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Two Ways To Play: Cheap Is New Expensive


Strengthen your portfolio in good times and bad.

Consumers Retail Switch

The Wall Street Journal reports American shoppers, feeling the pain of higher energy prices and a slowing economy, are switching from fancy labels to lower priced store brands. Sales at discount stores jumped nearly 6% last month while those of full-price department stores declined. Benefiting from the switch in consumer behavior are the retailers at the lower-end of the price scale.

Family Dollar (FDO) forecasts same-store sales increases of 4% to 6% for the next quarter. Dollar General (DG) said same-store sales rose 5.6%, and the nation's largest retailer, Wal-Mart (WMT) reported its highest monthly increase since May 2004. For more, see Professor Jeff Macke's Retail Roundup.

From the Bull Pen: Bulls are content to continue with the theme. Costco (COST) is an option; sell-stops can be set near the 200 DMA ($67).

From the Bear Cave: Bears might see a downside retail play in Aeropostale (ARO). Can the stock hold the $30 support level? Buy-stops can be set above yesterday's high ($32).

GE 2Q In-line

The Wall Street Journal reports General Electric (GE) posted a 5.8% drop in second-quarter profits, hurt by declines in its consumer finance and industrial products business. The conglomerate said earnings from continuing operations were 54 cents a chares in-line with analysts estimates. Revenues rose 10.6% year-over-year to $46.89 bln vs. $45.31 bln consensus. Earnings at the company's consumer-and small-business finance arm fell 8.8% as revenues rose 5.6%. But CEO Jeff Immelt said the decline in that segment wasn't as bad as the company had expected. GE reaffirmed its full-year earnings guidance with earnings in the range of $2.20-$2.30 vs. $2.22 consensus.

From the Bull Pen: Bulls believing the June low ($26.15) was the bottom can continue to play the upside in GE with sell-stops below that level.

From the Bear Cave: Bears welcome the rally in GE and can fade (read:sell) the stock into the $30 level.

For more ideas in real time throughout the trading day, check out Minyanville's Buzz & Banter.

Quick Check Around the World

Asian trading closed with the Hang Seng +1.66%, Nikkei -0.21%, Sensex -3.28%, Taiwan +2.39% and Shanghai -0.65%.

A quick check across the pond finds the CAC -2.16%, DAX -2.14%, FTSE -1.41%

As of 8:40 AM EST, S&P futures are lower -15 points to 1239, and Nasdaq futures are down -22 points to 1822.

A Look At Commodities

Commodities are mostly higher. Crude oil is up +3.17 to 144.78. Gold is up +12.60 to 954.60. Silver is up +0.145 to 18.245, but copper is lower -2.15 to 373.35.

The dollar index is down -0.128 to 72.358.

On the Radar

Trade Balance: -$59.8 bln vs. -$62.5 bln.
Import Price Index (m/m): 2.6% vs. 2.0% cons.
Import Price Index (y/y): 20.5% vs. 18.6% cons.

10:00 University of Michagan Confidence: 56.0 cons, 56.4 prior
14:00 Monthly Budget Statement: $33.0B cons, $27.5B prior

Happy Friday! Good Luck!
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