Before The Bell: Paulson Shift in Housing, Whole Foods Report Card
Paulson revealed a shift in housing. Whole Foods reports. Futures point to ugly open.
The WSJ reports U.S. Treasury Secretary Hank Paulson said the number of potential U.S. home-loan defaults "will be significantly bigger" in 2008 than in 2007. Paulson stated in an interview that he is aggressively encouraging the mortgage-service industry to enable a large group of borrowers to qualify for loans with better terms rather than on a case-by-case basis. Paulson admitted to this change in thinking by saying his outlook evolved as he learned more about the situation. Read Professor Mike Mish Shedlock's Mothball Housing Strategy Doomed To Fail.
From the Bull Pen: In a slowing economy, consumer non-durables and pharmaceuticals tend to out-perform. Bulls can look at Merck (MRK) with sell-stops below $55 (the trend-line from September).
From the Bear Cave: Those looking to press the downside housing bet should do so with defined risk given their fall thus far. Toll Brothers (TOL), with a buy-stop above $20, offers such a set-up.
Whole Foods Report Card
Whole Foods (WFMI) reported earnings of $0.24 EPS, $0.06 less than consensus estimates. Revenues rose 35% on an annualized basis to $1.74 bln versus estimates of $1.61 bln. The WSJ reports profits slipped mainly due to higher costs related to its acquisition of Wild Oats, yet operations remained sound with same store sales coming in at 8.2% Further CEO John Mackey remained upbeat over its recent acquisition and stated he isn't seeing a weakened consumer in the face of increasing economic pressure. For more context, read Toddo's Will We Rally Before it Gets Ugly?
From the Bull Pen: Whole Foods forecasted same store sales growth between 7.5-9.5%. Those believing the company can weather the storm in the retail environment may place sell-stops below recent support at $38.
From the Bear Cave: Those unconvinced that Whole Foods is not feeling the weight of consumer stress may choose to play the downside with buy-stops above the 200 dma ($42.25). Professor Kevin Depew also recently mentioned J.C. Penney (JCP). Traders may play the downside with stops above $45.98.
Click on Minyanville's Stocks To Watch for more company-specific ideas.
Quick Check Around the World
Asian trading closed with the Hang Seng -4.15%, Nikkei -2.46%, Sensex -3.52%, Taiwan -2.27% and Shanghai -1.50%.
A quick check of Europe finds the CAC -1.79%, DAX -1.85%, FTSE -1.41%, ATX -2.19%, Swiss Mkt. -1.40% and Stockholm -1.43%.
A Look At Commodities
Crude oil is higher by +0.35 to 98.38. Gold is up +9.6 to 801.0. Silver is up +0.135 to 14.63. Copper is lower, down -8.00 to 298.95.
As of 8:30 AM EST, S&P futures are down by -16.80 points and Nasdaq futures are lower by -22.50 points.
On the Radar
Initial Claims: 330 k vs. 330 k. Prior Revised to 341 k from 339 k.
10:00 Leading Indicators: -0.4%
10:00 Michigan Sentiment-Rev: 75.0 cons
10:30 Crude Inventories: 2814 k prior
Click here for Minyanville's full Trading Radar.
One more day till Turkey Day! Good luck and good eatin'!
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