Thursday, January 6, 2011

Morning Note...

Futures ~10bps higher this morning as jobless claims are in-line and same-store-sales for December are “mixed,” for lack of a better word, but slightly “weaker than expected” is also viable.  Initial Jobless Claims for the week ending January 1st were 409k vs. the 408k expectation and the prior 391k revision.  Continuing Claims for the week ending December 25th were 4.103M vs. the 4.080M expectation and the 4.150M prior reading.  Europe ~75bps higher on the aggregate.  USD flat.  EUR/USD 1.3115.  Oil -65bps.  Gold -10bps.  Asia mixed overnight.  Regarding same-store-sales, here’s a summary from the Barclay’s desk:

(1) WHY DID SO MANY RETAILERS MISS?  It's actually been very company-specific, as opposed to some single, prevailing theme.  There are a bunch of inconsistencies across the space, but point is that middle-income disappointed, high-end delivered, and a lot of these holiday channel checks were off.  Net net, we think Retail underperforms today.
                              
(2) STRENGTH came from Luxury (JWN, SKS) and the Off-Price channel (ROST, TJX), while the middle-man got hit (GPS, JCP, KSS, M).

(3) Very contrary to this time last year, ANF outperformed AEO/ARO, and consensus was positioned that way for the most part.  AEO and ARO came in with some of the lowest expectations, and both still disappointed.  While +15% for ANF is better than street, it's mostly in-line with buy-side expectations and AUR not great.  Nonetheless, not complaining about +15% on a morn like this.

(4) Similar amount of pre-announcements as this time last year (14 now vs. 15 then).  This time around, more balanced between those that raised (4), reaffirmed (5), and lowered (5).  For what it's worth, on Dec comp day in Jan 2010, the MVRX closed flat vs. SPX.

(5) Weather impact wasn't addressed as much as we thought it would be.  Only 1 or 2 small-caps actually quantified the effect.  I gotta imagine more color to come on these conf calls.

(6) One last thing worth mentioning is that HGG cut comp and EPS guidance pretty meaningfully (namely, the video comp).  This should make BBY extra interesting tomorrow.  TGT also called out electronics as weak.

- COMPS BETTER:   DDS, JWN, ROST, SKS, TJX, URBN
- COMPS IN-LINE:  ANF, COST, KSS, LTD
- COMPS WORSE:    AEO, ARO, BJ, GPS, JCP (below whisper), HGG, M, TGT

- GUIDANCE BETTER:   KSS, NWY, ROST, TJX
- GUIDANCE IN-LINE:  ARO, FRED, GPS, M, TGT
- GUIDANCE WORSE:    AEO, BEBE, CATO, WTSLA

* PRE-MKT MOVERS:  AEO (7.4%), ANF +1%, ARO +0.7%, DDS +1.5%, GPS (7.1%), JCP (1.5%), JWN +1.3%, KSS (1.5%), LTD (0.2%), M (3%), ROST +1.8%, SKS +4.3%, TGT (4.6%), TJX +2.8%, URBN (2.9%)

BMOC ups ADM.  CITI initiates DEO with Buy.  CITI ups COV.  FBP reverse stock split.  BCAP cuts LAMR.  PCS Q4 net adds weaker.  PCX upgrade at BB&T. 

S&P 500 PreMarket 8:30am (last/% change prior close/volume): 

Best Quotes:  The race is on for 2011, and if you have been a non believer that the rally in equities has legs, let’s face it you are stuck in the gate.   With no meaningful upside resistance levels, and dips aggressively bought you have to be worried that 1300 will be the first level for a pullback.   Volumes have been great 3 straight days over 4.4 billion shares, the 75 day moving average is about 4.2.    M&A is still robust.  Early New issue has been easily absorbed.   It’s been long said that the market could not have a meaningful rally without the financials.  Well they are involved and still under owned.   Support levels 1265 yesterdays low, 1256.25 is the weeks low.   Continue to buy the dips,  the money is coming back to equities, you can feel it.