Talk about volatility! One day after the largest Dow Jones Industrial Average decline in two months, the markets came roaring back Thursday morning, only to surrender a large portion of the gain in the afternoon.
The catalyst for today’s positive action was the Commerce Department’s retail sales report showing a 0.7% increase in November, the largest increase in the last eight months.
Another positive for the market was the Labor Department’s report showing that initial claims for state unemployment benefits fell 3,000 to 294,000 during the first week of December. This number was 1,000 claims below economists forecasts, and served to strengthen the notion that the labor market is gaining traction.
The Dow was initially ahead by 225 points in the morning, but gave back about three quarters of that thereafter to finish more than 0.3% higher, while the S&P 500 climbed more than 0.4%, and the Nasdaq Composite gained 0.5%.
Hot sectors today were consumer cyclical goods and technology stocks. Among today’s best stocks were Walgreen Company (WAG), Lululemon Athletica inc. (LULU), and Office Depot Inc (ODP), all of which had tremendous showings.
Walgreen Company (WAG)
WAG stock gapped up 7% to highs not seen since August amid news that CEO Greg Wasson has decided to retire after the completion of phase two of WAG’s merger with Alliance Boots GmbH, the European drug store and largest chain in the United Kingdom.
The board of directors will vote on the deal on Dec. 29. Stefano Pessina, the current executive chairman of Alliance Boots, will become the company’s acting CEO until a permanent replacement is named. This was a reversal of the plan from August, in which Wasson was expected to head up the merged companies.
WAG stock is up more than 24% since October.
Lululemon Athletica inc. (LULU)
LULU stock was another big winner today, although its third quarter earnings report came in with very mixed results. LULU reported earnings per share of 42 cents, 4 cents better than expected, although down from 45 cents in the year ago quarter.
Revenue of $419.4 million was up 10% from a year ago, but missed Wall Street’s estimate for 12% growth. Net income and sales figures were also mixed, and the company gave a less than inspiring forecast of 65 to 69 cents per share for the fourth quarter, 3 cents below expectations.
Still, analysts were in a forgiving mood, and LULU stock was up over 9% today, for a total of 31% since mid October.
InvestorPlace contributor Joseph Hargett recently pointed out that LULU could be poised to end the year with a bang, and it certainly did today.
Office Depot Inc (ODP)
Hedge funds seem to be calling many of the shots these days on Wall Street, and thus it was no surprise that ODP stock blistered higher by more than 12% today when Starboard Value LP, said it will push Office Depot to merge with Staples, Inc (SPLS). Option trading on both ODP and SPLS has been heavy this week, perhaps on advance speculation of this news.
Analysts would like to see these two retailers merge to ward off competition from stores such as Wal-Mart Stores, Inc. (WMT) and online giant Amazon.com, Inc. (AMZN). ODP stock traded a very heavy 36 million shares today and is up 77% since mid-October.
As of this writing, Ethan Roberts did not hold a position in any of the aforementioned securities.
