The Daily Dose: What's Up?

 | Dec 05, 2013 | 9:00 AM EST
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First, a backstory. I received a couple email inquiries into why I was trespassing on a new Target construction site on Wednesday. What? Your favorite stock boy next door is not allowed to have a dangerous side?  Sheesh. Anyway, I totally appreciate the concern. Except for a few scratches from the pine tree I had to dive into to avoid being spotted by a patrol, and modest personal sadness from realizing I was a better fence jumper 10 years ago, I left the scene unharmed and with the sought after prize... pics.

Photo by Brian Sozzi

Why am I going through such extremes to have mental and physical images of a single Target (TGT) store being built over the course of a couple months?  Here is the skinny...

  1. I was curious about the size of the team contracted to build a typical Target store. With new locations being fancier inside and out, what are the costs looking like to bring the Target brand into the next level of retail relevancy?
  2. Are there corners being cut in the building process given Target's weaker one-year same-store sales run rate? A series of cut corners, spread across Targets being constructed throughout the United States leaves the door wide open for a Wal-Mart (WMT) continuing to open green-friendly supercenters and smaller neighborhood markets to grab some market share.
  3. Where is Target's thinking with respect to newer store locations, still in rural outskirts or nearer to highways as has become increasingly important for big box retailers. This particular Target store is on a corner lot alongside a highway, perfect for snagging out of towners and the locals continuing to overpay at supermarkets.
  4. Although I had to bolt in and out of the construction zone, I wanted a visual of the interior of the store literally as I was standing on a pile of dirt. By obtaining that visual, I now can piece together HQ's areas of departmental emphasis as the fixtures and merchandise begin to arrive.

Believe you me, I am just beginning with undercover stuff like this, game on 2014.

Okay, onto the stock market. I hope you are sitting, but the S&P 500 was valued 0.8% more four sessions earlier than it is today. Hard to imagine, right?  Is this a blip on an otherwise remarkable year or early innings of a downdraft as January 2014 (yes, January) concludes?  I don't think an epic bout of stock market misery is forthcoming near-term, rather an adjustment to a range of economic realities that are finally being pondered by investment bank committees and assorted researchers.

The New Juice Running Through the Market's Veins

Traffic trends at places to visit and buy merchandise: Unmentioned by many was that JC Penney's (JCP) not so magical 10.1% comp jump was driven by conversion as opposed to an influx of deal-seeking humans. We continue to rate JC Penney shares a sell without a price target. Aeropostale (ARO) missed with its loss per share figure, noting weak traffic. We continue to rate Aeropostale shares a sell (hope you saved the pre-earnings tip we sent a few weeks ago on Aeropostale... there has been a shuffling of the deck internally), and remain concerned it will have to raise penalizing cash in 2014. New York & Company (NWY) had uber high-energy greeters at its stores on Black Friday, its traffic was below plan.

Target only two weeks ago called out soft traffic borne by people being scared to shop as an issue. Lame traffic causes above plan, margin killing promotions and cautious order-taking for future quarters when all is said and done. The culprit for these naughty occurrences: the "One and Done Economy", as in the average income U.S. household that is disconnected from the stock market and scrimping to get by purchases one heavily price-researched gift for a family member and then they are done. No double spending (buy online and in store).

Real economy, meet the law...the Fed: As more economic realities rain down on the cashless registers of physical retailers, there is a financial data stream suggesting a stable, meh type growth U.S. economy. Unfortunately, this environment puts the Fed in the position of potentially seeking to remove a bit of froth from the market via language on the Dec. 18 FOMC release and in Bernanke's final press conference (OMG, so sad!), and then in the Fed speaker circuit. There will be no actual taper at the December meeting unless the non-farm payroll headline breaks 300,000 (meaning, isn't happening), but the rising prospects (brought about by summer-like commentary from Bernanke) of there being a withdrawal of incremental liquidity at Yellen's first official meeting is what the market appears to be adjusting to today.  

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