Stock Market Wrapup May 15th
The stock market largely retreated from its early enthusiasm over tame inflation numbers reported by the Labor Department, though the Dow Jones Industrial Average closed higher to set another record. The Nasdaq and S&P 500 indexes closed in the red. In other markets, the 10-year Treasury note lost ground, while crude oil prices pushed back over $63 a barrel.
Stocks got off to a strong start after the Labor Department reported that the core consumer price index increased by a modest 0.2%, in line with Wall Street's expectations. Overall CPI, including food and energy costs, rose 0.4%. Those tame numbers buoyed the hopes of investors yearning for a rate cut later this year by the Federal Reserve.
Investors also had to digest disappointing earnings from two retail bellwethers: Wal-Mart (NYSE: WMT) and Home Depot (NYSE: HD), both of which reported before the market's open. Wal-Mart posted an 8% profit increase, but said it was due to cost cutting more than revenue growth. The company also said it would probably miss its Q2 targets. Home Depot reported a steeper-than-expected profit decline of -29.5%, which it attributed to wild winter weather and the weak housing market. Wal-Mart's shares lost -0.5% of their value today, while Home Depot closed -1.8% lower. Bull Market Report subscribers can read our analysis of the CPI report, the retail outlook, and prospects for a Federal Reserve rate cut in today's edition.
The Dow index was pumped up by a solid move from General Motors (NYSE: GM), which is still basking in the afterglow of Chrysler's acquisition by Cerebus Capital Management. Investors hope the deal will lead to significant changes in the U.S. auto industry that will make GM and Ford Motor (NYSE: F) more competitive. Other Blue Chips with a strong global presence like Alcoa (NYSE: AA) and 3M (NYSE: MMM) also helped the Dow today.
Regional grocery operator Winn Dixie (Nasdaq: WINN) gained 37.2% today after reporting improved financial performance and continued progress on its turnaround plan. The company reported a profit for the quarter ended April 5th of $17.8 million against a loss in the year-ago period of -$29.0 million.
In other retailing news, Limited Brands (NYSE: LTD) announced it would sell a 67% stake in its Express brand to Golden Gate Capital for $548 million in cash while also exploring options for its Limited stores. The company's announcement confirmed expectations that it would concentrate on its rapidly expanding Bed, Bath & Bodyworks and Victoria's Secret brands. Limited shares closed -4.5% lower.
Elsewhere in M&A, financial information provider Reuters (Nasdaq: RTRSY) announced that it had agreed to be acquired by Canada's Thompson (NYSE: TOC) for roughly $17.24 billion.
posted by Stock Administrator @ 6:52 PM
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