Small Business Sentiment, Trade Deficit, Import Prices, Greek Bonds, Alcoa, Talbots

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Today's Coffee offers our daily business news run down of economic reports, global financial markets and corporate news drivers. This particular copy covers the NFIB Small Business Sentiment Index, International Trade Deficit, Import and Export Price Data, Greek Bond Sale, the WaMu Hearings, Weekly Same-Store Sales Data and Corporate News from Alcoa and Talbots.

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Small Business Sentiment, Trade Deficit, Import Prices, Greek Bond Sale, Alcoa, Talbots

NFIB Small Business Survey

The National Federation of Independent Business Index of Small Business Optimism declined 1.2 points in March to 86.8. The Index has now posted 18 consecutive monthly readings below 90, and things are not getting any better now for small business owners. Nine of 10 index components fell in March from already poor February levels. Bill Dunkelberg, NFIB chief economist and the Dean of Temple's Business School when I earned my undergrad degree (he presided over my graduation), said, "The March reading is very low and headed in the wrong direction."

Indeed, the details of the report were much uglier than the 1.2 point decline indicates. Small businesses are not hiring, though they have finally stopped firing staff. They are still reducing inventory, and are not making capital investments. Revenues and sales are still on the downtrend for most small business owners. This is clearly an important reason why unemployment is not improving. The Obama Administration has therefore got it all wrong with its small business incentive program, which is geared toward inspiring hiring. No matter what kind of tax breaks you offer small businesses to hire, until they see sales on the move, they're just not going to do that. The Administration needs to reassess its program, and think more critically about what will drive economic activity.

International Trade Deficit

The International Trade Report met expectations in showing an expansion of the trade deficit, however, the expected degree was understated. February's trade deficit expanded to -$39.7 billion, from a revised -$37 billion in January. Economists had forecast the deficit would expand to -$39 billion.

The trade gap was influenced more by non-petroleum goods than it was by petroleum goods, giving a clearer view of economic activity excluding price changes in petroleum. February's imports rose by $3 billion, while exports only increased by $0.3 billion. While the petroleum trade deficit expanded by only $0.4 billion, the non-petroleum deficit expanded by $1.6 billion. Within this data, imports of consumer goods rose by $1.1 billion, indicating improving domestic demand in the States; some of this gain must be due to inventory restocking, but also due to increasing consumption and improved consumer sentiment. The trade deficit with China narrowed to $16.5 billion from $18.3 billion.

Import, Export Prices

Import and Export Price data were published this morning for March. Both imports and exports rose by 0.7%; economists had expected import prices to rise 1.0%. Import prices had fallen 0.2% in February, while exports fell 0.4% that same month (revised).

Both fuel and non-fuel import prices rose in March, however, fuel prices accounted for 80% of the rise. March marked the seventh of eight months of import price increase, with February's decline the anomaly. Import fuel prices rebounded 2.9% in March, after dropping 1.2% in February. However, natural gas prices decreased for the first time in six months. Over the past year, the petroleum index is up 70%. Non-fuel import prices rose for the eighth consecutive month, rising 0.2% in March. Agricultural export prices rose 2.1%, driving the overall export price increase. Non-Ag prices increased 0.6% though as well.

Weekly Same-Store Sales

The International Council of Shopping Centers (ICSC) posted its latest weekly same-store sales data for the period ended April 10. With the prior week's report for the period closed April 3 showing Easter driven sales growth of 2.1% week-to-week, and 4.7% year-over-year, we expected a compensatory shortfall in this week's report (and we got it). This time around, for the period ended April 10, week-over-week sales gained just 0.1%, while the yearly increase amounted to 4.0%. Recall that last year's spring marked the worst of the worst as far as economic activity goes (and the stock market too), especially at the front-line of American consumers. Thus, yearly comps are going to benefit from easy match-ups for a good number of weeks to come.

Greek Bonds Find Plenty of Buyers

Two separate auctions meant to raise 650 million euros each were oversubscribed by 6-8 times, somewhat easing Greece's concerns that capital raising efforts might be difficult (the price is what is really in question). Greece is paying 4.85 percent for its newly issued 52-week bills and 4.55 percent for its 26-week bills.

Clearly, and as as we demanded here last week, the EU decision to definitively state the exact amount of funds it would commit to Greece, and when it would do so, made all the difference in easing market uncertainty. Still, while Greece is paying similar rates for its newly issued debt to existing yields on similar maturities, it is also paying twice what it was able to get at auction just this past January.

While the euro inched higher, at $1.36, it was far off it's Monday peak of $1.3691. Traders are refocusing on the still troubled European economies, including Greece's ongoing struggle. Also, the yield Greece is still being required to pay is raising new concerns about its ability to avoid default.

WaMu Execs Face the Fire

Former executives of Washington Mutual (WaMu) are facing Congressional panel today defending the high-risk lending that led to its eventual closure. At the time, it was the largest bank failure in American history, but one that Wall Street Greek predicted by name well ahead of its demise (please find it yourself... I'm too busy) making short investors rich in the process. This hearing might help put a few executives in prison, as there is evidence they neglected the words of risk officers, even firing one (gee, that's a familiar theme these days). In the end, criminals and snakes find their fiery pit, sometimes even in life, and we "naive" do-gooders are rewarded some how, some way, some day. Thank the Lord!

In other activity, the FDIC board is considering topics like banker compensation as a risk factor for deposit insurance. At 7:15 PM, Richmond Federal Reserve Bank President Jeffrey Lacker addresses the economic outlook to a group of West Virginia business leaders, with a press conference to follow.

Corporate News Drivers

Alcoa (NYSE: AA) kicked off earnings season with its report after the close Monday. Alcoa's loss narrowed from the prior year period, but its adjusted results still missed analysts' estimates. Thus, AA shares are down 2.6% at the hour of publishing.

Talbots (NYSE: TLB), both bankrupted and reborn within the short life of our blog, swung a profit in its latest quarter reported today. TLB shares are up 4.2% as a result. Excluding items, the company earned 13 cents, versus analysts' view for $0.02. If for some reason the analysts' consensus includes the item, TLB still beat the number with a $0.07 EPS figure. Also, the company said its revenue would likely beat the analysts' view for the first quarter and full year.

Novartis (NYSE: NVS) posts data on its multiple-sclerosis drug Gilenia today. The day also highlights investor conferences from McCormick (NYSE: MKC) and Aegon (NYSE: AEG). Earnings reports are due from CSX Corp. (NYSE: CSX), Fastenal (Nasdaq: FAST), Infosys Technologies (Nasdaq: INFY), Intel (Nasdaq: INTC), Linear Technology (Nasdaq: LLTC) and Talbots (NYSE: TLB). Article should interest investors in NYSE: WMT, NYSE: TGT, Nasdaq: COST, NYSE: M, NYSE: JCP, NYSE: CHS, NYSE: ANN, NYSE: GPS, NYSE: RTP, NYSE: BHP.


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