The Day Ahead: Retail Drives Hope

 | Feb 21, 2012 | 8:40 AM EST  | Comments
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In the Headlines

In what looked suspiciously like a case of "buy the rumor, sell the news," global stocks reflected some trader malaise Tuesday after an early morning announcement from Europe that a $171.9 billion bailout deal with Greece had been reached. Wall Street futures reversed off earlier lows, and indicated a slightly higher open.

European indices were trading to the downside following the Greek deal, though London's FTSE 100 was showing less damage than its continental counterparts. Overnight, Asian stocks finished moderately higher, buoyed by the Greek deal news. Japan's Nikkei slumped 0.23%, pulling back after notching gains Monday.

There are no significant U.S. economic reports due today.

Commodities Corner

Crude oil prices rose by $1.38 per barrel, to $104.62. U.S. markets were spooked by Iran's halt of oil exports to French and British companies.

Gold was up $13.50 per ounce, to $1,739.40.

Earnings

It's a busy day for big retailers. Dow Jones Industrial Average component Home Depot (HD) said mild weather brought in shoppers ready for an early start on spring home-improvement projects. The company reported fourth-quarter income of $0.50 a share, easily topping views of $0.42. Sales were $16.01 billion, also ahead of expectations, which called for $15.49 billion.  Home Depot shares rose $1.59, 3.4%, to $48.30 in the premarket.

Rival Lowe's (LOW) benefited from Home Depot's good news. Lowe's shares were up $0.81, or 2.9%, to $28.49 ahead of the open.

Fellow DJIA retailer Wal-Mart (WMT) reported fourth-quarter earnings of $1.51 per share, excluding items, topping views of $1.45. Backing out tax advantages, earnings were $.144 per share in the quarter. Revenue was a bit on the light side, however. It came in at $122.3 billion. Analysts had forecast $124.21 billion. The company's Sam's Club warehouse unit was a standout, with same-store sales up 5.4% in the quarter, before adding in gasoline sales. On Monday, Wal-Mart said it was buying a majority stake in China-based e-commerce company Yihaodian. Shares were down $1.78, 2.8%, to $60.70 following the earnings news.

Still another closely watched retail chain, Macy's (M), is due to report early today. Earnings of $1.70 per share topped expectations of $1.65 and met expectations for sales of $8.72 billion.  Those results mark year-over-year increases. Macy's shares have been trading at multiyear highs recently, and jumped 3.8% to $37.63 in premarket trading.

S&P 500 component Medtronic (MDT) reported ahead of Tuesday's open, earning $0.84 per share in its fourth quarter, in line with views. The cardiac gear maker said revenue was $3.92 billion, short of expectations for $3.98 billion. Shares rose $0.06 to $40 in the premarket.

After the close, Dell (DELL) reports its fourth quarter. The maker of computers, servers and networking gear has been trading at its best levels since September 2008. It's expected to earn $0.52 a share on revenue of $15.96 billion.

Analyst Actions

Oracle (ORCL) was downgraded to Market Perform from Outperform at JMP Securities. Among factors cited by analysts was an expectation that Oracle's efforts to build its cloud business would take longer than expected.

Also from the tech sector, Web-hosting specialist Rackspace (RAX) was demoted to Neutral from Outperform at Cowen, based on valuation. Rackspace shares fell by $0.43 to $52.50 in the premarket.

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