It was with sadness that I began my daily routine of writing The Oxen Report. The great Democrat and the final surviving child of the nine children in the politically famed Kennedy family, Ted Kennedy, died this morning at age 77 after a long battle with brain cancer. He was a Senator for over forty years and instrumental in passing numbers of important civil rights and disabilities’ legislation.
The markets today appear to be ready for a pullback with futures as of 7:40 AM showing the Dow down about twenty points and the Nasdaq down a bit over two points. The market will be directed more at 8:30 AM with the release of the Core Durable Good and Durable Good Order reports. These reports measure how many orders were placed for a number of manufactured goods, such as cars and appliances. The numbers are expected to jump in the month due to Cash for Clunkers.
On the economic data front, there will also be a new home sales report being released at 10:00 AM and crude inventories at 
10:30 AM. Oil prices slipped in Asia overnight to above $72 a barrel on what appears worries that the price is too high for weaker demand. Additionally, on the crude front, Russia’s giant oil producer, Gazprom, reported a 62% drop in revenue in their Q1 of this FY. The Russian economy has been suffering since the decline in oil prices and global meltdown. This report helped to signify how hurt the country has been.
That data may have helped spurn a European wide pullback, with almost every major European index trading down over 0.5%.
On the earnings side, the most exciting earnings are definitely done for this season, but two important companies in Williams Sonoma, luxury retailer, and Dollar Tree reported earnings this morning. Williams Sonoma (WSM) beat expectations for its earnings, turning a profit when analysts believed they would not. The stock is up over 10% in pre-market trading on the news. Dollar Tree (DLTR) also beat earnings as a continued cut back in jobs and economic worries has helped discount retailers thrive.
8:30 AM Update: Core Durable Goods came in lower than expected just now with a 0.8% increase in orders, which was lower than the 1.1% expected. Durable Goods orders, however, came in better than expected at a 4.9% increase. The non-core reporting includes automotive sales and reflects Cash for Clunkers.
Buy Pick of the Day: Family Dollar Stores Inc. (FDO)
Family Dollar was one of my favorite recession stocks for the Fall of ’08 through Spring ’09, but the company has taken a fall in the recent past as signs of renewed spending habits may begin to cut into Family Dollar Stores’ revenues. The company, a discount retailer, should get a boost from a squashing of fears today after seeing Dollar Tree’s positive numbers. The market is trading in a very narrow range this morning, and today is a day to show something positive or lose value. Over the past two weeks, the company has lost nearly 4% and has been trading sideways over the past couple days.
Dollar Tree noted that they saw increased same-store sales from one year ago, beat outlooks for revenue and profit, and reported higher revenue. The company did not simply cut costs to make money like most, and this signals that these companies with discount items are still very valuable right now.
Family Dollar is up 1.5% in pre-market trading, but it has a lot of upside to prices it was two to four weeks ago. Right now with investors starting to brew up some worries once again, good earnings and safety are important. Family Dollar is reporting earnings in two weeks, as well. This news should start to pump the stock up as investors start to pick up the stock and price in better than expected results.
The technicals all are in favor of the ability for the large for FDO. Slow stochastics are near the 0 mark, which means that the stock has been oversold and buyers are on the sideline. This news should put the buying interest back into the stock. If the stock rallies enough, it could put on a major short squeeze as the short interest in FDO has been rising.
Family Dollar has consistently beaten earnings estimates over the past year, and it is a leader of this group. This news should bring buying to the table.
Sell Pick of the Day: Las Vegas Sands (LVS)
With the core durable goods coming in worse than expected, it means that industries, such as, electronics and appliances, which are less volatile than automotives and airplanes did worse than expected last month. The news should not be
received well by investors about electronic equimpment and appliance producers, but it appears for many of the electronics companies that the bullish durable good orders is masking the core durable orders.
Therefore, turning my attention to another sector where I will not get burned is important. Futures are starting to look much more positive after the durable goods report. One group of stocks that might be hit today are the smaller scale casinos. One chain, the Isle of Capri Casinos Inc., reported very weak earnings this morning, missing expectations by over 80%. Similar companies, such as, Ameristar Casinos Inc. (ASCA) and Century Casinos Inc. (CNTY), as well, the bigger names like Las Vegas Sands should be hurt by the continued news of weakness in this sector.
The reason I like Las Vegas Sands over the smaller market cap casinos is that LVS has been on a tear as of late. The stock has increased its share value for four straight days, and it has jumped 100% in a month and a half. Today’s news, while not putting a huge damper in LVS’ comeback, may hinder the stock’s ability to increase. The stock is up slightly in pre-market trading, and 
that means the stock comes at a great value. With its stochastics bumping near the top of overbought and its RSI showing the stock is way overvalued. Any weak news for this sector may create a number of sellers.
The ISLE news is not going to be powerful in the market, but as the rest of the casinos more similar to ISLE dwindle, LVS will be hit, as well. Therefore, I would recommend waiting a bit to buy in while the market prices in some of these durable good joys that came out this morning.
Good Investing,
David Ristau
