Back to top

Ahead of Wall Street

Thursday, November 14, 2013

Soft economic numbers out of Europe, Janet Yellen’s confirmation hearing, and weak earnings reports from Wal-Mart (WMT - Analyst Report) and Cisco (CSCO - Analyst Report) provide the backdrop for today’s trading action. It’s hard not to extrapolate the weak Wal-Mart and Cisco results to their respective industries, even though the issues could very well be company-specific.

The overall tone emerging from Wal-Mart’s release this morning and Cisco’s after the close on Wednesday is broadly weak. Wal-Mart beat on EPS, missed on revenues, and provided weak guidance. The retail giant’s tepid momentum for the holiday season is in contrast to what we heard from Macy’s (M - Analyst Report) on Wednesday and likely indicative of problems for other operators like Target (TGT - Analyst Report) at the low end of the retail space. Results from Kohl’s (KSS - Analyst Report) were also broadly disappointing.

Beyond retail, the unusually weak guidance from Cisco reflects terribly for global tech capital-spending trends. The company’s problems appeared particularly notable in emerging markets like China, India, Brazil and Russia.

Q3 GDP data for the Euro-zone runs counter to the overall positive sentiment about the region’s outlook that has been taking hold lately. Yes, the region’s economic growth was positive, up +0.4%  in Q3. But that is down from Q2’s +1.2% GDP growth pace, which came after 6 quarters of back-to-back negative GDP growth. France’s economy contracted, as did Italy’s. Germany’s growth was positive (+1.3%) and matched expectations, but was down sharply from Q2’s +2.9% growth pace.

These three economies combined account for roughly two-thirds of the region’s total economic output. There were some encouraging signs from the region’s southern periphery, however, with economies in Spain and Portugal showing modest positive growth.

The overall picture emerging from today’s GDP numbers spotlights the divergent paths for the European and American economies. That’s the reason why the European Central Bank recently had to cut interest rates while the U.S. Fed is getting ready to start tapering its ongoing QE program. Janet Yellen is unlikely to provide any fresh Taper guidance in her Senate confirmation hearings today, but the dominant question for investors at present is whether Taper is a December event or something much later.

Sheraz Mian
Director of Research

Please login to or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research


Are you a new Zacks Member or a visitor to

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
UTD THERAPE… UTHR 117.83 +28.51%
TRIQUINT SE… TQNT 20.67 +6.52%
VASCO DATA… VDSI 14.77 +4.68%
BANCO DO BR… BDORY 15.53 +3.95%
STRATTEC SE… STRT 80.24 +3.00%