What’s the Story?

by CC July 12, 2012 7:46 am • Commentary


Global stocks are on course to record a seventh consecutive day of declines as the latest batch of central bank monetary policy manoeuvres fail to counteract worries about fading economic activity.

The FTSE All-World equity index is down 0.8 per cent as the FTSE Eurofirst 300 endures a loss of 1.1 per cent and after the Asia-Pacific region shed 1.7 per cent. S&P 500 futures point to Wall Street falling 0.9 per cent.

Risk aversion is the dominant theme, particularly with regard to commodities and growth-sensitive currencies. Copper is down 1.8 per cent to $3.38 a pound and the Australian dollar is off 1.3 per cent to $1.0113.

Conversely, money is moving into fixed income bolt-holes as the 10-year US bond yield contracts by 3 basis points to 1.48 per cent, 4bp above a record low and German Bund yields are down 4bp to 1.25 per cent. Berlin, London and Washington this week have all secured record low yields on 10-year auctions.

The dollar index is up 0.4 per cent to a fresh two-year high, pressurising gold, which is down $13 to $1,563 an ounce.

The global equity benchmark’s fall over the last seven sessions has not been great – the 3.4 per cent dip contains, for example, Wednesday’s decline of just 0.03 per cent.


The stock-market geeks are getting nervous.

Wall Street’s technical analysts — the folks who rummage through charts and patterns searching for hints on the market’s next move — are worried.

Up until recently, major stock indexes had been steadily gaining, setting higher highs and higher lows. Many chart watchers view that pattern as a bullish development.

But the big worry now is the S&P 500′s five-day losing streak could portend more trouble ahead.

The S&P 500 has lost 2.4% throughout the skid and is approaching two key technical levels. The index is hovering right around its 50-day moving average. More importantly, perhaps, the index is within striking distance of falling through a key “uptrend line” that extends through the 1330 to 1335 range.

This line, which many chart watchers are fixated on, started at the S&P 500′s June 4 low of 1266.74, It had been trending higher as stocks were gaining grand. Now that trend is in danger of breaking.


Late Wednesday, Supervalu SVU +2.72%  said dividend payments have been suspended as management and directors undertake a review of strategic alternatives for the Eden Prairie, Minn.-based company. Chief Executive and President Craig Herkert promised “bold but necessary moves” would be taken, including cutting back on capital spending in the short run while continuing to pay down debt. In particular, management’s increasing its target for debt reduction to a range of $450 million to $500 million for fiscal 2013. “We expect our business transformation to meet our customers’ demands for great quality at lower prices,” Herkert said in a statement as Supervalu also reported results for the first quarter ended June 16. Earnings came in at $41 million, or 19 cents a share, down from $74 million, or 35 cents, earned in the year-earlier period. Quarterly revenue fell to $10.59 billion from the prior year’s $11.11 billion. According to estimates compiled by FactSet Research, the consensus of analysts had been that the supermarket operator would generate a profit of 37 cents a share on revenue of $10.61 billion.

Callaway Golf ELY -8.71%  said it’s reducing the size of the company’s workforce by 12%, as recovery in its business has not played out at the pace previously anticipated by management. The Carlsbad, Calif.-based company also disclosed preliminary results for the second quarter while issuing an updated outlook calling for a 2012 pro-forma loss of 55 cents to 75 cents a share. In light of a “slower-than-anticipated pace of recovery, we no longer expect that 2012 full-year financial results will be significantly better than last year,” said Chip Brewer, president and CEO, in a statement. For the second quarter, Callaway sees earnings on a pro-forma basis of 5 cents a share, a reversal from the prior year’s comparable loss of 1 cent a share, with sales growth pegged at 3% to $280 million. The company will formally report second-quarter results on July 26. Meanwhile, Callaway’s “comprehensive” cost-reduction initiatives announced late Wednesday will carry associated costs estimated at $40 million over the next 12 months, with more than half expected to be non-cash charges, and will yield gross annualized savings of about $52 million.

Along with reporting second-quarter results, Marriott International MAR -0.37%  projected earnings in ranges of 39 cents to 41 cents a share for the third quarter and $1.65 to $1.75 a share for all of 2012. The full-year forecast doesn’t include the impact of the Bethesda, Md.-based hotel operator’s pending transaction with Gaylord Entertainment Co. GET -0.27%  to manage the latter’s four hotel properties. For the June quarter, Marriott saw business strength in the North America and Asia-Pacific regions as earnings reached $143 million, or 42 cents a share, up from $135 million, or 37 cents, earned during the same period in 2011. Quarterly revenue slipped to $2.78 billion from the prior year’s $2.97 billion, a reflection Marriott’s move to spin off its timeshare business VAC -1.85% . The company said it spent $400 million to buy back 10.5 million shares of common stock in the latest quarter. On average, Marriott had been forecast to earn 42 cents a share on revenue of $2.83 billion, according to the FactSet-derived consensus of analyst estimates.

Phillips 66 PSX +2.45%  said it will pay a quarterly dividend on common stock at the rate of 20 cents a share. It’s the first payout declared since the Houston-based company became publicly traded in April. The dividend’s payable Sept. 4 to stockholders of record as of July 23.

The board of Ryder System Inc. R -0.51%  approved an increase of 7% in the Miami-based company’s quarterly dividend, to 31 cents a share. It’s payable Sept. 21 to holders of record as of Aug. 20, Ryder said.

Beazer Homes USA Inc. BZH -3.36%  said it increased to $300 million the size of a private offering of 6.625% senior secured notes, up from the $275 million previously contemplated. The six-year notes priced at par, the Atlanta-based company said. Net proceeds will be earmarked to fund or replenish cash expected to be used to finance the redemption of Beazer’s 12% senior secured notes due 2017 and for general corporate purposes.

Underwriters fully exercised their option to buy more shares in connection with the initial public offering of ServiceNow Inc. NOW -5.25% , the San Diego-based company said. As a result, nearly 13.4 million common shares of ServiceNow were sold to the public at a price of $18 each. Of the shares sold, nearly 10.4 million were sold by the company and more than 3 million were sold by selling stockholders.

New Mountain Finance Corp. NMFC -0.47%  commenced a public offering of nearly 5.3 million common shares, the New York-based company said. Net proceeds will be used to acquire common membership units from New Mountain Finance Holdings LLC, which in turn will use the funds for temporary debt repayment and for new investments in portfolio companies, among other things. Underwriters will have the option to buy up to 787,500 additional shares in connection with the secondary offering, New Mountain said.