Market briefing --- Bob (fast)
NYSE --- Matt (slow)
>> welcome to the final hour of “the world financial report.” I’m bob bowdon. Retailers report august sales tomorrow and the numbers will be closely watched because the back-to-school season is the second biggest after christmas. Analysts expect august retail sales likely will be the weakest in 17 months. The expectation is that same store sales gained 1 1/2% to 2% from a year ago. The international council of shopping center originally forecast sales would grow as much as 4%.
>> one of the problems is if you appeal to the low-end consumer, like 99 cents stores, like big lots, you may have a problem because your customer, like wal-mart, your customer is hit so hard in the pocketbook on their disposable income and they are running scared.
>> wal-mart cut its august forecast last week estimating that sales could be unchanged to up 2% from a year ago, blaming soft back-to-school shopping and hurricane charley. Another factor is falling wages. Federal statistics show the average paycheck for about 80% of workers after adjusting for inflation has fallen during the past three months.
>> i think psychologically the real impact of anything from gas prices to employment is going to take place at the very low end, at the deep discounters. But i think from a broad standpoint a lot of the retailers are going to see a surprisingly resilient next few months.
>> analysts say the biggest sales gains for august could come from specialty clothing chains and high end stores, which typically attract consumers who are less affected by higher gasoline prices. Well, speaking of energy, crude oil surged after the u.s. Crude inventories dropped more than expected last week, closing price in new york was $44 a barrel. You see there that’s up almost 4 1/2% in one session. Now also there’s the inventory number. The energy department reports that oil stockpiles fell 4.2 million barrels last week, the lowest in about 5 1/2 months. Supplies were expected to drop only 400,000 barrels. Among the other energy movers on the day we saw unleaded gasoline in new york on a wholesale basis up over 4% there and to $1.18 -- $118.90 and heating oil up 5.3% and natural gas futures down 2.15%. Well, record high gas prices and a declining consumer confidence cut demand for cars and trucks last month. The big three u.s. Auto makers reported all greater than expected declines in august sales. General motors, the world’s largest auto maker, sales fell 14% from a year ago. Number two ford reported a 13% decline and daimler chrysler said u.s. Sales were down 5.7%. Ford’s august sales included a decline of 26% for cars. The auto maker says that it will reduce production by nearly 8% in the fourth quarter. That’s the biggest planned cut in more than a year. G.m., ford and chrysler all continue to raise incentives in august. Economists say that consumers have gotten used to the rebates and that it still may not be enough to trigger new car buying.
>> it’s going to be tough to get any economic growth out of a sector like autos where we’ve come up a long period of very low interest rates and incentives as well and it’s really difficult to continue the sales at a brisk pace as a result.
>> instead, he says, consumers are devoting their money to filling up their gas tank. Shares today of the big three auto makers were mixed as general motors and ford moved lower. Daimler chrysler shares up .8%. Manufacturing expanded at a slower pace in august as fewer companies reported an increase in orders and production. The institute for supply Management’s factory index last month fell to 59 from 62 back in july. Economists had expected a reading of 60. Anything above 50 indicates expansion. The index has shown expansion since 2003, since june of 2003. activity at the nation’s factories may be slowing but construction showed no sign of participating in the slowdown. Spending on construction rose .4% in july to a record annual rate of $997 billion. The rise was the fifth in six months and followed no change in june. Economists say the data Suggests that construction will continue to support growth in the third quarter. The two-day rally of treasuries stalled as the i.s.m. Number fell less than some traders expected. Checking treasuries on the day, we say not much movement in the 10-year, the yield stayed unchanged at 4.12%. Moving on, the five-year was up 2/32 and the yield data 3.3%. And the shortest end of the curve also not much movement there, the yield just down one tick there, 2.38%. Well, moving on, a rally in stocks faded amid the surge in oil prices plus traders say the evacuation of a washington building brought fears of terrorism back into the market . Let’s get to the closing numbers as they finished. It was a mixed market if you call the dow down which was more or less unchanged. Down just five points for the dow at 10,168. S&p 500 up as you see there .15%. 1105. The nasdaq was the winner of The day up .67% finishing at 1850. On the big board 1.14 billion shares traded and we have advancers beating decliners by almost 2-1. Over at the nasdaq 1.42 billion shares traded and advancers beat deck decliners though not by the margin they did at the big board. The dow and s&p little changed today. Oil and health care stocks were the―among the movers to the upside. For more on today’s trading action we bring in julie hyman at the big board. Well, perhaps we’ll have julie hyman a little later. Moving on here, concerns over politics, terrorism, oil prices and the economy have seen investors seeking refuge in big companies that generate predictable profits. Stocks editor matt nesto looks at the near-term outperformance of large cap stocks with respect to some of their smaller brethren.
>> big vs. Little, the Quintessential david and goliath battle. If you take a look though at the volatility of late, and the outperformance of the largecaps there is also a store oir maybe a lesson, an old adam depending how long you’ve been at it to be learned as well. Take a look at the first chart. Small, medium and large this is quart tower date, the three particular indexes and you can see the largecap index, the yellow line on top, the best performer. That’s the s&p 500. We’re down about 3% quart tower date. Below that the mid cap index down 4.3% and then the small caps down about 5 1/2%. What’s important here is this volatility equation that i talked about and that is the low point that at one point during this quarter, the small cap index had fallen as much as 12%. The mid caps were down about, well approaching 10% while the worst that it―the worse it got for the small caps was about―excuse me, the large caps, was about 7%. So that volatility although greater for the small caps and mid caps also can spell long-term performance. And opportunity. Check this out. Five years, the outperformance for the small caps vs. The large caps is market . White line, small caps. Up 55%. The mid caps, below that, up 43%. And way down yonder here, bobby, we’re down 18% for the s&p 500. So that’s why this recent comeback is noticeable, folks. You want names, you’ve got names here. These are the quarter-to-date winners for you. Goodyear tire, 25% and only 2/3 of the way through the third quarter. New month mining just jumped into the top five today with a 1% gain. Genzyme, pulte homes, does this jump out sneer seven times forward earnings. It does to me. That’s half the p.e. I jumped over the comparisons, guys, but forgive me. I’m just going to go with the losers here, delta, ciena, andrew, teradyne, broadcom down 40% to 50%. That’s it. Back to you.
>> thank you, matt nesto. Appreciate that. We have breaking news for t.h.c. The news is the company says it is cooperating with a subpoena from the san francisco u.s. Attorney. The subpoena relates to documents that pertain to medical directorships. The subpoena also forced some physician relocation pact. The company said it is Cooperate wg a subpoena from the u.s. Attorney in san francisco. You see in the regular session tenet shares just up 1% finishing at $10.53 but in the extended hours trading, the latest trade is also $10.53. so unchanged after that news. Moving on, the investors that have filed a lawsuit against software maker oracle may be getting another chance. A federal appeals court has reinstated a suit that claims oracle improperly accounted for about $228 million. The lawsuit, which has already been dismissed three times, says that in 2000, oracle created phony sales on its books to hide a slowdown in demand. The judge in today’s appeals case says there is enough evidence against oracle to have the case reinstated. Shares of the world’s third largest software maker have declined almost 22% in the last 12 months. When we come back after the break shares of corinthian college surged today on earnings news. Coming up next we’ll talk with a bear stearns analyst about her outlook for education stocks.
