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What These Two Big Benchmark Stocks Are Telling Us About the Economy NowBy: profit confidentialArticle Word Count: 440 words [Comments (0)] Total Views: 1 Views |
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Wal-Mart Stores, Inc. (NYSE/WMT) missed analyst earnings expectations yesterday. The world’s largest retailer earned 2.9% less in its fiscal third quarter of 2011 compared to the same period of 2010. But here’s the important part: Wal-Mart reported yesterday that sales at its stores open at least one year rose a pathetic 1.3% in the third quarter. Sales at Wal-Mart, a company that caters to the lower end of retail, are growing at a slower pace than American GDP. Now let’s move to another big retailer and another benchmark stock, The Home Depot Inc. (NYSE/HD). The world’s biggest home improvement retailer saw its earning jump a big 12% in the third quarter of 2011, compared to same period of last year. If we look at the all-important same-store sales, we see that benchmark stock Home Depot reported that stores open at least one year saw sales grow 3.8% in the U.S. in the third quarter of 2011, compared to the third quarter of 2010. Why are same-store sales pathetic at benchmark stock Wal-Mart (actually a concern), while same-store sales are rising at benchmark stock Home Depot? Simple answers. The persistent high unemployment in the U.S. is having a huge impact on low-end retail. At the beginning of a recession, you see consumers cut high-end retail spending and increase low-end retail spending. But, as the economy has not turned around, with the underemployment rate at about 16%, consumers are cutting back on all kinds of spending, including low-end retail. We clearly see this in benchmark stock Wal-Mart. The really important numbers to help us understand what kind of economic year we will have in 2012 will be the Christmas 2011 retail sales in the U.S.—and we’ll be watching them like a hawk. Wal-Mart’s poor same-store sales number is another red flag for the U.S. economy. As for Home Depot, the real estate market in the U.S. is still in disarray. People are not upgrading their homes, because bank financing is hard to get and because the underlying fear that property prices will fall further persists. So, what do homeowners do if they are not upgrading their homes? They improve what they have…which is why benchmark stock Home Depot’s same-stores sales have risen 3.8%. Michael’s Personal Notes: While I see it’s not getting much mainstream media attention, what’s happening in California with its finances could turn out to be of great concern for all of America? In case you are not familiar with the situation, in June, California Governor Jerry Brown adopted an $86.0-billion budget. To get… For more information: - Benchmark Stocks Author InfoFor more information: - Benchmark StocksGrab this articles
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