Stocks surged despite some disappointing economic data, both from the U.S. and overseas.
First, the scoreboard:
- Dow: 16,651.80, +91.3, (+0.5%)
- S&P 500: 1,946.72, +13, (+0.7%)
- Nasdaq: 4,434.13, +44.9, (+1%)
And now, the top stories on Wednesday:
1. Retail sales for July were flat compared to June, the worst reading in six months. Economists were expecting retail sales to climb 0.2%. Excluding autos and gas, retail sales were up 0.1%, missing expectations for a 0.4% gain. “Clothing increased 0.4% primarily on the extreme discounting at related stores as many retailers rid the shelves of summer apparel, making way for the back-to-school season — the second largest season after Christmas holiday spending,” said Bloomberg economists Richard Yamarone and Josh Wright. Ian Shepherdson of Pantheon Macroeconomics said the report was “A bit disappointing but the trend is OK and August should be better.”
2. Overnight, Japan reported second quarter GDP that fell 6.8% on an annualized basis. The drop was expected, as Japan enacted a new consumption tax in April, but is still a severe decline for the world’s third-largest economy, which grew 6.1% annualized in the first quarter.
3. In addition to the poor retail sales report, retail giant Macy’s reported earnings and revenue that disappointed, and shares of the company fell more than 5%. Macy’s reported earnings per share of $US0.80, missing the $US0.86 that was expected by analysts on revenue of $US6.27 billion, which also missed the $US6.3 billion Wall Street was looking for. Macy’s said it failed to make up for its poor sales performance in the first quarter, and now sees full-year sales up 1.5%-2%.
4. SeaWorld shares got absolutely crushed, falling more than 32% after the theme-park operator reported disappointed earnings and revenue. Attendance at the company’s park also continues to lag in the wake of CNN’s controversial documentary “Blackfish,” which brought to light questions regarding the treatment of Orca whales. In the second quarter, SeaWorld’s attendance was up 0.3% from the prior year, but this compared to year-ago attendance that fell 9%. Year-to-date, attendance at SeaWorld parks is down 4.3%.
5. Brazilian presidential candidate Eduardo Campos was killed in a plane crash on Wednesday as it was preparing to land in bad weather. Following the report, Brazil’s Ibovespa stock index fell as much as 2%, but eventually pared most of these losses. Campos was currently third in the polls, and Tony Volpon at Nomura said these developments don’t change his view of the election, which he expects to be won by Aécio Neves.
6. Deere & Co. shares fell more than 2% after the agribusiness giant said it expects revenue to fall 6% compared to last year. The company also gave an update on its view of the global agriculture market and the global economy.
7. Shares of King Digital fell more than 23% after the maker of the popular Candy Crush mobile game last night reported revenues that disappointed. The company also announced a surprising $US150 million special dividend and said its revenue for the full-year would be below current expectations. Analysts at Deutsche Bank downgraded shares of King following the report, noting that among other games, the Kim Kardashian: Hollywood game creates intense competitions for the company.
8. The latest mortgage applications report from the Mortgage Bankers Association showed that, on a seasonally adjusted basis, mortgage applications fell 2.7% for the week ended August 8. Following the report, Quicken Loans vice president Bill Banfield said, “While bond pricing was relatively flat and mortgage-backed security prices did little to move interest rates around last week, we did see a slight drop in both refinance and purchase activity. Overall, purchase volume has been unable to reach last year’s levels.”
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