TLB Talbots (The)

On Tuesday, Ben Bernanke said US economic growth remained “frustratingly slow from the perspective of millions of unemployed and underemployed workers”. Such comments from the Federal Reserve Chairman kept the investors bearish as the markets suffered losses for the fifth consecutive trading day. Markets had been moving up initially but Bernanke’s comments ensured benchmarks extended their stay in the red, yet again.

The markets have now declined for five consecutive trading day and the Dow Jones Industrial Average (DJIA) lost 0.2% to settle at 12,070.81. After dropping below the psychological level of 1,300 for the first time since March 23, 2011, on Monday, the Standard & Poor 500 (S&P500) continued to be weighed down as it declined again, by 0.1%, to close at 1,284.94. The Nasdaq Composite Index was down less than 0.1% to finish off at 2,701.56. On the New York Stock Exchange, declining stocks outnumbered the stocks that climbed higher by a ratio of 1,684 to 1,297. Consolidated volumes on the NYSE were 3.6 billion shares.

Global pressures and domestic disappointing data indicating slowing economic growth have dampened investor sentiment for quite some time now. Discouraging data about job markets, the housing sector, manufacturing output, higher gasoline prices and the lack of any catalyst have resulted in markets taking losses for five consecutive weeks. For the week, the indices are lingering in the red and if the trend continues the markets will surely be recording a six week losing streak, which will highlight huge concerns about the economy. Amidst such a trough trajectory, Bernanke disappointed many who believed the Fed will be declaring another round of economic stimulus.

Ben Bernanke acknowledged the slowdown in economic progress as he delivered his speech at the International Monetary Conference in Atlanta. While the markets had opened with gains, moments after Bernanke started his speech benchmarks started to move lower. Bernanke said: “U.S. economic growth so far this year looks to have been somewhat slower than expected. Aggregate output increased at only 1.8% at an annual rate in the first quarter, and supply chain disruptions associated with the earthquake and tsunami in Japan are hampering economic activity this quarter. A number of indicators also suggest some loss of momentum in the labor market in recent week”.

Bernanke also targeted critics who had blamed the Fed policy for the surging prices. He mentioned the supply and demand dynamic was the reason behind price rise and said: “When the price of any product moves sharply, the economist’s first instinct is to look for changes in the supply of or demand for that product…Indeed, the recent increase in commodity prices appears largely to be the result of the same factors that drove commodity prices higher throughout much of the past decade: strong gains in global demand that have not been met with commensurate increases in supply. With the demand for oil rising rapidly and the supply of crude stagnant, increases in oil prices are hardly a puzzle”.

The job market has posed a threat to the recovery and employment reports have suggested no improvement in the economy. Bernanke mentioned that an improving job market is vital for “setting the course for household spending”. Further, he opined: “As you know, the jobs situation remains far from normal,” and added “Until we see a sustained period of stronger job creation, we cannot consider the recovery to be truly established”.

Additionally, Bernanke said: “Although it is moving in the right direction, the economy is still producing at levels well below its potential; consequently, accommodative monetary policies are still needed.” Nonetheless, he did not suggest any possibility of the third round of quantitative easing. The current $600 billion bond purchase program is scheduled to stop this month end. This worked against many investors who had been hoping for an economic stimulus plan.

However, Bernanke is hopeful of a better performance in the second half of the year and said he expected a better hiring scenario “from last month’s pace as growth strengthens in the second half of the year”. He further assured prospects of lower gasoline prices and said the sluggish outlook for the April-June period, which was mainly due to the effects of the Japanese natural disaster, will dissolve in the upcoming months. He assured: “growth seems likely to pick up somewhat in the second half of the year”.

As the benchmarks struggled to cope up with a disappointing employment situation, the Labor Department reported job openings in the US had declined for the first time in three months. According to the department, the number of positions that are to be filled declined by 151,000 to 2.97 million. The report also reflected the lack of faith among the companies about the recovery.

Among stocks in focus were, Temple-Inland Inc. (NYSE:TIN), International Paper Co. (NYSE:IP), Ford Motor Company (NYSE:F) and Sunoco, Inc. (NYSE:SUN) and they surged 40.4%, 0.4%, 0.3% and 4.0%, respectively. One of the leading decliners for the day was The Talbots, Inc. (NYSE:TLB), which dived 40.5% after its quarterly results failed to beat estimates.

The financial stocks shared the losses as the Financial Select Sector SPDR fund was down 0.2%. Among decliners in the sector were Citigroup Inc. (NYSE:C), The Goldman Sachs Group, Inc. (NYSE:GS), Bank of America Corporation (NYSE:BAC) and Wells Fargo & Company (NYSE:WFC) and they dropped 1.3%, 0.7%, 1.7% and 1.9%, respectively.

 
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INTL PAPER (IP): Free Stock Analysis Report
 
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