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Why PetSmart May Be in the Catbird Seat


Empty-nesting baby boomers propel the percentage of housholds with furry friends.

One to watch: Animal spirits will rein on Wall Street at the end of this dog day of August as America's largest pet-supply retailer announces earnings after the close. PetSmart (PETM) hopes to profit from our enduring fondness for Fluffy and Fido. Approximately 63% of US households own a furry or feathered friend, propelled by empty-nesting baby boomers. Pet pasta, pet Prozac, pet planes -- any visitor from Mars watching humans scurry to clean up after our dogs could be forgiven for thinking animals are the master race. It's a lucrative business, one that propelled PetSmart to $5.1 billion in '08 revenue. Concerns include competition from category killer Wal-Mart (WMT) and slipping discretionary spending. But with the company having recently announced both a share buyback and 233% increase in its quarterly dividend, shares may be let of the leash again soon.

What just happened: Stocks (and Brett Favre) staged comebacks yesterday, even if neither lasts long. Target (TGT) upgraded earlier this morning at Piper Jaffray (PJC), jumped 7.5% on above target earnings. Tuesday Morning did well all day, ending up 9.4%. Waste Management (WM) was kicked in the trash and slid 2.4%. All the tea in China will cost you more, after prices hit a record high on supply constraints. T. Boone was less happy however as natural gas fell to a seven-year low, leaving slim Pickens on the profit potential of his alternative energy plan.

What's happening:
A Shanghai swoon is exerting a negative impact on shares worldwide. (Stop me if you've heard this one before). China entered panda bear market territory, its 4.3% overnight decline meaning the market is down 20% from an early August '09 high. Europe is also in the red. Here at home, stocks have opened lower, Goldman's downgrade of Dow component Alcoa (AA) contributing to the general malaise in equities. Warren Buffett Op-Ed's in today's New York Times that the US economy is "out of the emergency room," though he warns Deficit Attention Disorder could cause another ugly eruption. (Something distant cousin Jimmy cautioned against years ago). And a happy fifth birthday to Google (GOOG), which IPO'd on this day in 2004.

What will happen:
Data released today reveal mortgage applications rose 5.6% last week on an increase in refinancing activity. Oil inventories are out at 10:30 a.m. Eastern. The Kansas City Fed kicks off a 3-day economic conference in Wyoming; the bailout black hole is doubtless up for discussion in Jackson Hole. Bally Total Fitness finds out how far it is from fiscal fitness in an appearance before bankruptcy court. And we'll be learning about earnings from BJ's Wholesale (BJ), Deere (DE), Eaton Vance (EVN), Gymboree (GYMB), Hot Topic (HOTT), Limited Brands (LTD), NetApp (NTAP), and Phillips-Van Heusen (PVH).

Though the dollar is down double digits from its March peak against a basket of major currencies, it remains high as a kite, apparently.
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