Had a tough Thursday? At least you’re not a KFC fried chicken smuggler in the Middle East. Wall Street struggled on Thursday too, with the Dow falling 42 points on worries about the Fed’s future stimulus plans.
#1. Fed Presidents Speak Out Against More Stimulus
There’s a rift… in the House of Bernanke. Three outspoken Fed Presidents have said that the Fed’s quantitative easing program to stimulate the economy has gone way too far and should be stopped – now. These “hawks” are more concerned about inflation and keeping the money supply under control while other “doves,” like the Boston Fed prez, think the Fed needs to do even more for the economy (and we do more peace man).
Investors were freaking… cause nobody wants the Fed’s money-printing frenzy to stop. The Fed’s “QE” quantitative easing programs (we’re at #3 since the crisis) help keep interest rates low to generate economic growth. It also makes stocks look more attractive to investors because bond returns are driven so low by the low-interest rate environment.
Although “improve considerably”… is still the Fed’s official stance, more investors are worried that the monetary stimulus of QE3 could end as soon as this summer. Jitters caused markets to show some weakness Thursday.
#2. JC Penney Earnings Worse Than You Thought
Oh, the humanity… Wall Street wasn’t surprised that struggling retailer JC Penney (JCP) lost money during the quarter, but was stunned at the amount – $348 million vs the $163 million expected. Shares dropped 1% on the news.
JCP, are you serious?… A year ago, JCP fired Mike Ullman and hired Ron Johnson as CEO. Johnson was supposed to take what he did at Apple and translate it to the retail store. Cha-ching. (Psyche) Johnson’s plans failed. A month ago he was fired, and Ullman was brought back to replace him. Not a great start to the company you already failed once, Mr. Ullman.
Hope remains… JCP has taken out a $1.75 billion loan from Goldman Sachs to prepare for seasonal sales. They also have been working on a new ad campaign designed to bring customers back in the store. Big changed await JCP in 2013, but they must deliver if the company expects to reverse their 5-straight quarterly loss streak.
#3. Hot Tesla To Offer More StockIf you asked a Spaniard… they would say that Tesla Motor’s (TSLA) stock is en fuego! The maker of luxury electric cars saw its stock jump another 8% Thursday by announcing a new stock offering.
Tesla is up over 57%… a week after announcing their first ever quarterly profit. Since going public in 2010, the electric car company has had trouble attracting consumers to their environmentally friendly automobiles. With such a high demand for the stock, Tesla is dishing out 2.7 million more shares as well as $450 million in convertible debt.
So much money… so few car options. Tesla is planning on using the money to repay a massive $465 million loan from the Department of Energy. The DOE gave the carmaker the loan in 2010 to make all electric plug in vehicles. The result? The Model S is the first zero-emission, zero-gas, full-size electric vehicle on the market.
#4. Weekly Jobless Claims Shockingly Pop
What happened?… After 4 straight weeks of weekly jobless claims dropping (like it’s hot) to their lowest level since 2008, the number of Americans filing for 1st time unemployment claims rose. Jobless claims spiked by a hefty 32,000 this past week to reach 360,000 claims total – erasing all of the last month’s improvement with one big fat eraser (NYTimes).
The takeaway… is that these weekly figures tend to be more volatile than the monthly employment report you eagerly look forward to from the Labor Department. While economists don’t have an explanation for this past week’s surprise jump (no seasonal factors or major corporate layoffs or asteroids), the big takeaway for investors was how this not-so-hot econ data will sit with the Federal Reserve as the central bank makes stimulus decisions.
- Hey brah, how you feeling about the economy: It’s the Reuters/UMich Consumer Sentiment Poll for May
Copyright © 2013 MarketSnacks