Stocks were trading higher on Wednesday on a lower-than-expected rise in consumer prices in April and strength in retail stocks, which were pulled up by better than expected earnings from Macy's Inc. (M).
On Wednesday, the Dow Jones industrial average was trading 95.18 points, or 0.74%, higher at 12,927.36. The broader S&P 0 index was up 10.46 points, or 0.75%, to trade at 1,413.19. The tech-heavy Nasdaq composite index was down 3.65 points, or 0.15%, at 2,484.84.
Macy's shares were up after the department store chain posted a drop in income from continuing operations to two cents per share from 11 cents in the first quarter of 2007 on 2.6% lower same-store sales and 2.9% lower total sales. Earnings beat Street estimates, however, and the company reaffirmed its fiscal 2009 outlook of a 1% drop to a 1.5% rise in same-store sales growth and earnings of $1.85-$2.15, excluding one-time division consolidation costs.
Freddie Mac (FRE) reported a wider loss of 66 cents per share in the first quarter, vs. a loss of 35 cents per share a year ago, as the U.S. housing market worsened, though the results weren't as poor as expected. The second-largest buyer and backer of home loans in the U.S. also said it plans to raise $5.5 billion in new capital. But like its bigger cousin, Fannie Mae (FNM), Freddie will benefit from having to keep 15% more capital than required by law on its balance sheet, down from the current 20% mandate, with another five-point cut expected in September, as long as the company stays in good standing with regulators.
There was a 65% surge in U.S. foreclosure filings -- which includes default notice and bank repossessions -- to 243,353 in April from the same month last year, while the number of homeowners who fell behind in mortgage payments was up 4% since March, research company RealtyTrac Inc. said on Wednesday. The growing number of defaults is contributing to a deepening slide in home values.
On the economic data front, the consumer price index rose 0.2% in April, less than the median forecast of 0.3%, and after rising 0.3% in March. The core index -- which excludes food and energy prices -- inched up 0.1%, also below expectations. Helping to rein in the headline number were flat energy prices in April, though food prices jumped 0.9%, their biggest increase in 18 years.
Core inflation was held back by a low reading on shelter costs due to higher utility costs and a drop in prices for lodging away from home, while the overall CPI was held back by a decline in gasoline prices. Gasoline prices are likely to rise sharply in May and the increase in food prices in April suggests that pressures in this area are intensifying, John Ryding, chief U.S. economist at Bear Stearns & Co., said in an email note. With import prices rising sharply and crude oil at $125 per barrel, May’s CPI report is likely to be far less benign than April’s, he predicted.
Oil prices slid in anticipation of an increase in U.S. crude inventories last week. Crude supplies probably grew by 2.5 million barrels to 325.6 million barrels in the week ended May 9, according to the median of responses in a Bloomberg News survey. Gasoline and distillate inventories are also expected to increase.
On the NYMEX, crude oil for June delivery was trading $1.15 lower at $124.65 per barrel.
Among other stocks in the news Wednesday, Whole Foods Market (WFMI) shares dropped after the company reported second-quarter EPS of 29 cents vs. 32 cents a year ago despite 6.7% higher same-store sales and 28% higher total sales. The company estimates the negative impact on EPS from the Wild Oats acquisition was about six cents per share. It sees fiscal 2008 sales growth, excluding Wild Oats, of 15%-20% and same-store sales growth of 7.5%-9.5%. For the first four weeks of te third quarter, same-store sales growth was 5.7%, down from the second quarter.
Deere & Co.'s (DE) second-quarter earnings of $1.74 per share fell a penny short of analysts' expectations, vs. $1.36 per share a year ago, on a 18% rise in revenue. The farm equipment maker sees third-quarter net income of $550M-$575M and fiscal 2008 earnings of $2.2 billion. John Deere said that escalating raw-material costs and the availability of various parts and components are expected to have an adverse impact on operations for the rest of this year.
Major European indexes were trading higher Wednesday. In London, the FTSE 100 index was up 0.17% at 6,222.50. In Paris, the CAC 40 index rose 0.54% to 5,025.78, and Germany's DAX index inched up 0.08% to trade to 7,066.18.
In Asia, Japan's Nikkei 225 gained 1.18% to finish at 14,118.55, while Hong Kong's Hang Seng index slipped 0.08% to 25,533.48.
Treasury market
Treasuries were trading higher on Wednesday on lower than expected inflation figures and despite strength in equities. The ten-year note climbed 11/32 to 100-00/32 for a yield of 3.87%, and the 30-year bond rose 31/32 to 96-23/32 for a yield of 4.58%.