4:57 pm Weekly Wrap

Oil prices came within a hair of $128 this week, industrial production was reported to have declined 0.7% in April, Moody's expressed new concerns about the financial strength of the bond insurers, Fed Chairman Bernanke said conditions in the financial markets are still far from normal, Wal-Mart's guidance for the current quarter was conservative and the stock market... well, the stock market gained 2.5%.

It was another example this week of the marked improvement in sentiment since the bailout of Bear Stearns in mid-March.  While bad news was attended to, it was the good news - and the thought of good news - that carried the market this week.

On this note, it wasn't lost on participants that the effects of the fiscal stimulus are starting to kick in with the arrival of tax rebate checks.  Additionally, it's starting to register that this is just about the time the first of the Fed's rate cuts should start to impact the real economy.   Since last September the Fed, in a series of eight rate cuts, has knocked 325 basis points off the fed funds rate.

These pleasing considerations helped mitigate the effects of bad news and placed a higher premium on relatively good news such as retail sales, weekly initial claims, the consumer price index and April housing starts all being better than expected. 

The retail sales report was arguably the most pleasant surprise in this week's economic reports.  On Tuesday the Department of Commerce reported retail sales rose 0.5% in April, excluding autos.  The better news, though, was that retail sales were up about 0.6%, excluding autos and gasoline.  This positive number suggests there is still a decent underlying trend in consumer spending despite the macro headwinds.

If not the most pleasant surprise, the report that housing starts rose 8.2% in April to an annualized rate of 1.032 million units may have been the biggest surprise.  Granted that increase was driven by starts on multi-unit dwellings, yet the April number was almost exactly equal to the average level of 1.031 million for the prior four months.  

This doesn't mean the housing recession is over, but it does provide some hope that stability is returning to the housing market such that residential construction won't be near the drag on GDP growth that it has been in past quarters.

The industrial production report, admittedly, wasn't good news from an economic standpoint and both the Empire State Index and Philadelphia Fed Index showed negative readings that signaled a contraction in manufacturing activity in those respective regions.  Strikingly, though, the business outlook component for those regional manufacturing surveys was in positive territory and comfortably above the prior month's level, which reflects a more favorable view of the outlook for the economy.

Earnings news this week slowed noticeably from prior weeks, but like past weeks, the majority of reports were better than expected.  Dow component Hewlett-Packard (HPQ), which announced an acquisition of Electronic Data Systems (EDS) for $13.9 billion, also reported preliminary fiscal second quarter results that topped consensus estimates.

Separately, Freddie Mac (FRE) reported a sizable first quarter loss, yet its loss wasn't as great as feared and its stock rallied as a result, gaining 9% the day of the report.

Numerous retailers also beat quarterly expectations.  Wal-Mart (WMT) was one of them, but its conservative guidance and the understanding that its stock had gained approximately 15% in the two months leading up to its report, left the stock pretty much flat for the week.

In other corporate developments, Carl Icahn made proxy fight waves for Yahoo! (YHOO) while General Electric (GE) said it is reviewing strategic options for its appliance business.

Friday's session, which included an options expiration, marked a fitting end to the week.  Stocks sold off early on profit-taking activity, with the S&P 500 dropping 9 points, or 0.7%, before mounting an afternoon recovery that left it with a slight gain at the closing bell.

--Patrick J. O'Hare, Briefing.com

**For interested readers, please note that the S&P 400 Midcap Index, which isn't included in the table below, was up 3.5% for the week and is up 3.0% year-to-date.

Index	Started Week	Ended Week	Change	% Change	YTD
DJIA	12745.88	12986.80	240.92	1.9 %	-2.1 %
Nasdaq	2445.52	2528.85	83.33	3.4 %	-4.7 %
S&P 500	1388.28	1425.35	37.07	2.7 %	-2.9 %
Russell 2000	720.05	741.17	21.12	2.9 %	-3.2 %

10:23 am Advance Auto Parts (AAP)

Encouraging earnings results from Advance Auto Parts (AAP 38.24, +3.60), helped market participants send AAP shares more than 10% higher -- the largest one-day percent gain in more than thee years.

The Virginia-based auto parts retailer reported a 4% year-over-year increase in revenue to $1.53 billion, with earnings per share rising  21% to $0.86.  Wall Street expected earnings of $0.78 per share.

The company benefited from a 39 basis point increase in gross profit due to lower supply chain and logistic costs, along with more "effective" pricing.  The company also managed to limit cost increases, with a modest 11 basis point increase in selling, general and administrative expense.

The company boosted the amount of its share repurchase program.  It authorized $250 million in share repurchases, which replaced the $105 million it had remaining on its $500 million repurchase program that was authorized in August 2007.

The company said it is in a turnaround and its financial results will not be linear, as a result the firm expects short-term earnings volatility, but expects to deliver long-term value.

09:20 am Abercrombie & Fitch (ANF)

Abercrombie & Fitch (ANF 76.08) said the first quarter selling environment was more challenging than expected, but the retailer still managed to increase profit from one-year ago, and top analysts' expectations.

For its first quarter, Abercrombie & Fitch earned $0.69 per share or $62.1 million, a 6% increase over last year.  The results were three cents better than expectations.  Total company revenue increased 8% to $800.2 million. This result, however, was largely due to the opening of new stores, as comparable same-store revenue fell 3%.  The company said it benefited from foreign tourists coming to the U.S. to take advantage of the weak dollar.

Abercrombie & Fitch operates a total of 1,040 stores, under Abercrombie & Fitch, abercrombie, Hollister and RUEHL brands.

Abercrombie's CEO said "Despite a tough selling environment, we produced bottom-line growth while still remaining true to the aspirational positioning of our brands. We continue to focus on improving the quality of our product and the emotional store experience, which gives us our competitive advantage and is critical to our long-term sustainability."

The company reaffirmed its first-half earnings guidance of $1.61 to $1.65 per share, compared to the consensus estimate of $1.61.

08:51 am Autodesk (ADSK)

Design software maker Autodesk (ADSK 40.94) reported solid first quarter results despite the economic slowdown in the United States. Strong demand from emerging markets and a favorable currency exchange rate helped boost the firm's results.

The maker of computer-aided design software (CAD) said revenue rose by 18% to $599 million and income rose by 9% to $0.50 per diluted share on a non-GAAP basis.  The results were better than expected, as Wall Street had pegged revenue at $589 million, and earnings per share at $0.48.

Revenue in emerging economies rose 41% compared to last year, and now represents 17% of total revenue.  Meanwhile, Europe, Middle East, and Africa saw revenue increase by 25%, and Asia Pacific saw an increase of 27%.  The Americas saw sluggish growth of 4%, due to economic weakness -- Autodesk has several products that are used in construction.

Autodesk issued in-line guidance for its full year, as it expects earnings per share of $2.20 to $2.30, compared to the consensus estimate of $2.23.

08:19 am Nordstrom (JWN)

Retailer Nordstrom (JWN 37.29) reported after Thursday's close a drop in sales and earnings for its latest quarter.  However, the results were better than anticipated, which is spurring some buying interest in premarket action.

Nordstrom said its first quarter earnings fell 24% to $0.54 per share, or $119 million. This was $0.05 better than the consensus estimate that stood at $0.49 per share.

The drop in income was driven by a 3.6% slip in revenue to $1.9 billion, mostly due to a 6.5% decline in same-store sales.  A decrease in merchandise margins and an increase in selling, general and administrative expenses also weighed on the quarterly results. Nordstrom is disappointed with the decrease in same-store sales, but is pleased with its ability to control inventories and expenses and deliver earnings that were on the high end of their forecast.

Because of current business environment, the Seattle-based company lowered its outlook for the full fiscal year which ends Jan. 31, 2009.  It expects to earn between $2.65 and $2.80 per share, down from its previous range of $2.75 to $2.90 per share.  The lowered earnings guidance is in-line with analysts' expectations, who forecast earnings of $2.76.

08:05 am Kohl's (KSS)

Sluggish sales growth and increased expenses took its toll on first quarter earnings at department store Kohl's (KSS 50.49), with net income falling 27% from the prior year. However, the result was better than Wall Street had anticipated.

The Wisconsin-based retailer reported a sluggish 1.5% increase in revenue to $3.62 billion. The slow growth was largely due to a 6.7% drop in comparable store sales.

Net income slipped to $153 million, or $0.49 per diluted share, compared to a profit of $209.0 million. A 155 basis point increase in selling, general, and administrative expenses was the main catalyst for the profit decline. The results topped estimates by five cents, as analysts had already tempered their expectations in light of the current economic environment.

Looking ahead, Kohl's expects to earn between $0.70 and $0.74 per share in the second quarter, which brackets the consensus estimate of $0.72. For the full year, Kohl's forecast earnings per share of $2.95 and $3.15, compared to the $3.11 estimate.

Despite the better-than-expected results, shares of Kohl's are facing a bit of profit-taking this morning, falling 1% ahead of the opening bell. Shares of Kohl's have rebounded 32% since January -- and 17% since Briefing.com suggested the name in our Bargain Hunting column.

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