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Midday Market Update

Stocks Up; Retail Earnings Eyed

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U.S. Market    
Stocks were seeking to end a losing streak Tuesday and were higher at midday, as several retailers reported quarterly earnings. 

Despite the rise in equities, Treasuries also were up at midday as emerging-markets bond rates increased, leading investors to seek safety in U.S. bonds. 

Separately, the Fed Bank of Chicago said its National Activity Index improved in July, though it still signaled below-trend economic growth. The index increased to negative 0.15 for the month, up from negative 0.23 in June. The subindexes were nearly split in terms of positive or negative movement for July, and it marked the fifth month in a row with a negative reading. 

The Dow was 0.4% higher at midday. The S&P 500 was up by 0.7%, and the Nasdaq had gained 1.0%. 

Stocks on the Move
Heavy focus was on  J.C. Penney's (JCP) second-quarter earnings report today, which revealed a loss of $586 million, worse than the $147 million loss posted the same time last year. Revenue fell by 12% to $2.66 billion, and both total sales and earnings per share fell short of Wall Street expectations. The retailer is seeking to improve its operations following the management shakeups during the past year with CEO Mike Ullman retaking the helm earlier this year and activist investor and board member William Ackman stepping down from his post last week. Shares, however, were 4% higher at midday as the firm reported sequential improvement in monthly same-store sales and a better cash hoard. 

 Best Buy's (BBY) turnaround continued to take shape during the second quarter, with both top- and bottom-line results coming in ahead of market and Morningstar's internal expectations. Online comparable sales growth of 10% (16% including gaming console preorders, which will ship in the fourth quarter) was ahead of expectations and validated recent traffic driving initiatives. However,  Morningstar analysts think much of the low-hanging fruit from Best Buy's cost-cutting efforts has already been eliminated. Still, shares had jumped by more than 10% by midday. 

 TJX Companies (TJX) reported an 8.4% increase in second-quarter revenue along with a 14% increase in year-over-year net income. Same-store sales for the quarter improved by 4%, which is even more noteworthy as it came on top of a 7% comp in the year-ago period.  Management raised its full-year outlook again (the second time this year) and now expects earnings per share of $2.74-$2.80 (versus the previous range of $2.70-$2.78) supported by same-store sales growth of 2%-3%. Shares were nearly 6% higher at midday. 

 Home Depot (HD) posted a 17% improvement in second-quarter earnings along with a sales gain of more than 9%. Earnings per share and revenue exceeded Street estimates, and same-store sales increased in the low double digits, as well. The home-improvement retailer increased both its EPS and revenue forecasts for the year, but shares were down by 0.1% at midday. 

Foreign Markets
Stocks overseas were lower across the board following a sluggish Monday in the U.S. markets. 

The Shanghai Composite was 0.6% lower, while the Nikkei 225 and the Hang Seng fell by 2.6% and 2.2%. 

The FTSE 100 lost 0.2%, the Paris CAC fell by 1.4%, and the DAX was 0.8% lower.

Kevin O'Shaughnessy does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.