Yesterday, we had a fantastic rally, but the question will be can it continue today. The big announcements are in the retail sector, the job reports, and some key earnings that will shape the day. However, more and more, I am hesitating on the fundamentals as the market continues to trade on sentiment. I will do my best to lay out the fundamentals here and what they mean, but its any guess where we are going now.
To start, futures are up very sharply going into the trading day on a number of bullish indicators, with the Dow currently up almost 100 points (8:00 AM). The extended excitement about the Fed report is definitely fueling some of the higher prices, but the real fuel so far this morning is coming from a fresh batch of positive earnings from a new sector, retail and Europe’s better than expected contraction. Germany and France in Q2 of 2009 even swung to gains. This global news has been very positive for the futures. However, the market is completely ignoring the fact that foreclosures rose 7% in the month of July to record levels. Europe’s success and earnings are overpowering this small, tiny snafou.
On the earnings front, three key retailers in three different sectors all reported positive earnings surprises. Wal-Mart Stores led the way earning an EPS of 0.88, beating the estimates of 0.85, as well as, boosting their yearly outlook. On the department store front, Kohl’s slightly beat earnings estimates with an EPS of 0.75 compared to 0.74. Specialty stores got a nice boost, as Urban Outfitters surpassed earnings expectations, posting an EPS of 0.29 while analysts had expected an EPS of 0.26. The company saw its revenue increase, which is a very positive number, as well. The three companies definitely gave a nice shot in the arm to the retail sector, but we will still have to see retail sales do in the release at 8:30 AM before we start to party!
Oil rose throughout the rest of the world on Thursday’s trading on the positive news from the IEA about increasing oil consumption and demand, but we will have to wait to see the new data on retail sales and jobless claims before taking any position on which way oil may go.
If the market opened right now (the time is 8:20 AM), I would be very bullish and recommend really any retail stock. However, we really…