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Stocks Wavering; Earnings in Focus

Kevin O'Shaughnessy

U.S. Market
Stocks sought direction during morning trading as investors eyed retail earnings reports and anticipated statements from several Fed officials today.

After his comments contributed to a late sell-off Monday, investor Carl Icahn clarified his remarks by emphasizing the unpredictable nature of the stock market.

Concerns about U.S. growth also came to the fore after the Organization for Economic Cooperation and Development said in its economic outlook that current U.S. policies and political conflicts pose significant threats to a near-term global recovery and exacerbate already-existing woes from the eurozone and Japan. The OECD also said it expects global economic expansion of 1.2% this year and then modest increases in subsequent years.

Meanwhile, the Labor Department said its third-quarter employment-cost index increased by 0.4%, lower than the expected 0.5% increase, but not much different from recent increases during the past several years. The latest data indicate ongoing slow job growth along with low inflation pressures.

The Dow, the S&P 500, and the Nasdaq were each 0.1% higher at midday.

Stocks on the Move
Home Depot (HD) posted a 43% gain in third-quarter earnings on the back of a 7.4% gain in same-store sales and a total revenue increase of 7.4%, as well. Earnings per share and revenue exceeded Wall Street forecasts, and the firm increased its full-year EPS and revenue outlooks. Shares were up by 2.1% at midday.

Best Buy (BBY) remains one of the more impressive retail turnaround stories in recent memory, with third-quarter results mixing solid domestic top-line growth (both in store and online) with aggressive cost-cutting efforts, say Morningstar analysts. Among the key highlights were a 1.7% increase in domestic comparable sales despite a difficult consumer spending backdrop, a 15% increase in online comparable sales (closer to 20% when factoring in preorders for new gaming consoles), and Renew Blue cost cuts. However, shares lost more than 7% as the firm warned of the potentially negative impact that increased holiday promotions will have on the firm's gross margins.

The onslaught of challenges was once again felt in Campbell Soup's (CPB) first quarter, as sales (down 4%) and operating income (down 20%, with adjusted margins 350 basis points below last year at 15.6%) each sank more than management expected. As such, the firm lowered its full-year forecast for sales to 4%-5% (from 5%-6%) and earnings per share to $2.53-$2.58 (from $2.55-$2.60). Shares were off by 6% at midday.

TJX Companies (TJX) saw a 35% gain in third-quarter earnings and an 8.9% increase in year-over-year revenue. Same-store sales were better than the company had expected, and TJX increased its full-year EPS outlook range.

Dick's Sporting Goods (DKS) posted a slight drop in third-quarter profit, which came in at $50 million compared with $50.1 million the same time last year. Revenue edged higher to $1.40 billion from $1.31 billion. EPS and revenue still beat Wall Street forecasts. Shares were 0.9% higher at midday.

Foreign Markets
Stocks in Asia were mostly lower. The Shanghai Composite and the Nikkei 225 each lost 0.2%, while the Hang Seng was flat.

European stocks were lower, as well, with the Paris CAC losing 1.1%, and the FTSE 100 and the DAX falling 0.4%.