Today’s Earnings
BJ*, DE*, HAR, JDSU, LTD, NTAP, PETM, SNPS, & YGE
BJ
BJ’s profit for the second quarter that ended August 1, was $35.1 million, or 64 cents per share, compared with $36.5 million, or 61 cents per share, a year earlier.
Analysts, on average, had been expecting earnings of 62 cents per share, according to Reuters Estimates.
BJ’s previously announced its second-quarter sales fell 5.2 percent to $2.5 billion, while sales at its clubs open at least a year, or same-store sales, dropped 7.7 percent.
As the recession pressures household budgets, warehouse clubs such as Costco Wholesale Corp (NasdaqGS:COST – News), Wal-Mart Stores Inc’s (NYSE:WMT – News) Sam’s Club and BJ’s Wholesale are attracting shoppers seeking low prices on staple items, like bread and paper towels.
People pay an annual fee to shop in the clubs and get discounts on everything from cartons of fresh fruit to flat panel TVs and gasoline for their cars.
But the clubs are facing greater challenges compared with a year ago when high gas prices and food inflation spurred their sales.
For the full year, the company expects earnings of $2.46 to $2.56 a share, up from its prior outlook of about $2.44 to $2.54 a share.
BJ’s shares were up $1.23 at $32.55 in trading before the opening bell.
____________________________________________________________
DE
NEW YORK (MarketWatch) — Deere & Co. /quotes/comstock/13*!de/quotes/nls/de (DE 46.02, +0.93, +2.06%) said Wednesday its fiscal third-quarter earnings fell to $420 million, or 99 cents a share, from $575 million, or $1.32 a share, in the year-ago period. Sales plunged 24% to $5.9 billion. For 2009, the Moline, Ill., farming-equipment maker forecast a net income of $1.1 billion, in line with analysts’ mean expectation, according to a poll by FactSet Research. Shares of Deere jumped 2.5% in premarket trading to $46.20.
China Has Now Corrected 20% From The Top; Is It A Bear Market Again ?
By Bloomberg News
Aug. 19 (Bloomberg) — China’s stocks tumbled, briefly driving the benchmark index into a so-called bear market, on concern economic growth will falter as banks rein in lending.
The Shanghai Composite Index lost 4.3 percent to 2,785.58, as Citic Securities Co., the nation’s biggest brokerage, slumped 7.8 percent and China Vanke Co., the largest developer by market value, fell 5.6 percent.
The gauge has slumped 19.8 percent since Aug. 4, after more than doubling from November, as China rolled out a 4 trillion yuan ($585 billion) stimulus package. A plunge in new bank loans in July, disappointing earnings and concern the government will seek to damp property speculation has sapped confidence, driving losses close to the 20 percent threshold for a bear market.
“It’s irrational selling that has shattered market confidence,” said Larry Wan, Shanghai-based deputy chief investment officer at KBC-Goldstate Fund Management Co., which oversees about $583 million in assets. “Some mutual funds have been reducing their stock holdings as they are pessimistic about the economic outlook.”
China Everbright Securities Co., which had the smallest first-day gain of any new stock in Shanghai this year, slumped by the 10 percent daily limit today. About 10 stocks fell for each that rose on the benchmark index.
“It’s scary,” Xu Xuehong, a 64-year-old retired worker in Shanghai who had about 300,000 yuan invested in shares, said in an interview at a branch of Shenyin & Wanguo Securities Co. “The decline is too rapid; I am not going to make new investments.”
Share Sales
The market slump follows the lifting in June of a nine- month moratorium on initial shares sales that triggered about $1 billion worth of IPOs by eight companies including China Everbright, China State Construction Engineering Corp. and Sichuan Expressway Co.
The Shanghai index, the world’s best-performing major market from Jan. 1 to Aug. 4, remains 59 percent below its record level on Oct. 16, 2007. Of the so-called BRIC group of emerging economies that includes India and Brazil, only Russia is in a bear market.
Chinese stocks are “extremely frothy” and investors should have an “underweight” position in the country’s shares, said Devan Kaloo, who oversees $11.5 billion as head of global emerging markets at Aberdeen Asset Management Ltd.
“I’m worried about a correction in a market that has been driven by cheap money,” said Kaloo, whose Aberdeen Emerging Markets Fund has beaten 98 percent of peers this year.
Tighter Loans
A slump in China’s July lending to less than a quarter of June’s level and disappointing earnings from companies including Yunnan Copper Industry Co. have weighed on shares.
“The current correction is reflecting the tightening in lending,” said Andy Xie, a former Asian chief economist at Morgan Stanley, who correctly predicted in April 2007 that China’s equities would tumble. “We’ve seen the peak of this market cycle.”
An estimated 1.16 trillion yuan of loans were invested in stocks in the first five months of this year, China Business News reported on June 29, citing Wei Jianing, a deputy director at the Development and Research Center under the State Council, China’s Cabinet.
The market may fall a further 10 percent, Xie said Aug. 17. The Shanghai index is trading at 30.3 times reported earnings, against 17.5 times for shares on the MSCI Emerging Markets Index, and remains 53 percent higher than at the start of this year…….
China Takes Down Asian Markets
By Jonathan Burgos and Shani Raja
Aug. 19 (Bloomberg) — Asian stocks fell, briefly dragging China’s key index into a so-called bear market, as Maanshan Iron & Steel Co. reported losses and shipping rates slumped.
Maanshan Steel, China’s No. 4 listed steelmaker, lost 7.5 percent, while China Cosco Holdings Ltd., the world’s largest operator of dry-bulk ships, slumped 7.4 percent in Shanghai. Tokio Marine Holdings Inc. dropped 2 percent after Japanese regulators said new guidelines will hurt insurers’ solvency ratios. Sony Corp. sank 3.9 percent after cutting the price of its PlayStation 3 game console.
The MSCI Asia Pacific Index fell 0.7 percent to 109.93 as of 6:23 p.m. in Tokyo, erasing an earlier gain of 0.6 percent. The gauge has rallied 56 percent from a more than five-year low on March 9 amid speculation the global economy is recovering.
“We may need to see a healthy pullback,” said Daphne Roth, Singapore-based head of Asian equity research at ABN Amro Private Banking, which oversees about $14 billion. “Investors are still waiting for better entry levels.”
Japan’s Nikkei 225 Stock Average lost 0.8 percent to 10,204, while Hong Kong’s Hang Seng Index sank 1.7 percent. China’s Shanghai Composite Index dropped 4.3 percent, taking its drop from this year’s high on Aug. 4 to 19.8 percent. That’s just short of the 20 percent tumble that signals a bear market.
China Takes Down European Markets & U.S. Futures
By Adam Haigh
Aug. 19 (Bloomberg) — European and Asian stocks fell and U.S. index futures retreated as lower metals dragged down commodities producers and China’s Maanshan Iron & Steel Co. posted a second straight half-year loss. The Shanghai Composite Index entered a bear market.
BHP Billiton Ltd. slid 1.1 percent as lead, tin and nickel slipped on the London Metal Exchange. Maanshan fell 7.5 percent after announcing a 795.4 million yuan ($116 million) net loss.
The MSCI World Index sank 0.5 percent as of 9:41 a.m. in London. The gauge of 23 developed nations has rallied 51 percent since March 9 as companies from GlaxoSmithKline Plc to Intel Corp. reported better-than-estimated results and Germany and France unexpectedly returned to economic growth.
“Markets globally were getting on for 60 percent up from their low so you shouldn’t really be too surprised if you see some pullback” in stocks, Richard Cookson, the London-based head of global asset-allocation research at HSBC Holdings Plc, said on Bloomberg Television. “I’m extremely wary about equity markets at this point,” said Cookson, who has an “underweight” position on developed-market stocks.
Europe’s Dow Jones Stoxx 600 Index lost 1.2 percent. The 42 percent rally since March 9 has left the measure valued at 40.2 times the profits of its companies, near the most expensive level since 2003, weekly data compiled by Bloomberg show.
Standard & Poor’s 500 Index futures expiring in September slipped 1 percent, while the MSCI Asia Pacific Index decreased 0.7 percent as Maanshan sank 7.5 percent to 4.81 yuan….
German PPI Drops The Most in 60 Years
By Gabi Thesing and Christian Vits
Aug. 19 (Bloomberg) — German producer prices fell at the fastest pace in 60 years last month as energy costs declined.
Prices dropped 7.8 percent from a year earlier after falling 4.6 percent in June, the Federal Statistics Office in Wiesbaden said today. That’s the biggest decline since the office started to calculate the series in 1949 and exceeded economists’ forecast for a 6.5 percent drop, according to the median of 21 estimates in a Bloomberg News survey.
The price of crude oil has dropped more than 50 percent from a record in July 2008, while weaker demand is also weighing on inflation. The European Central Bank, which has cut its benchmark interest rate to a record low of 1 percent, has downplayed the threat of deflation in the euro-region economy.
“Producers’ pricing power is declining and one could see the data as a first sign of deflation,” said Carsten Brzeski, an economist at ING Groep NV in Brussels. “However, deflation is only dangerous if it lasts and I expect producer prices to return to positive territory by year-end.”
The euro extended its decline against the dollar after the report and was down 0.3 percent at $1.4094 as of 7:42 a.m. in London.
Oil Falls Below $69 Over China Bear Market Concerns
By ALEX KENNEDY p {margin:12px 0px 0px 0px;}
SINGAPORE (AP) – Oil prices fell below $69 a barrel Wednesday in Asia following a selloff in regional stock markets.
Benchmark crude for September delivery was down 58 cents to $68.61 a barrel by late afternoon in Singapore in electronic trading on the New York Mercantile Exchange. On Tuesday, the contract gained $2.44 to settle at $69.19.
Most Asian stock markets dropped sharply Wednesday, with Shanghai’s index tumbling as much as 5 percent, amid concerns the recent rally was petering out.
Crude has snaked around $70 a barrel for about two months amid low summer trading volume. Investors are cheered by signs that the global economy is emerging from recession, but concerned the recovery may be sluggish.
Oil rose as high as $70.50 a barrel Wednesday before turning down, following a sharp drop in most major Asian stock indexes.
Meanwhile, Kuwait’s oil minister said there is no need for the Organization of Petroleum Exporting Countries to change production levels because crude is trading at acceptable prices.
Sheik Ahmed Al Abdullah Al Sabah told reporters in Kuwait on Wednesday that current prices are “not bad, not bad at all.”
U.S. crude demand has been weak so far this summer, but inventories unexpectedly fell last week, evidence consumption could be rebounding.
Inventories plunged 6.1 million barrels last week, the American Petroleum Institute said late Tuesday. Analysts expected the API numbers to gain 1.1 million barrels, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.
The Energy Department reports mandatory supply figures on Wednesday, while the API numbers are reported by refiners voluntarily.
In other Nymex trading, gasoline for September delivery fell 1.36 cent to $1.99 a gallon and heating oil dropped 0.79 cent to $1.86. Natural gas for September delivery slid 1.7 cents to $3.08 per 1,000 cubic feet.
In London, Brent prices fell 61 cents to $71.76 a barrel on the ICE Futures exchange.
Consumers Are Hunkering Down According to Recent Retail Sales
Major retailers reported that American consumers are continuing to hunker down, casting a cloud over the durability of the U.S. recovery and underscoring the importance of overseas demand in restoring the world economy to health.
Retailers across the spectrum provided foreboding reports. Discounter Target Corp. reported that sales at stores open at least a year were down 6.2% from a year earlier in the quarter ended Aug. 1, while luxury purveyor Saks Inc. reported a 15.5% drop in same-store sales over the past quarter as shoppers stuck to buying basics. Building-supply chain Home Depot Inc. saw total sales drop 9.1% in the quarter ending Aug. 2, and it reaffirmed expectations of a 9% sales drop this year.
Reuters
A cashier at Target in Los Angeles checks the authenticity of $100 bills. Some retailers don’t expect conditions to improve until next spring.
Retail executives said they don’t expect conditions to improve until next spring. Some stores are girding for slow back-to-school and Christmas seasons by cutting inventories.
Home Depot Chief Executive Frank Blake told investors Tuesday that he didn’t expect a year-over-year increase in same-store sales until the second half of 2010. “We remain concerned by the high level of foreclosure activity, which we believe continues to put pressure on the housing markets,” he said.
The cuts in inventories, as well as reined-in expenses, are helping some retailers bolster profit margins. Hoping to avoid the massive markdowns of last year, retailer Neiman Marcus said it has cut its purchases 25%. Such steps played well with investors Tuesday: Target shares jumped 7.6% and Saks rose 6.9% after each reported a smaller profit decline than expected. Target shares are up 28% this year and Saks is up 30.6%.
American consumers appear so shaken by the worst recession since the Great Depression — and so pinched by unemployment, stagnant wages and stingier lenders — that they are reining in spending on all but basics. Economists also see an upturn in U.S. household saving as the beginning of a prolonged period of thrift.
The retailers’ reports serve as a reminder that it will be consumers, foremost, who will fuel a sustained U.S. recovery. Consumer spending accounts for about 70% of all demand in the U.S. economy.
Most economists expect growth to resume in the second half of this year at a modest pace, as U.S. businesses rebuild depleted inventories and the housing market stabilizes. Economists who see a second-half rebound point to a global-manufacturing revival and recent reports that the economies of France, Germany and Japan managed to expand in the second quarter. The Commerce Department said earlier this month that U.S. exports in June rose 1.9% from May after rising 1.6% the month before.
But U.S. consumers could be the counterweight. In a survey of economists this month, The Wall Street Journal asked if a substantial increase in consumer spending was needed for sustained growth. Of the 43 economists who responded, 60% said yes.
“Not only has employment fallen, but a lot people are facing salary freezes or other cutbacks,” said Lou Crandall, chief economist of financial-research firm Wrightson ICAP. “That is going to have a significant drag on consumer spending going forward.”……
Toyota & Sanyo Talk Batteries
By James Gunsalus and Kiyori Ueno
Aug. 19 (Bloomberg) — Sanyo Electric Co., the world’s largest maker of rechargeable batteries, rose the most in two months in Tokyo trading after Nikkei said the company will supply lithium-ion batteries to Toyota Motor Corp.
Sanyo rose 10 percent to close at 247 yen on the Tokyo Stock Exchange, the biggest advance since June 17, after surging as much as 17 percent. The benchmark Nikkei 225 Stock Average slipped 0.8 percent.
Toyota will buy batteries from Sanyo from about 2011, Nikkei English News reported earlier, without citing anyone. Sanyo said on July 3 it aims to quadruple sales to automakers by 2015 as people buy more gasoline-electric cars.
Sanyo isn’t the source of the Nikkei report, Tokyo-based spokesman Hiroyuki Okamoto said. The Osaka-based company’s policy is to provide lithium-ion batteries for any hybrid-car maker that wants them, he said. Hideaki Homma, a spokesman for Toyota in Tokyo, denied the report and declined to comment on whether the carmaker is in talks with Sanyo.
Lithium-ion batteries have higher output and capacity than the nickel-metal hydride type that Toyota uses in the Prius and other hybrid vehicles, the Nikkei report said.
“I don’t think those snapping up Sanyo today seriously expect a boost in its earnings from a possible deal with Toyota,” said Naoki Fujiwara, chief fund manager at Tokyo-based Shinkin Asset Management Co., which oversees the equivalent of $3.7 billion. “They’re buying the stock just for quick returns.”
Last month, Sanyo posted a third straight quarterly loss after a decline in sales at its components business, which includes rechargeable batteries.
The net loss of 18.4 billion yen ($194 million) in the three months ended June, compared with a profit of 28.2 billion yen a year earlier, Sanyo said on July 30. Sales fell 25 percent to 361.3 billion yen.
Sanyo said revenue at its components business, including semiconductors and rechargeable batteries, fell 29 percent to 164 billion yen.
Revenue from car batteries will likely exceed 100 billion yen by 2015, Mitsuru Honma, head of the rechargeable-battery unit, said in an interview. The company declined to give a precise figure for the current level.
Corporate Bonds See Record cash Inflows In The Past Year
Global corporate bond issuance has risen above the $1,000bn (£604bn) mark – the first time it has broken through this threshold in a single year – with four months remaining of 2009.
The boom is because of the difficulty companies face in obtaining bank loans and strong demand from investors, who can gain a big yield pick-up on corporate paper compared with government bonds.
Investors have switched more of their cash into corporate bonds because these offer better returns than the low interest rates on bank deposits.
Corporate bond issuance has risen to $1,103bn so far this year, beating the annual record of $898bn in 2007, according to Dealogic, the data provider. The jump in issuance has been seen in dollar, euro, yen and sterling-denominated deals.
Volumes in dollar, euro and sterling have risen to record annual highs, only eight months into the year, while volumes in yen are close to record levels.
Dollar issuance has risen to $487bn, euro to $299bn, yen to $64bn and sterling to $53bn.
In contrast, volumes of syndicated bank loans this year are 52 per cent down on 2008 and 69 per cent down on 2007. Banks are more reluctant to lend as they repair their balance sheets.
So far this year, syndicated bank lending has risen to $1,052bn compared with $2,182bn during the same period in 2008 and $3,369bn at the same point in 2007.
Richard Batty, investment director at Standard Life Investments, said: “Corporate bonds are the number one asset choice. We are very overweight in corporate bonds. The spread of corporate bond yields over government bond yields more than compensates for any company default risk.”
But investors are much more choosy about the bonds they buy than before the credit crisis. Most of their money is parked in the big, established investment-grade companies in sectors such as utilities and oil and gas.
Of the $1,103bn raised this year, $989bn, or 90 per cent, has been in investment-grade bonds, with 30 per cent issued by companies in the utilities and oil and gas sectors.
Are PE Values Too High ?
Chart Of The Day observes that we’ve broken another record…
Why shouldn’t we panic? Because the reason the PE is so high is that earnings are near a cyclical low. This chart actually illustrates why it’s silly to use P/E ratios based on a single year of earnings–because they can be wildly misleading.
On normalized earnings, stocks are about 10%-15% overvalued (see Robert Shiller’s chart below). That’s a far cry from the record overvaluation shown in the chart above.
Of course, just because we’re not at a record normalized PE doesn’t mean the market won’t crash.
Buffet Comments On U.S. Monetary Policy
Berkshire Hathaway CEO Warren Buffett, a supporter of Barack Obama and an indirect beneficiary of the bailouts, writes in a NYT op-ed to warn about the crushing mountain of debt the US government is now building up.
After laying out the staggering numbers, he concludes thusly:
I want to emphasize that there is nothing evil or destructive in an increase in debt that is proportional to an increase in income or assets. As the resources of individuals, corporations and countries grow, each can handle more debt. The United States remains by far the most prosperous country on earth, and its debt-carrying capacity will grow in the future just as it has in the past.
But it was a wise man who said, “All I want to know is where I’m going to die so I’ll never go there.” We don’t want our country to evolve into the banana-republic economy described by Keynes.
Our immediate problem is to get our country back on its feet and flourishing — “whatever it takes” still makes sense. Once recovery is gained, however, Congress must end the rise in the debt-to-G.D.P. ratio and keep our growth in obligations in line with our growth in resources.
Unchecked carbon emissions will likely cause icebergs to melt. Unchecked greenback emissions will certainly cause the purchasing power of currency to melt. The dollar’s destiny lies with Congress.
Read the whole thing >
CMBS Defaults Expected To Rise
S&P report warns CMBS defaults on the rise, peak default period ahead according to a report issued by Standard and Poors on August 18, 2009 –
With the effects of the recession visible across all commercial property sectors and debt financing scarce, defaults among rated North American commercial mortgage-backed securities (CMBS) increased last year.
The 529 new CMBS defaults in 2008 is more than twice the number reported in 2007–and future periods are likely to experience higher default levels as more recently issued loans enter their peak default periods.
For its 2008 default study, S&P studied the characteristics of 69,317 loans originated for securitization from 1993 through 2007 with a total original principal balance of $949.21 Billion. Loans originated between 2005 and 2007 made up 41.45% of the studied population by loan count (28,732) and 56.57% by principal balance ($537 Billion).
At the end of 2008, 3,107 loans ($20.43 Billion) in rated CMBS transactions had defaulted on a cumulative basis. For 2008, the cumulative default rate by loan count was 4.48%, and the annual default rate was 0.76%. In terms of principal balance, the 529 loans that defaulted in 2008 had a principal balance of $4.43 Billion, significantly more than the $1.85 Billion that defaulted in 2007.
Of the major property types, office space saw the greatest increase in defaulted loans in 2008, as 389 office loans defaulted, up 30.98% from 297 in 2007.
Comments »
![[tight purse strings]](http://ibankcoin.com/cronkite/wp-content/imagescaler/4f3e049f7790be67af26712ec75954f2.gif)
