It was a rough day for global trade, with European markets touching new lows as Greece, Portugal, Italy and now Ireland continue to face the onslaught of the rating agencies. Economic data was mixed, with the trade deficit expanding significantly temporarily, but with weekly chain store sales excelling above the prior year. Small businessmen relayed a long running sour mood, and the FOMC published the minutes of its latest meeting. The corporate scene was colorful, with some reason to celebrate and other options to sell-off. The Dow closed down 0.5% while the NASDAQ lost 0.7%.
Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.
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Rough Day for Global Trade
European Stocks Tanked
European shares hit a four-month low Tuesday on jitters that the troubles in Greece were spreading to Portugal and Italy. It’s been like dominos, as the convoluted European process drove hundreds of thousands of Greeks to the street in a near overthrow of their government. This was followed by the timely downgrade of Portugal by S&P (NYSE: MHP), everybody’s favorite firm these days. Finally, last week’s rumor that Silvio Berlusconi might not be making things so comfortable for his Finance Minister, and that Mr. Tremonti’s austerity plans might not be politically digestible for the enduring Italian PM, was enough weight to send EU stocks for a ride. This afternoon we learned that the pressure will not lessen tomorrow either, given that Moody’s (NYSE: MCO) has just downgraded Ireland’s debt rating to junk. It was the third straight session of struggle for Europe, with Greek stocks touching a 14-year trough.
Bank of Japan
The Bank of Japan (BOJ) announced monetary policy today. Just a few days after the momentous rate hike by the ECB, the BOJ said it would continue to encourage its uncollateralized overnight call rate to remain at or around 0.0 to 0.1%. Considering where the rate sits, there’s not much more the bank could do but encourage. The bank also said Japan’s economic activity was recovering with the easing of supply constraints related to the earthquake. However, the BOJ still had to lower its economic growth forecast, which was last reported in April.
Small Business Sentiment
Our friends at Bloomberg Radio said it well this morning, when relaying that based on the reports of the NFIB Small Business Optimism Index, it would appear small businesses never exited recession. The index fell another tenth of a point in June, to 90.8, "solidly in recession territory" according to the report. The Greek was not at all surprised, as I walk the streets of New York and converse with small businessmen daily. According to the NFIB, small businessmen are anticipating to spend more on capital goods, but pessimism still dominates expectations about future sales gains.
One good note on a relative basis: small businesses did most of the hiring in June according to ADP. The story here has been that tax break incentives to inspire hiring aren’t good enough; small businessmen need revenues to support the hiring of the next employee. The index slipped to 90.0 in May.
International Trade data for May showed the trade gap ballooned on the high price of oil through the month. Economists surveyed by Bloomberg were looking for the trade gap to narrow in May to $42.7 billion, versus April’s $43.7 billion gap. However, the deficit actually widened to $50.2 billion.
Weekly Same-Store Sales
The International Council of Shopping Centers (ICSC) and Redbook reported on weekly same-store sales Tuesday as usual. According to the ICSC, sales rose 0.4% against the immediately preceding week. The year-to-year comparison was interesting with sales increasing 5.5% over the prior year. Redbook concurred, noting 5.2% sales growth against the prior year period. It’s hard to say what the reason was for the strength in the annual comparison, but it may have had more to do with last year than this, given the weekly rate of growth. Some pointed to better weather.
FOMC Meeting Minutes
The Federal Reserve released the minutes from its June meeting this afternoon. The meeting was the one that might have ushered in QE3, but did not. Thus it offers interesting insight into just how much support there was for the stoppage of quantitative easing. You can see the minutes by clicking through here.
The Senate Banking Committee heard testimony regarding investor protections Tuesday.
Clean Fuel Energy (Nasdaq: CLNE) received an investment of $150 million by Chesapeake (NYSE: CHK), and its shares surged 15% as a result Tuesday. Clean Fuel Energy is developing natural gas for transportation, and Chesapeake is the most active U.S. driller of natural gas. Clean Energy was also upgraded today by a Northland Securities analyst to “outperform” from “market perform”. A common denominator between the two companies, other than natural gas, is T. Boone Pickens, who has interests at both.
Alcoa (NYSE: AA) started EPS season with its Monday evening report. The stock fell 1.2% today, despite its Q2 report showing its net profit doubled on better pricing. Since pricing changes are well known ahead of time, stocks like Alcoa are rewarded or punished before reporting, and then must meet expectations. Plus, the market tends to look ahead, and the global economy has not been stellar of late.
Cisco Systems (Nasdaq: CSCO) shares were lifted a percent today as it announced a refreshing of its major switching platform, Catalyst 6500, at its own Las Vegas event. An analyst at Gleacher & Co. also noted that an anticipated layoff announcement might also be helping the stock, as it is seen as a bit fatty by the analyst community - and it would seem also by the market.
Novellus (Nasdaq: NVLS) lost 11% today, after its Monday evening EPS report offered a sales miss, a poor outlook and a current conditions report that troubled investors. That said, its EPS results beat the Street view by three cents, based on Thomson Reuters data.
News Corp. (Nasdaq: NWS, Nasdaq: NWSA) remains pressured, shedding a point on worries it may not consummate its BskyB British acquisition now. There’s also worry that an investigation may implicate more than the News of the World people, and reach to other News Corp. publications, based on what we heard on Bloomberg Radio today.
On the corporate front, analyst and/or shareholder meetings took place at Campbell Soup (NYSE: CPB), Acorn Energy (Nasdaq: ACFN), Lam Research (Nasdaq: LRCX) and Pandora Media (NYSE: P). VMware (NYSE: VMW) discussed the future of cloud computing, and the next step for the cloud infrastructure. Oneok Partners (NYSE: OKS) split 2-for-1.
The earnings schedule includes news from Fastenal (Nasdaq: FAST), Wolverine World Wide (NYSE: WWW), Premier Exhibitions (Nasdaq: PRXI), AMREP (NYSE: AXR), Dynacq Healthcare (Nasdaq: DYII), India Globalization Capital (AMEX: IGC), Jewett-Cameron Trading (Nasdaq: JCTCF), Life Partners Holdings (Nasdaq: LPHI), Meade Instruments (Nasdaq: MEAD), NASB Financial (Nasdaq: NASB), Qiao Xing Mobile (NYSE: QXM) and Schmitt Industries (Nasdaq: SMIT).
Most Active Stocks
On the Upside: Clean Diesel Technologies (Nasdaq: CDTI), Orbitz Worldwide (NYSE: OWW), Radiant Systems (Nasdaq: RADS), eOn Communications (Nasdaq: EONC), SGOCO Group (Nasdaq: SGOC), TeamStaff (Nasdaq: TSTF), Rosetta Genomics (Nasdaq: ROSGD), Trunkbow Int’l (Nasdaq: TBOW), EntreMed (Nasdaq: ENMD), Synthesis Energy Systems (Nasdaq: SYMX), Clean Energy Fuels (Nasdaq: CLNE), Cardica (Nasdaq: CRDC), IFM Investments (NYSE: CTC), Pansoft (Nasdaq: PSOF), Central Virginia Bankshares (Nasdaq: CVBK), BioMimetic Therapeutics (Nasdaq: BMTI), RXi Pharmaceuticals (Nasdaq: RXII), SMF Energy (Nasdaq: FUEL), Daegis (Nasdaq: DAEG), FiberTower (Nasdaq: FTWR), Material Sciences (Nasdaq: MASC), Lentuo International (NYSE: LAS), Ameritrans Capital (Nasdaq: AMTC) and SPAR Group (Nasdaq: SGRP).
On the Downside: Coffee Holding (Nasdaq: JVA), Crystal Rock (Nasdaq: CRVP), Powerwave Technologies (Nasdaq: PWAV), Trex (Nasdaq: TREX), China Hydroelectric (NYSE: CHC), Vestin Realty Mortgage (Nasdaq: VRTA), Adolor (Nasdaq: ADLR), Vitran (Nasdaq: VTNC), Quest Software (Nasdaq: QSFT), Microchip Technology (Nasdaq: MCHP), Country Style Cooking (Nasdaq: CCSC), Wowjoint Holdings (Nasdaq: BWOW), Farmer Brothers (Nasdaq: FARM), 8X8 (Nasdaq: EGHT), Novellus (Nasdaq: NVLS), Altair Nanotechnologies (Nasdaq: ALTI), Affirmative Insurance (Nasdaq: AFFM), SemiLEDS (Nasdaq: LEDS), AXT Inc. (Nasdaq: AXTI), Ultratech (Nasdaq: UTEK), Biolase Technology (Nasdaq: BLTI), Entegris (Nasdaq: ENTG), Hansen Medical (Nasdaq: HNSN) and Kulicke and Soffa (Nasdaq: KLIC).
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