Equities Bounce Back, WMT Encouraging

Tuesday, May 18, 2010

The Dow mounted a strong reversal yesterday closing up 5 points for a full return from lows of down 184 points. Asia was flat to higher while Europe is bouncing back nicely with notables: UK up 1%, Germany up 1.5%, France up 2.1%, Spain up 3.6%, Italy up 2.2%. Yet, even with this one-day rebound Spain and Greece are solidly in bear markets down 23% and 25.6% year-to-date, respectively. These returns are in stark contract to the German DAX which is up 0.8% for the year. Just a superficial look at these returns points to the difficultly in maintaining a monetary union among these divergent economies and markets.

Wal-Mart beat on the top and bottom line reporting $0.88 v. $0.85e with revenues of $99.9 billion v. $99.0e. Guidance was light at $0.93-0.98 v. $0.98e coupled with a cautious statement from CEO, Mike Duke. "Our customers, particularly in the United States, are still concerned about their personal finances and unemployment, as well as higher fuel prices" (CNBC). Interestingly, the Street is taking a warmer tone to the retail giant's prudent tone with shares trading up 1.7% pre-market.

It looks as though deflation is still the primary concern in the US with producer prices this morning reporting a month-over-month decrease of 0.1%. Producer prices ex food and energy year-over-year are up a meak 1.0%. Doctor copper is often a good indication of inflationary pressures yet is now trading 17.6% off April highs falling hard since Europe began tail-spinning. Though, this pull-in comes after a 190% rally off December 2008 lows so I am not jumping to conclusions. It just seems as though inflation is not yet a problem.
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