Market Talk

Action in a couple retail stocks today could be offering some worthwhile insight into how this 4Q earnings period plays out.

Consider Williams-Sonoma and Whole Foods. WSM raised its 4Q earnings outlook this morning, citing strong holiday sales. Shares, however, are down 4%, and Newswires’ Caitlin Nish reports one analyst noting WSM didn’t raise estimates “as much as investors had almost become accustomed to,” or in other words, high expectations weren’t met.

Indeed, WSM sees 4Q EPS at 96c-98c vs prior 88c-93c view, but the Street was already at low end of the new view. And analysts also see some slowdown in sales trends vs prior the prior quarter. So, we have a stock selling off — even after the company says it’ll post at least in-line, if not upside 4Q results — because expectations ran too high. Continue reading…

Gosh the times are just swell!

For a second we’re going to buy into all the media hype glorifying the economic recovery. As bearish as we are over here at Market Talk, we can admit that the situation looks markedly better now than it did a year ago.

With that said, some things that just don’t add up. And the Pragmatic Capitalist does a great job noting “there are also signs of irrationality on the fray.” The blogger picks up on one specific theme that has us scratching our heads: the radical improvement in the consumer sector.

The Retail HOLDRS ETF (RTH) is experiencing a “full-blown v-shaped recovery,” blog notes, which is surprising considering the the high unemployment rate, declining consumer credit, increasing consumer bankruptcies and surging foreclosures.

We delved deeper into the numbers and found RTH was recently trading around $105, a level last seen in July 2007. Wait. July 2007? Back when the housing market was booming and the Dow Jones Industrial Average was just a few months away from soaring through 14000?

Yes, that July 2007. And now this retail ETF has erased any worries associated with the Great Recession and is pricing in some extremely lofty expectations.

Continue reading…

- Retail stocks have been some big beneficiaries of this yearlong bull market. Bespoke Investment Group finds more than half of the 31 S&P 500 retail stocks trade within 2.5% of their 52-week highs. Only four of those 31 trade below their 50-day moving averages and six are down this year. Macy’s (M) up the most year to date.

- Money market funds yielding virtually zero create a dangerous situation where people tend to chase yields elsewhere, with the stock market being a big beneficiary of that, writes Fred Wilson. “Find an acceptable place to put your money for a year or two at a low, but positive, yield. And then wait for rates to rise. Because they will and you don’t want to be in the wrong place when that happens.”

- “Reasonable reform has almost no chance of passing the Senate,” Simon Johnson notes. “But a well-crafted debate, drawn up on the right terms — and with the support of the president (although don’t hold your breath on that) — could really help shift popular understanding of the issues.”

- Apple (AAPL) got a lot of press last week for its market cap surpassing $200 billion and exceeding Wal-Mart’s (WMT) value. “I always snicker when I start hearing [these] stories,” Paul Kedrosky says. “When we press our noses against the market glass and ‘oooh’ and ‘aaah’ at a company’s market capitalization exceeding something it shouldn’t…let’s just say bad things tend to happen. Eventually.”

- “The trouble is that speculation is to financial markets what claptrap is to the political system: absolutely crucial,” Paul Murphy writes at FT’s Alphaville blog. “Speculators, faceless or otherwise, make markets more efficient by providing the liquidity which makes trades possible and, ultimately, produce more accurate prices…How is it that our political elite does not know this?”

- Most online readers still aren’t ready to climb pay walls, according to Pew Research. “It also does not give me comfort that we’re wasting previous time futzing over walls when we should be paying attention to the big problems we have…dreadful engagement and loyalty,” BuzzMachine blogger Jeff Jarvis says.

- Yahoo’s (YHOO) Senior VP of US revenue and market development, Joanne Bradford, is planning to leave the company and become chief revenue officer of online startup Demand Media, Kara Swisher reports. Departure marks a big step for Demand and a “definite blow” to YHOO CEO Carol Bartz’s turnaround efforts.

- Atlanta Fed looks at the discrepancy between the income and expenditure sides of GDP calculations in the past couple of years.

- In a blog post, Google looks back at how it brought its technologies and DoubleClick together over the past two years and its plans for online display advertising in the future.

- Check out who WSJ predicts will win the National Championship.