10 Recent Economic Warning Flares

by Kyle Woodley | June 22, 2012 5:30 am

Well, that sucked.

Going into Thursday, it hadn’t looked like all that bad a June. We still were looking at 5% gain out of the markets’ early-June investment shares[1] depths, and 1% for the month-to-date. Microsoft (NASDAQ:MSFT[2]) excited the tech world by unveiling the Surface tablet, potentially making the Microsoft-Apple (NASDAQ:AAPL[3]) rivalry worth paying attention to again. And Greece … well, it didn’t fall into the Aegean, so it got a check mark, too.

Then the indices took a roughly 2% dive Thursday — and while that didn’t put us under for June, it made some recent economic and market red flags look a little bit redder.

Specifically, the words “guidance” and “lowered” have been paired together in the past couple weeks a disturbingly number of times — and considering the broad swath of sectors we’re talking about here, these seemingly disjointed news bytes — coupled with a seeming end to recent momentum — might be reason enough for a healthy dose of caution heading forward.

First, a look at the recent crap dealt out at the national level:

U.S. GDP: This is the biggie. The Federal Reserve’s economic projections for U.S. gross domestic product was dumped Wednesday to a range of 1.9%-2.4%, down from gains of 2.4%-2.9% forecast in April. 2013’s prospects have been lowered, too, from 2.7%-3.1% to 2.2%-2.8%. By the way, in the same report, clouds formed over the forecasts for …

U.S. Jobs: Not that we shouldn’t have seen this coming. We’ve been inundated with a number of lousy jobs reports[4], not to mention the individual layoff headlines[5] coming out from scores of big businesses. Still, no one was happy to hear that the Fed doesn’t expect the unemployment rate to duck below 8% anymore. Projections for unemployment sit at 8%-8.2% from 7.8%-8% in April, and 2013’s unemployment rate forecasts were a few basis points lower, too. Even more depressing: The “real” number is shockingly worse[6].

Chinese Manufacturing: The Chinese manufacturing purchasing managers’ index reading, out Thursday, dropped from 48.4 in May to 48.1 in June. Anything sub-50 means manufacturing is shrinking. In HSBC’s report, its chief economist said, “With external headwinds remaining strong, exports are likely to decelerate in the coming months.” Those headwinds? Crummy ol’ Europe and … a slowing U.S. economy.

In addition to the larger economic reports, a number of individual publicly traded companies across numerous sectors also have hedged their expectations as of late:

Procter & Gamble: Diversified consumer goods company Procter & Gamble (NYSE:PG[7]) — which makes everything from Old Spice deodorant to Iams pet food — is worried about foreign exchange rates and weakness in developed markets. Whereas it expected revenues to grow 1%-2% in the fourth quarter, PG now is calling for a loss of the same measure, and it dropped Q4 earnings projections to 75-79 cents per share from 79-85 cents.

Philip Morris International: Citing currency concerns just like P&G, tobacco giant Philip Morris (NYSE:PM[8]) dropped earnings projections to $5.10-$5.20 per share from its April forecast of $5.20-$5.30 per share.

Adobe: The maker of PhotoShop and Acrobat, Adobe Systems (NASDAQ:ADOBE) felt the crunch Wednesday (and a bit more Thursday) after trimming its fiscal-year revenue growth forecast from 6%-8% to 6%-7%. Its current-quarter expectations of 59 cents in earnings per share on $1.1 billion in revenues also are short of analyst calls.

Rite Aid: Drugstore stock Rite Aid (NYSE:RAD[9]) lowered fiscal 2013 projections of $25.4 billion-$25.8 billion in revenues and flat-to-1.5% growth in same-store sales, now expecting revenues of $25.3 billion-$25.7 billion in sales and a 0.5%-1% decline in same-store sales. It also expects a net loss of 13-29 cents per share.

Body Central: Small-cap young women’s retailer Body Central (NASDAQ:BODY[10]) was cut in half on Monday after lowering its full-year guidance. It previously expected earnings of 26-28 cents per share on revenue of $80 million-$82 million — that has been hacked to forecasts for 19-21 cents on $77 million-$79 million in sales.

The retail sector also has had a couple other guidance warning flares. Bed Bath & Beyond (NASDAQ:BBBY[11]) got absolutely hammered Thursday after putting out disappointing earnings forecasts. And shoe retailer DSW (NYSE:DSW[12]) rocked the entire footwear sector earlier this week when its second-quarter EPS guidance of 60-64 cents fell well shy of the 76-cent analyst mark.

All that isn’t to say that Wall Street is about to crumble, but it does mean you should be on watch for more of the same. If European headlines continue to frighten, or earnings start getting ugly in earnest, there could be a lot more slump left this summer.

Kyle Woodley[13] is the assistant editor of InvestorPlace.com[14]. As of this writing, he did not hold a position in any of the aforementioned securities. Follow him on Twitter at @KyleWoodley[15].

  1. investment shares: http://investmentshares.net/
  2. MSFT: http://studio-5.financialcontent.com/investplace/quote?Symbol=MSFT
  3. AAPL: http://studio-5.financialcontent.com/investplace/quote?Symbol=AAPL
  4. a number of lousy jobs reports: https://investorplace.com/2012/06/7-ugly-u-s-jobs-numbers-are-much-more-important-than-europe/
  5. individual layoff headlines: https://investorplace.com/2012/06/lousy-jobs-report-follows-tear-of-wall-street-layoff-news/
  6. The “real” number is shockingly worse: https://investorplace.com/2012/06/the-real-unemployment-rate-is-nearly-15/
  7. PG: http://studio-5.financialcontent.com/investplace/quote?Symbol=PG
  8. PM: http://studio-5.financialcontent.com/investplace/quote?Symbol=PM
  9. RAD: http://studio-5.financialcontent.com/investplace/quote?Symbol=RAD
  10. BODY: http://studio-5.financialcontent.com/investplace/quote?Symbol=BODY
  11. BBBY: http://studio-5.financialcontent.com/investplace/quote?Symbol=BBBY
  12. DSW: http://studio-5.financialcontent.com/investplace/quote?Symbol=DSW
  13. Kyle Woodley: https://investorplace.com/author/kyle-woodley/
  14. InvestorPlace.com: https://investorplace.com/
  15. @KyleWoodley: https://twitter.com/#%21/kylewoodley

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