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Midday Market Update

Stocks Lower; Data, Washington Eyed

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U.S. Market    
Stocks fell this morning as investors eyed data and the potential for a government shutdown.

Personal spending rose 0.3% in August, while incomes rose by 0.4% in the month. Both measures were in line with expectations. Inflation remained modest with prices rising 1.2% year-over-year in August up from 1.1% in July. Excluding volatile food and energy prices, prices were also up 1.2% year-over-year.  

Consumer sentiment fell short of expectations according to the Reuters/University of Michigan survey. The final-September reading of 77.5 was below the August reading of 82.1 and the 78.0 expected by economists. One-year inflation expectations rose to 3.3% in September from 3.2%in August.

The U.S. Senate was poised to vote on a continuing resolution that would temporarily fund the government and avoid a shutdown. It is widely expected that the Senate would strip out a provision added by the House to defund Obamacare. The federal government is set to shutdown on October 1st if no agreement can be reached. 

At midday the NasdaqS&P 500  and Dow were down 0.1%, 0.4% and 0.5% respectively. 

Stocks on the Move
Shares of  BlackBerry (BBRY) rose 1.5% after the firm reported  fiscal second-quarter earnings. The firm had announced last week that results would fall well short of initial expectations. Revenue was down 49% sequentially, as the firm sold only 3.7 million devices, mostly older BlackBerry 7 models. Handset prices fell 34% sequentially. The firm recorded a loss of $1.84 per share, driven by a $934 million inventory write-off of its signature Z10 handsets. The firm cancelled its traditional conference call in light of its $9 a share deal to be acquired by a consortium led by Fairfax Financial. 

 J.C. Penney (JCP) announced after Thursday's market close that it intends to  offer 84 million new shares, plus the potential for 12 million more shares in the underwriter's overallotment, to give it more time to engineer a turnaround. With 221 million shares at the end of the last quarter, the potential increase in shares is 43%, which would result in roughly a 30% dilutive effect to earnings per share, all things being equal. As of Friday morning, the issue is reported to price at $9.65 a share, suggesting a cash raise of about $810 million, depending on fees and any overallotment shares.  Shares plunged 9% on the news.

Shares of wide-moat  Nike (NKE) were up 5% after the firm reported a  strong first fiscal quarter. The company had many bright spots, but perhaps most impressive was its growth in mature markets, especially North America along with some early signs of improvement in Europe, and its improving gross margins while leveraging expenses. Nike’s outperformance came on strong gross margins, (up 120 basis points to 44.9%, whereas guidance last quarter was for flat gross margins), lower-than-expected marketing expenses (demand creation fell 16% to $731 million), and a slightly lower tax rate of only 25%. Revenue grew 8% to just under $7 billion.

Foreign Markets
European shares were volatile today. In late trading, the FTSE 100 was down 0.8% while the Paris CAC and Germany’s DAX were unchanged.

Asian markets were mixed on the day. The Nikkei 225 was down 0.3% while the Shanghai Composite and Hang Seng were up 0.2% and 0.4% respectively. 

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