Business News Review 11-30-10

Economic Data Analysis

We covered the international market activity in an earlier article today, "Spanish Bond Spreads Widen, European Unemployment Grows, Indian GDP Thrives." The day's business news review covers the weekly same-store sales data for a very important shopping period; home price data; an economic barometer; and confidence measures of both consumers and investors.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

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Business News Review

The day's business news review covers a busy economic report schedule, and one that was mostly positive. The problem was that the positives were not overwhelmingly so, and the negative was an important one. Home prices slid again in broad-based fashion, and our double-dip forecast of old was repeated on TV by S&P economist, David Blitzer, who said there would be a lot of "I told you so" and "double-dip" comments. It sounded to us as if it were meaningless (we suppose it's not to you). The fact is, it was not, and we led the investment community in forecasting the double-dip in housing. On the positive side, good readings on consumer and investor confidence were nice to see, but not reliable to invest on.

Weekly Same-Store Sales

Beware the weekly same-store sales data, which on first blush give the impression of a solid revival of the consumer. Remember that this year's measured period included the Saturday after Black Friday, whereas last year's period did not. You can bet your bottom dollar that the Saturday after Black Friday is significantly better for store traffic than the Saturday before it. Also, a great deal more Americans are likely seeking bargains this year, after draining their resources over the course of another bad year. Qualifiers provided, the International Council of Shopping Centers (ICSC) reported sales rose just 0.5% over the immediately prior week. Sales marked a 3.5% gain over the prior year period. Redbook noted year-over-year sales 4.9% higher than in 2009.

Cyber Monday was reportedly strong, based on the 15% increase in ecommerce reported by research firm, IBM Coremetrics. From Thursday through Saturday, sales increased 14% against the prior year.

I've two points to make: First, last year was an anomaly, an extremely poor year for all economic activity. In other words, the bar was set quite low. Secondly, this again might reflect a reluctant shopper, shopping at home perhaps due to depression brought on by missing deals and the usual shopping outing on Black Friday. I know someone who did not expect to shop, and yet bought something on Monday (did you?). It should also reflect an increased number of bargain seekers, for necessity's sake. Thus, I'm not too enthused to see this data, but we will take it just the same.

Consumer Confidence

It's a smooth transition into the consumer mood after covering sales activity. The Conference Board reported on the month of November today, noting an increase in the consumer mood. The Index gained a couple points, rising to a mark of 54.1, up from 49.9 in October. The same component that took this measure down in months past, gave it renewed life this time around; the Expectations Index recovered significantly, so hope never dies. November's result also beat economists' expectations for a reading of 52.0. We expect a change here if the government lets unemployment extensions die and revives the death tax at the same time. That said, the current level of confidence is not exactly euphoric either.

Investor Confidence

State Street (NYSE: STT) measures investor confidence monthly, and November offered signs of life. According to State Street, institutional investors were greater risk takers in the US and Europe this month, but Asian investors took a step back. The global confidence measure gained 9.3 points, while US confidence improved 12.2 points this month. Surprisingly, European investors had great appetite in November as well, but we have a feeling that is changing dynamically.

Home Prices

The S&P Case Shiller Home Price Index was reported this morning for September. We heard Professor Case, an all around nice guy we don't dislike here, address an issue we've had with the report this morning on TV. He noted that the report is this late, covering September, because it is complete. There will be no revisions, nor future reporting of better September numbers. That's great, but why can't it be completed sooner, given the name on the report…

That said, this late data reflected what we've already seen in the Existing Home Sales data, and what Wall Street Greek forecast months ago. Home prices slid in September and seem to be suffering from an eroding false basis price point. The 10-City Index produced a 0.7% month-over-month price decline, and the US National Home Price Index gave back 2.0% in the third quarter. Prices are 1.5% below their year ago levels, according to the group.

18 of 20 MSAs covered by S&P noted price decrease in September, so the problem is broad-based and definite. The reporting group confirmed something we've been saying; in our words: without government stilts, housing has a significant handicap to overcome. It is weighed down by a heavy inventory of distressed properties, and given the underemployment rate, it's lacking energy to drive forward.

Chicago PMI

The Chicago Purchasing Managers Index (PMI) measures area business activity, including both manufacturing and nonmanufacturing. This latest report covering the month of November showed improvement in the index, to 62.5, from 60.6 in October. A reading above 50 marks expansion, so we've got faster growth to report here. Analysts were not looking for quite this good a number either, where the consensus mark was set at 61.0. I view this data point as the most positive on the day, which is one that I only see modestly positive in aggregate.

Corporate Wire

Google (Nasdaq: GOOG) is facing an antitrust lawsuit by the EU, ala Microsoft (Nasdaq: MSFT). The complaint waged argues the search giant favors its own sites and its customers' sites over those of rivals in paid and non-paid search rankings. Meanwhile, rumor has it that Google is going to acquire two year old internet phenom, Groupon, for, get this, $6 billion dollars. Not a bad turn around on a young startup. Groupon has proven an effective tool for small businesses and others to fill the room for openings and to create a buzz around a business. The acquisition capitalizes on local search interests Google has documented in its regular work.

Look for analysts' and shareholders' meetings at Hologic (Nasdaq: HOLX), Lowe's (NYSE: LOW), Biogen Idec (Nasdaq: BIIB) and JDSU (Nasdaq: JDSU). The day's EPS schedule highlights reports by Avanir Pharmaceuticals (Nasdaq: AVNR), Rosetta Genomics (Nasdaq: ROSG), SemGroup (Nasdaq: SEMG), Trina Solar (NYSE: TSL) and DELEK (OTC: DGRLY.PK). The remainder of the schedule includes Barnes & Noble (NYSE: BKS), BluePhoenix Solutions (Nasdaq: BPHX), China Bak Battery (Nasdaq: CBAK), Copart (Nasdaq: CPRT), Funtalk China (Nasdaq: FTLK), Ingles Markets (Nasdaq: IMKTA), Linktone (Nasdaq: LTON), Lukoil (OTC: LUKOY.PK), National Bank of Greece (NYSE: NBG), Omnivision Technologies (Nasdaq: OVTI), Patriot Transportation (Nasdaq: PATR), Rada Electronic (Nasdaq: RADA), Thor Industries (NYSE: THO) and Universal Technical Institute (NYSE: UTI).

The Credit Suisse Group (NYSE: CS) Annual Technology Conference highlights presentations by Hewlett-Packard (NYSE: HPQ), SanDisk (Nasdaq: SNDK), First Solar (Nasdaq: FSLR), IBM (NYSE: IBM), Applied Materials (Nasdaq: AMAT), Dell (Nasdaq: DELL), Fairchild Semiconductor (NYSE: FCS). The Piper Jaffray Healthcare Conference (NYSE: PJC) hosts presentations by Baxter International (NYSE: BAX), St. Jude Medical (NYSE: STJ), Exelixis (Nasdaq: EXEL), Laboratory Corp. of America (NYSE: LH), Orthovita (Nasdaq: VITA), Quality Systems (Nasdaq: QSII), Ziopharm Oncology (Nasdaq: ZIOP), Abiomed (Nasdaq: ABMD), Celgene (Nasdaq: CELG), Pharmaceutical Product (Nasdaq: PPDI), Wright Medical (Nasdaq: WMGI), Cepheid (Nasdaq: CPHD), Hospira (NYSE: HSP), Isis (Nasdaq: ISIS), Neurocrine Biosciences (Nasdaq: NBIX), Arthrocare (Nasdaq: ARTC), Incyte (Nasdaq: INCY), Salix Pharmaceuticals (Nasdaq: SLXP), Alliance Healthcare (NYSE: AIQ), Alnylam Pharma (Nasdaq: ALNY), BioMarin Pharma (Nasdaq: BMRN), Cardica (Nasdaq: CRDC) and Covance (NYSE: CVD). There are several other conferences in session today at JP Morgan (NYSE: JPM), Citigroup (NYSE: C), Friedman Billings Ramsey, BB&T (NYSE: BBT), NYSSA, Canaccord Genuity, etc. This concludes today's business news review.



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