Market Wrap-Up for June 3 (AVB, NWL, SPLS, CL, CME, more)
The big monthly jobs report this morning showed a change in nonfarm payrolls for the month of May coming in at up 54,000, vs. the economist estimate of up 165,000. With this, the unemployment rate came in at 9.1 vs. the economist estimate of 8.9%. All this bad news could set the stage for a third round of quantitative easing (QE3 will be the term thrown around in the media). One other disappointing data point from this morning was news the U.S. Treasury will lose approximately $1.3 Billion on its bailout of Chrysler, following the sale of the remaining 6% stake to Fiat. We still have to see what the final verdict will be with other bailouts, but this initial news will not be music to taxpayers' ears.
It looks like the first week of June is continuing the May downtrend for the markets. That said, some of the names on our recommended list have come down a touch and look enticing for those who are just getting into the markets or who have capital that can be put to work. We continue to scan for the best opportunities moving forward and will be as diligent as ever to keep the best dividend stocks list as timely as ever.
There were some bright spots in today's selling, including apartment REIT AvalonBay Communities ( AVB ) which guided profits higher. Also bucking the downtrend were shares of Polo Ralph Lauren ( RL ) and Schlumberger ( SLB ). As for stocks in the red, Newell Rubbermaid ( NWL ) and Diamond Foods ( DMND ) are seeing selling following their earnings update. Selling was fairly widespread, hitting names like Metlife ( MET ), Staples ( SPLS ), CME Group ( CME ), and Colgate-Palmolive ( CL ).
Getting back to the jobs picture, the National Federation of Independent Business (NFIB) is releasing a survey this coming Tuesday which will show a continuing negative sentiment about job creation. According to the survey:
"Further indications of minimal future growth include the fact that in the next three months, 13 percent plan to increase employment (down 3 points), and 8 percent plan to reduce their workforce (up 2 points). That yields a seasonally adjusted net negative 1 percent of owners planning to create new jobs, a 3 point loss from April. Overall, reports of job reductions have returned to historically normal levels. However, the percent of owners hiring has not recovered to levels historically observed after two years of expansion. With one in four owners still reporting 'weak sales' as their No. 1 business problem, there is little need to add employees, especially with the uncertainty about future labor costs arising from new regulation and legislation."
To take the conversation a little further and where I feel a touch of pessimism coincidentally comes with news of Groupon's IPO filing yesterday. For those of you who are not familiar with Groupon, the company is an online discount buying club where users sign up and get access to deals, mostly in their local markets. The company pushes retailers and service providers to offer big discounts on which Groupon will take their cut and pay the merchants in installments from members who bought the deal of the day that was offered. It sounds great from a business owner's standpoint initially as the hope is that you will have higher exposure to potentially new customers. The big problem is the discount aspect and where customers become used to buying product only on discount. There are many businesses where margins are not big enough to support the discount model. As the trend for deals continue, the result is business owners and service providers look at their bottom line and see discounting adds further pressure to their bottom line, pushing away any hopes of adding new employees. I have read quite a bit of reports where business owners have been bashing Groupon from a standpoint it did more harm than good for businesses that have experimented with the service. Again, if the margins for a business are thin to start, it is more on the business owner to get all the details before signing up with a daily deal of the day site like Groupon or the many others that are out there.
From the survey data above, you can see how tough it is to run a successful business where growth is happening. I continue to stress to anyone out there who is considering an entrepreneurial pursuit to perform as great a due diligence as possible. Going into business for yourself is either great or horrible for the most part. Many new businesses never make it past their first year, but this all comes back to doing your homework and knowing the ins and outs of the specific business/niche you will be pursuing.
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