ALL FINANCIAL FOREX NEWS on ONE PAGE » U.S. markets

Green Light For GameStop – US-FOREX.US

Forex-Publisher — Thu, 20 Aug 2009 03:14:39 +0000

It’s a tough business if customers aren’t buying what you’re selling. This summer videogame sales have fallen sharply from last year, defying the prerecession assumption that the industry is growing so fast that nothing can stop it. Investors will get a look at the fallout when GameStop reports earnings on Thursday morning. The retailer is a popular hangout for gamers looking for the latest Xbox title or hoping to swap a conquered game for another used one. Despite the downturn, analyst Arvind Bhatia of Sterne Agee thinks GameStop is a go for investors.Sales of games and gaming hardware fell sharply last month. Software was down 26% in July compared with the year-ago period, according to research firm NPD, well below what Bhatia and other analysts had expected. A weaker slate of games from the major publishers coupled with still-high prices for popular game consoles like the Microsoft
Xbox 360, the Sony
PlayStation 3 and the Nintendo
Wii likely played a role. But the economic downturn has taken a toll on what consumers buy and discretionary purchases are taking a backseat to groceries and rent.That has led Bhatia to reverse his predictions for the industry, guessing that total game sales will fall 3% this year instead of rise by the same amount. GameStop
will feel the pinch. He thinks same-store sales, a common way to measure retail performance, fell 16% last quarter from the same period in 2008. Competition for used games, a very profitable business, may lower GameStop’s healthy margins. Overall, Bhatia thinks the firm will report earnings per share of 23 cents, well below the 28 to 33 cents GameStop itself had predicted and the Wall Street consensus of 30 cents.So why is the stock a buy? Industry sales data are no secret, and the sleepy summer is priced into GameStop’s shares, says Bhatia. Many analysts expect console makers to lower their prices this fall , and that should boost game sales, too. A strong lineup of eagerly awaited blockbusters is due out in the coming months, luring gamers into stores. Finally, GameStop’s second-hand business is a strong one and the firm dominates the market. Bhatia thinks the shares are worth 31, a 25% premium to their closing price on Tuesday.

The New ETF Darlings – US-FOREX.US

Forex-Publisher — Thu, 20 Aug 2009 03:14:28 +0000

After the stock market lost 37% last year, retail investors have developed a taste for comparatively stodgy fixed-income assets, especially exchange-traded funds. Assets under management by fixed-income ETFs climbed 47%, to 83 billion, this year, according to Barclay’s data. That gain outpaced the 17% jump in assets held by all U.S. ETFs.“Some people are feeling gun shy with equities,” said Tom Graves, equity analyst at Standard & Poor’s. Graves and others believe that investors, nervous from watching stock investments in their retirement accounts swing, have taken to less volatile bond markets, where high-rated corporate securities with near certain yields of 6% can look more appealing than betting on stocks. ETFs are usually the cheapest route, offering lower fees than managed bond mutual funds or open-end index funds.Of iShares’ four most-popular ETFs in July, two were bond funds, according to Morningstar: the iShares Barclays TIPS Bond
, which follows an inflation-linked index, and iShares Barclays 1-3 Year Credit Bond
, a corporate credit fund.Where the money goes, fund managers soon follow. At least 14 new fixed-income funds were started this year. Bond giant Pacific Investment Management Company launched its first bond ETF in June, the 1-3 Year U.S. Treasury Index Fund
. Vanguard also unveiled seven new bond index funds earlier this month. Expected to become available by the end of the year, the Vanguard funds will track a range of corporate and government bond indexes and be available as ETFs.
Fixed-income funds’ appeal is also partly a result of corporate bonds’ spectacular run. Speculative-grade notes from companies with heavy debt burdens have soared 38% this year and junk bond ETFs have become popular picks on investing blogs. The flow of money into such funds may be evidence of retail investors chasing returns, but that’s not why Vanguard and PIMCO are offering new fixed-income ETFs, said Daniel Wiener, chairman of Adviser Investments.
“They see this is where indexing is heading,” Wiener said. As a result, Vanguard, whose name is synonymous with index funds, wants to compete in the young and growing ETF field, now dominated by iShares and State Street
.
Wiener sees the development of fixed-income ETFs following the same trajectory as open-end bond index funds. They seemed to lag behind stock market funds in assets and variety. Vanguard introduced its Total Bond Market fund in 1986. It took six years to get 1 billion in assets and held 5 billion by the end of 1997, according to his data. Everybody knew about Vanguard’s stock index funds, he said, “but it took years for the Total Bond Market to gain momentum. It’s like people didn’t figure out that if indexing worked in stocks, then it would work in bonds.”

High Hopes For Metals – US-FOREX.US

Forex-Publisher — Thu, 20 Aug 2009 03:14:24 +0000

While recent pullbacks across raw materials may stoke fears of the bubble bursting, commodities bulls are undeterred. Inventories, after all, are extremely low and will have to be replenished once demand improves. Until then, volatility is just part of the game.Fears that China’s inventory build is over and that the economic recovery won’t be as robust may pressure prices of industrial metals in the near-term, but the sector’s long-term growth prospects remain promising. Thus far, China has been a main driver behind metals price growth but, according to Barclays Capital analyst Kevin Norrish, “the potential still exists for a significant boost to global metals consumption over the coming months as the industrialized work manufacturing sector recovers from double-digit declines registered in the first half of 2009.”The firm hiked its price forecasts for the metals on Wednesday, citing expectations for demand among developed countries that will be swifter than the market is anticipating. “We expect metal inventories to be rundown through the second half of 2009 with the recovery in OECD demand likely to be sharp and strong,” said analyst Gayle Berry. On Wednesday, the Materials SPDR
exchange-traded fund closed ahead by 35 cents, or 1.2%, at 29.44; and the SPDR S&P Metals and Mining
ETF closed up by 22 cents, or 0.6%, at 40.17. Year-to-date, the funds have gained nearly 30% and 45%, respectively.

Bonds Still Have Legs – US-FOREX.US

Forex-Publisher — Tue, 18 Aug 2009 22:59:52 +0000

All types of bonds have soared this year, from the debt of speculative-grade companies to the bonds cities and states sell to pay for schools. You might think that, the 38% return so far this year for junk bonds would mark the end of a run. But to Robert Tipp, chief investment strategist for Prudential Fixed Income Management, nearly all varieties of bonds still hold promise, even Treasurys. “We’ve come back a lot,” Tipp said, “but there’s still a long way to go.”At a gathering of Prudential’s
investment managers on Tuesday, Tipp and others discussed their outlook for the economy. All agreed that the worst had passed. “The Great Recession is over,” declared Edward Keon, a portfolio manager for Quantitative Management Associates. Another point of agreement: When economic growth returns, it will likely set a slow pace, so the investment managers expect the Federal Reserve to keep a lid on interest rates for the near future. “There’s no risk of the Fed taking away the punch bowl soon,” Tipp said. That means investments in corporate and municipal bonds should continue to perform well. Low interest rates, for instance, make it easier for companies and municipalities to refinance debt and avoid default.
One bond fund managed by Prudential, the Dryden Total Return Bond Fund, includes a mix of mortgage-backed, corporate and government bonds. As of its most recent regulatory filing, it owned debt from Goldman Sachs
, Bank of America
and JP Morgan Chase
at the end of April. Thirty-year bonds from Freddie Mac are its largest holding.
Tipp believes corporate debt hasn’t completely recovered from the sell-off that followed Lehman Brothers’ bankruptcy, when bond prices seemed to forecast another Great Depression. The average junk bond currently pays 9 percentage points over comparable Treasurys, a spread Tipp expects to fall. Before that spread dropped below 10% in July the entire junk bond market appeared “distressed” – usually a sign of a company’s impending collapse .
While inflation fears and looming bond sales keep some from buying Treasury debt, Tipp sees value in the long 30-year bond, which currently pays 4.35%. If the recession lasts longer, such safe haven securities may start climbing again. On the other hand, if the economy rebounds and the Fed raises rates, longer-dated Treasury bonds would be the least vulnerable. He’s avoiding shorter-dated Treasurys, which could get crushed if the Fed raises rates.

Retailers Cut As Consumers Hold Back – US-FOREX.US

Forex-Publisher — Fri, 14 Aug 2009 23:51:00 +0000

Economic indicators may point to gradual economic improvements but to consumers facing weak wages, default, unemployment and eroding asset values, there’s little comfort in a “less-bad” economy. With private consumption accounting for roughly 70% of U.S. economic activity, a recovery without the consumer doesn’t promise to be much of a recovery at all. The consumer conundrum was evident in Thursday’s spate of retail earnings reports as several chains topped analysts’ profit expectations-lifting outlooks in some cases-but saw little reason to feel confident about sales growth in coming quarters. Retailers have been able to cut costs and slash inventories to deliver better than expected performance but that can only go on for so long.”Overall, our customers are more disciplined in their spending,” Walmart
‘s president, Mike Duke, said during the company conference call on Thursday. “There’s a new normal now where people are saving more, consuming less, and being more frugal and thoughtful in their purchases.” Such trends bode well for discounters like Walmart, which exceeded analysts’ profit expectations but missed sales estimates with a 1.4% decline. Earnings fell for department store Kohl’s
but results were better-than-expected. The company also said future sales would depend on its ability to cater to shoppers that are less willing to spend. The company disappointed the market with third- and fourth-quarter guidance that was lower than what analysts’ have been projecting. The lower forecasts, however, reflected costs associated with store openings planned for the fall as the company puts stores up in locations acquired from Mervyn’s, which went bankrupt last summer.Cost-cutting helped Nordstrom
meet the Street’s estimates despite a 27% decline in second-quarter profits and a 6% drop in sales, which weren’t as weak as feared because of the strong response to its anniversary sale. The results prompted Nordstrom to raise its full-year earnings outlook to between 1.50 and 1.65 a share, from 1.25 to 1.50 a share. Analysts, who remain cautious on upscale retailers in the coming months, had been projecting a 2009 profit of 1.48 a share.On Friday, the market will see whether cost-cutting helped teen retailer Abercrombie & Fitch
post better than a 7-cent loss and sales of 647 million. Department store J.C. Penney
also reports on Friday and is projected to post a 1-cent per share loss on sales of 3.9 billion. Thomson Reuters contributed to this article.

Crazy For Junk – US-FOREX.US

Forex-Publisher — Fri, 14 Aug 2009 23:50:27 +0000

Here’s more evidence of risk-taking’s rebirth: Sales of the riskiest, speculative debt has already surpassed last year’s total. Corporations have sold 88 billion in junk bonds worldwide, up from 49.5 billion in 2008, according to data provider Dealogic. The 4.2 billion bond sale by Canadian miner Teck Resources Limited
in May is the year’s largest.Telecommunication companies have benefited the most, accounting for nearly 20% of the junk bonds sold. Italian mobile-phone company Wind Telecomunicazioni SpA’s 3.8 billion issue in July is the largest from the sector thus far. More hit the market in the past week. Wireless communication company NII Holdings
is currently marketing 500 million in notes; satellite television provider Dish Network
sold 1 billion in notes on Thursday; and Sirius XM Radio
announced an offering of 250 million in notes to repay debts owed to Liberty Media Corp.
How to explain the rush of new bond sales? Some credit goes to retail investors piling their savings into fixed-income mutual funds. Bond managers say the easiest and cheapest way to use that cash is by buying newly issued bonds from underwriting banks. The alternative can be costly. Putting a large amount of money to work in the secondary market by bidding on already trading notes could allow other bond traders to gouge the buyer. Bond funds received 11.5 billion in the seven days to August 5, according to the most recent figures from the Investment Company Institute. That’s up from 8.6 billion in the previous week. Of the 11.5 billion, 9.3 billion went to taxable funds, which hold corporate and Treasury bonds. Jeff Tjornehoj, research manager at mutual fund tracker Lipper, believes the popularity of fixed-income funds reflects a change in retail investors’ thinking. After getting burned on their stock holdings last year, people have come to see bonds as less volatile and stomach churning than stocks. The change in sentiment creates an opportunity for mutual funds to start new funds. Vanguard, for instance, unveiled seven bond index funds this week .
Low rates for Treasurys have helped, too, by making higher-paying corporate bonds more attractive. But yields on longer-dated government bonds are creeping higher as the Treasury continues to sell bonds to finance spending and the Federal Reserve empties out the 300 billion purse it used to purchase Treasurys. On Wednesday, a 23 billion auction of benchmark 10-year notes sold at a 3.7% yield. That’s much higher than the 2% reached in March but, apart from the 3.66% average rate in 2008, is still well below the annual average over the last 46 years, according to Federal Reserve data.
The 10-year note rose on Thursday to yield 3.59% after a record 15 billion auction of 30-year Treasury bonds turned out better than expected.

No Time For Games – US-FOREX.US

Forex-Publisher — Fri, 14 Aug 2009 23:50:23 +0000

Another month, another hit to an industry that once seemed immune to the financial distress afflicting broad segments of the economy. Sales of video games, both hardware and software, fell 29% in July compared to the same month in 2008, according to research group NPD. That’s the fifth consecutive monthly decline, although a smaller one than June’s 31% drop. Year-to-date that brings industry revenue to 8.2 billion, a 14% decrease in the first seven months of the year. But there’s reason to think the games industry is in for a rebound this fall.One unavoidable factor contributing to the steep decline in revenues this year are the game consoles. Machines like the Nintendo
Wii, the Sony
PlayStation 3 and the Microsoft
Xbox 360 are showing their age and their price. Hardware sales fell 37% in July, to software’s 29%. Some of that drop-off is to be expected: typically, a new generation of consoles will generate strong sales for its first few years before tailing off as more homes already have one in the living room. But the recession is also playing a role here: the three consoles still cost between 250 and 400 while consumers are cutting back on big discretionary purchases this summer. Games, in contrast, cost 40 to 60. .”Hardware sales have slowed considerably to date on nearly every platform,” writes NPD analyst Anita Frazier. The lone exception is the Xbox 360, which is up for the first seven months of the year.Analysts who cover the gaming beat are predicting that the console makers will likely reduce prices this fall to lure bargain-hungry shoppers. That should also benefit the publishers who make the games themselves and plan a slate of blockbuster titles to coincide with the console discounts. Among the releases industry watches are looking forward to are a Beatles version of the popular music game Rock Band, another installment in the action series Halo and another sequel to the war game Call of Duty. All three should be strong sellers.For the record, July’s biggest sellers heavily favored Nintendo, which has consistently surprised analysts with the popularity of its casual and easy-to-learn games. Wii Sports Resort was the month’s top seller with over 500,000 games sold. Nintendo heavily teased the game at this year’s E3 games expo, boasting of the new motion controller that comes with the title and lets players accurately simulate archery and other sports. .Publisher Electronic Arts
scored the second and third sports with NCAA Football 10 for the Xbox and PlayStation. Nintendo took the remainder of the top five with its Wii Fit training program and Mario Kart racing games for the Wii and the mobile console Nintendo DS. The PlayStation 3 garnered only one of the top ten this month as Sony’s high-priced, but high performance, game system continues to lag the competition.

Iron Ore Ships As Steel Shapes Up – US-FOREX.US

Forex-Publisher — Fri, 14 Aug 2009 23:50:18 +0000

Concerns about speculative buying continues to temper optimism regarding strengthening base metal prices as the market seeks to differentiate real metal demand from stockpiling and other conjectural buying. According to a recent report, one sector boasting solid demand is steel.Metal demand from China during the first half of the year bolstered steel demand, likely accounting for 60% to 85% of sales, estimates Tony Rizzuto, an analyst and managing director at Dahlman Rose & Co. He is one of the authors of the firm’s recent “Iron Ore, Steel and Dry Bulk Review” that highlights the Chinese government’s efforts to deflate speculative bubbles while maintaining steady growth by encouraging banks to lower lending. According to the review, steel and iron ore will continue to trend higher, supported by strong consumption. Automobile and construction industries account for the bulk of Chinese steel consumption. Auto sales have been rising in China as its economy grows even as the world remains in recession and in the U.S., thanks to the government’s Cash for Clunkers program. For a read on construction demand, report authors Rizzuto and Omar Nokta, an analyst and head of research at Dahlman Rose, looked to cement production. Cement is a good indication of rebar consumption and unlike most base metals, it isn’t easy to stockpile massive amounts of cement. Therefore, increased cement production indicates a pickup in construction activity and bolstered steel demand. Chinese steel trends suggest stronger iron ore consumption both from China and other global markets that have seen blast furnace restarts such as South Korea, Japan and Europe. Since these markets also depend on the seaborne market for iron ore, bulk dry freight demand is also strengthening. Rizzuto and Nokta estimate that China will import 518.4 metric tons of iron ore from the seaborne market, up from their prior projection for imports of 448.3 million tons. Companies poised to benefit from these trends, according to the report, include ArcelorMittal
, BHP Billiton
and Steel Dynamics
in metals and mining; and Diana Shipping
, Genco Shipping & Trading Limited
and Navios Maritime Holdings
in the dry bulk sector.

Retailers Cant Wait For School – US-FOREX.US

Forex-Publisher — Thu, 13 Aug 2009 20:46:10 +0000

American shoppers can’t decide if they’re ready to spend again or should hold off on that new plasma screen in case they lose their job, their home or their life savings. Big retailers also can’t decide. They posted better July sales figures than some had expected but a mixed batch of second-quarter earnings. Today the Commerce Department said July retail sales fell a tenth of a percent in July when economists had been expecting a gain of 0.7%. Excluding cars and gas the numbers look even worse, a drop of 0.6% last month. .With that in mind, investors are eyeing the fall shopping season, which for many chains actually means the end of summer, to tell them whether the recession is ending. Analyst Deborah Weinswig at Citigroup
points out a few factors that could boost back-to-school sales for stores but says the season is likely to be a challenging one for many firms as shoppers cut back on more expensive “wants” in favor of cheaper “needs.”Helping out is a later Labor Day this year, the latest in ten years, which means many schools start later, too. That will extend the school shopping season a bit and many states have shifted their annual sales tax holidays to August, too, lending an added incentive for people to hit the mall. The tax holidays could add 1.5% to 2.5% to August sales, Weinswig estimates. .Also favoring your local Target
, Costco
or J.C. Penney
, is a lower price for gas than last year, adding 140 billion to consumers’ wallets, says the Citigroup analyst. Similarly, as oil plummeted from last year’s high, so have other commodities. The global downturn has taken a bite out of prices for everything from crops to metals and that is translating into lower wholesale costs for stores. With merchandise costing them 5% less than last year, some firms will have the option of passing those savings on to consumers if their sales are weak. If sales are strong, they’ll get to pocket the difference for their bottom lines.But stores can’t ignore the recession and its effects on American spending. Citigroup found that nearly half of shoppers plan to spend less this back-to-school season than they did last year. Many families will be buying only what they think they need, cutting back on discretionary items, says Weinswig. For August and September, Weinswig estimates a sales decline of between 3% and 4% compared to last year. That’s more optimistic, she notes, than colleagues at the National Retail Federation . .For her money, Weinswig likes department store J.C. Penney, although she rates it a high-risk investment. Penney is cutting back on opening new stores during the recession but has the right mix of merchandise and advertising for the long-term, even though the near-future could be painful, she says.
Also a buy, but with less risk, is CVS Caremark, the pharmacy chain that now manages prescription benefits, too. The firm has acquired rivals and invested in new ideas like drop-in clinics that should help it dominate its industry.

Consumers Trade Down – US-FOREX.US

Forex-Publisher — Thu, 13 Aug 2009 20:46:05 +0000

Cash-strapped consumers are looking to get the most bang for their buck, forcing retailers to adapt to new spending habits, says Claire Gruppo, co-founder and managing director of investment bank and M&A firm Gruppo, Levey.”People aren’t comfortable paying for brands or an experience if they don’t feel it’s worth it,” Gruppo said, “and the trend we’re seeing across most brands is consumers seem to be trading down for ticket prices.” Americans have become more careful with their money, but the key to their behavior isn’t price, but value. For example, instead of buying a 20 t-shirt at Ann Taylor
, consumers will purchase it for 5 at Wal-Mart
or Kohl’s
. They’re still buying a t-shirt, but not at 20.The environment is very difficult. Instead of rising 0.7% as expected, on Thursday, the U.S. Commerce Department reported retail sales fell by 0.1% in July, and would have dropped by 0.6% if it were not the government’s “clash for clunker” program. Department store stales sunk 1.6%, while broader general merchandise stores, which includes mega-retailers like Target
, saw sales decrease 0.8%. The data reinforces the thesis held by many on Wall Street that business, rather than consumers, will lead the economic recovery.To navigate this trend, some retailers have become more careful in managing their inventory, by reducing product lines and offering fewer items within a line. The strategy is simple: offer the consumers what they’ll actually purchase. This way businesses are better able to streamline inventory and not tie upa lot of capital in items that aren’t going to move. The trick is to reduce inventories without shoppers thinking that they have fewer choices.”Good retailers are thinking not so much about discounting as much as adding items of lines of merchandise at different price points that they’re not going to have to sell at 50% off retail,” Gruppo said. “They’re starting different offerings at lower price points.”Gruppo highlighted Macy’s
recent performance as an example of this approach. “They beat expectations and raised their forecast for the year,” Gruppo said. “The brand has always been known for good value at department stores, and it’s the first piece of good news from something other than a big-box discounter.”
Gruppo expects retailers to operate in this fashion until consumer spending begins to turn around. “Until unemployment and lack of credit ease more than what we’ve seen this will be what the retail landscape will look like,” Gruppo said. The businesses that will have an edge through the end of the year will be the ones that offer lower prices but with strong value, Gruppo added.