payne, please refer to the company’s website www.wstreet.com.



     

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