Jim Cramer Blog

Stocks continued to trade mixed Thursday following another batch of economic news. Retailers are in focus today following the release of same-store sales data for December. Data on the services sector was below estimates and pending home sales fell. Oil prices continue to decline Thursday, making their way below $57 a barrel. This has occurred today despite the fact oil reserves fell by 1.3 million barrels last week. Overall, there has been some profit taking yesterday and today, but the losses have been rather mild. However, Friday’s employment report could have a larger impact on stocks. Oil prices have been on the decline this past month, most notably this past week. Forecasts for warmer weather across much of the U.S. have trimmed demand expectations. This drop has occurred despite concerns about an embargo on Iran and a likely production cut by OPEC. The past two weeks have also seen large drops in oil reserves, yet crude continues to decline. After hitting a high near 150 on Dec. 15, the Oil Services HOLDRs (OIH) have fallen near 130. Hopefully the pumps will show a drop in price as well. The ISM Non-Mfg. Index fell slightly in December to a level of 57.1. This was down from 58.9 in November and below estimates for a reading near 58.0. However, the services sector of the economy remains strong and the employment component actually saw a mild gain to 53.3. One disappointing aspect of the report was the unexpected rise in the prices paid component to 59.1 from 55.6 in the prior month. The S&P Retail Index ($RLX) is flat on the session despite some concerns about same-store sales growth in December. Analysts state that warm weather tempered purchases of seasonal gear and the sharp rise in gift card sales also hurt results in December. Card sales are not counted in sales figures until they are redeemed. The ICSC reported that same-store sales rose 3.1 percent in December, which is solid, but not robust. Within the retailing sector, Wal-Mart (WMT), Costco (COST) and American Eagle (AEOS) posted strong results and are seeing their respective stocks rise. However, shares of Pacific Sun (PSUN), Bebe Inc (BEBE) and Limited Brands (LTD) are all falling on disappointing results. It wouldn’t be much of a surprise to see the bulls step in as the session moves forward. However, overall gains could be tempered by the fact Friday will see the release of the always important jobs data. Current expectations are for 100,000 jobs to have been added in December. On Wednesday, the ADP report showed a 40,000 job loss during the month, but the Challenger report this morning stated that just 55K job cuts were announced in December, half as many as cut in December 2005.
By Jody Osborne

Labels: AEOS, BEBE, COST, LTD, OIH, PSUN, WMT