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Two Ways To Play: Cheap Is New Expensive

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Strengthen your portfolio in good times and bad.

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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!
No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

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