By Carlos Guillen
Stock trading activity has been rather jittery so far during today's session as investors appear to be taking some profits off the table in light of mixed economic data from China and in a sort of delayed reaction to comments from a number of Federal Reserve bank presidents that suggested that the central bank may start paring back its easy-money policies.
Despite indications that investor believe the U.S. economy is strong enough to sustain a reduction in Fed stimulus, the psychological effects of tapering still tend to get reflected in investors automatically taking some profits off the table on any Fed talk of tapering, almost like a knee-jerk reaction. In speeches yesterday, a few central bank presidents said that the central bank may start to begin winding down its easy-money policies, that is, reducing its $85-billion-a-month bond purchase program as early as this month when the FOMC meets on December 17-18.
Over in China, there were somewhat mixed data points, as retail sales unexpectedly accelerated in November but industrial output rose less than estimated. The country recorded strong retail sales, which rose at a rate of 13.7 percent in November on a yearly basis, higher than the consensus figure of 13.3 percent and higher than October's retail sales growth figure of 13.3 percent. And although November factory production rose 10 percent from a year earlier, the result was shy of economists' average projection of 10.1 percent and below the prior reading of 10.3 percent posted for October.
Here at home, perhaps not too dramatic but still adding a bit of optimism, was that the National Federation of Independent Businesses (NFIB) said its index of small-business optimism improved slightly. The NFIB index increased to 92.5 in November from 91.6 in the prior month, as over half of the improvement was accounted for by the labor market components. However, expected business conditions deteriorated further, with lots of dismal views of the economy coming next year. As it stands the Index has stayed range bound, between 86.4 and 95.4 since the recovery started, which is well below the average reading of 100 from 1973 through 2007. Uncertainty remains within small businesses, as they anticipate ramping taxes, regulations, and healthcare costs.
In corporate items, it is worth mentioning that General Motors is no longer partly owned by the U.S. government, clearing the way for the company to start returning cash to shareholders. In addition, GM has named Mary Barra as its new chief executive officer, effective January 15, 2013.
With overall very little in terms of market moving economic data, equity markets remain at the mercy of knee-jerk reactions from investors that have grown accustomed to the thought of everlasting Fed intervention; as such, stocks remain jittery.
CEOs in the Spotlight this Week
By David Urani
This week has been a big one for CEOs, with a few notable management changes taking place for varying reasons. Three moves from ANF, LULU, and GM cover a whole spectrum of despicable to commendable decisions.
Yesterday it was Abercrombie's (NYSE:ANF) surprise re-signing of CEO Mike Jeffries. This one is notable in that Jeffries has been terrible, both from a business and a PR standpoint. Abercrombie under his leadership has trailed the S&P 500 over the last five years, and is down 28% in the past year. Likewise, ANF's bottom line showed a $15.6 million net loss in Q3. Some of that underperformance can be attributed to Jeffries' own statements smearing the company's image, with the revelation that Abercrombie doesn't sell products for larger customers because they weren't 'cool enough' in his words. That comes as Abercrombie generally gets trampled by up-and-comers like H&M and Forever 21. This is one of the first CEOs I would have named to get the boot but amazingly they're extending his contract for another year. Add to that, he's one of the most overpaid CEO's around, having pulled in as much as $48 million in 2011. Bad move, Abercrombie.
Lululemon (NASDAQ:LULU) has had its own bit of controversy this year, beginning with the black yoga pants that turned see-through when stretched. Performance since then has simmered down and now that's turned into the end of the road for CEO Christine Day. Contrary to ANF's Jeffries, Day has been overseeing a great blossoming of the Lululemon brand over the past few years. Overlooking the see-through pants, which may be more the fault of their product developers than Day herself, I'm not totally convinced she had to go. Also, she'll be replaced by Laurent Potdevin, who is the former president of TOMS shoes who I wouldn't write off but doesn't necessarily strike me as a rock star but we'll see. There's also the case of Chairman and founder Chip Wilson who had his own Jeffries-esque moment when he said the see-through pants were the fault of the customers being too full figured for their sizes. Wilson has stepped down.
And while Jeffries and Wilson perhaps set up social barriers, General Motors (NYSE:GM) has smashed one in a noteworthy move. A day after the government exited its remaining stake in GM (for a $10.5 billion loss) CEO Dan Akerson has been replaced for personal reasons. The new GM CEO will be Mary Barra, who not only becomes the first female to run a major auto company but generally it's an industry where you don't see many female execs. She's been with GM for more than 30 years and in the last 22 months has been overseeing product development with great success. I can't argue with that, GM was the highlight of the latest November auto numbers at a 14% gain year over year. She also beat out a couple of other highly qualified male executives for the seat. We wish the best of luck to Mary, and good riddance to the government.