The news of day was US retail sales which were up 0.4% from December, but expectations were double that number. Rising retail sales is a positive, but the market would like a really clear cut positive sign that the US is on the road to recovery. Every major piece of recent good economic news has a “but” attached. For example, a lower unemployment number was paired with lower workforce participation, meaning that many people have given up on finding a job.
Also, today Moody’s cut the credit rating of 6 countries in Europe. The word anti-climatic comes to mind. Everyone’s focus is on Europe and the fragile state of European economies has been on the market’s mind for over a year. Moody’s rating cut is sorta like a story hitting the print version of newspaper 20 hours after its has appeared on TV and the Internet.
Of the three major stock indexes, two finished slightly up and one finished slightly down. In the last hour of trading, the Dow rallied 80 points to close at 12,878, 4 points higher than yesterday’s close. The bond market as represented by the Vanguard Total Bond Market ETF (BND) rose 0.11% to $83.80. Long term treasuries rose in value, probably due to continued uncertainty about Greece. The iShares Barclays 20 +Year Treasury Bond ETF rose 0.53% to 111.76
In terms of individual stocks, Zipcar (ZIP) fell over 14% as earnings jumped 25%. My guess is that expectations were much higher. While Zipcar is a great idea and is changing the rental industry, what exactly prevents every other rental car company from copying its model. In fact, I believe that Hertz has begun to offer a competing service (if not Hertz its a major name) Now that they have proven the case for business model, Zipcar is going to have to defend its product category.
Michael Kors (KORS) beat expectations and rose almost over $9 per share or around 25%. How did this sneak up on everyone? Well, the one analyst that covers the stock actually rated it an Outperform. Few professionals follow small cap stocks except when numbers are released, giving an inquisitive retail investor a potential investing edge.
In after hours trading, Zynga (ZNGA), the social game company behind Farmville, released earnings but so far has had little price movement as result.