NEW YORK ( TheStreet) -- So that's what passes for a sell-off on Wall Street in 2012. Leap Day was a loser as Federal Reserve Chairman Ben Bernanke put the word out that a better economy means more stimulus is less likely. Not exactly a shocker and arguably one of those good problems you hear about. The sentiment from Big Ben spooked some but this wasn't the mass exodus the bears (and even some bulls) have been expecting, and February goes into the books with a solid 2.5% gain for the Dow Jones Industrial Average, putting the blue chips up 6% year-to-date and five months in a row. S&P Capital IQ is still looking for a near-term decline of 3-5% in the S&P 500 (up 8.6% so far in 2012) but the firm says the index could push past its year-end target of 1400 before that occurs. It's advising folks to trim their stock holdings, which mutual fund investors have appartently been doing of late. "
We acknowledge that the S&P 500 could overshoot into the low-1400s before the pullback commences," the firm said on Wednesday. "We view current price levels, as well as a price overshoot, as very good areas in which to lighten equity exposure. We think the next pullback could be particularly sharp, due to the price structure of many market indices and individual stocks. There is very little chart support beneath the market, in our view, so when a drop comes, get your fingers out of the way." Meantime, Ian Shepherdson, chief U.S. economist at High Frequency Economics, found Bernanke's testimony, which will get another airing on Capitol Hill on Thursday, more interesting than expected. He thinks that pledge from the central bank to keep interest rates "exceptionally low" until late 2014 looks a bit shakier now than it did in late January. "We wonder if the markets might look back on this event at some point in the not-too-distant-future, and think of it as the first step along the road to an eventual policy tightening," he said on Wednesday. Shepherdson said that Bernanke's unwillingness to move beyond boilerplate on QE3 was telling, and that this reinforced his conviction that there won't be another round of bond buying from the central bank for the stock market to benefit from. Bernanke's puzzlement about the improving jobs market underlines the conundrum the chairman may find himself in if the unemployment rate continues to drop.
"The rate remains well above the Fed's 5.3-6% estimate of the sustainable rate, but given the lags in monetary policy and the Fed's extreme current stance, what happens if unemployment is down to just, say 7% by Easter next year and shows no sign of leveling off," he wrote. "That, by the way, is our central expectation, and it explains why we think policy will be tightened long before the end of 2014." It'll be interesting to see if more sellers show up on Thursday and try to sneak out some profits as the market continues to digest Bernanke's slight shift. Maybe March comes in like a bear this year. As for Thursday's scheduled news, Foot Locker ( FL) is reporting its fiscal fourth-quarter results before the opening bell, and the average estimate of analysts polled by Thomson Reuters is for earnings of 51 cents a share in the January-ended quarter on revenue of $1.49 billion. Shares of the New York-based sneaker seller hit a new 52-week high of $29.44 in Wednesday's session, and after closing at $29.17, the stock is up 21% so far in 2012 and nearly 50% in the past year. The company has a string of seven consecutive quarterly beats on the line with an average upside surprise of roughly 3.4%, and the sell side is split with the 16 analysts covering the stock running the gamut between strong buy (5), buy (3), hold (7) and underperform (1). The median 12-month price target of $30 shows valuation -- the stock's forward price-to-earnings multiple sits at 14.3X -- may be an issue for some. Sterne Agee previewed the quarter last week, saying it sees "strong potential" for the company's profit to top its in-line estimate of 51 cents. The firm has a buy rating and a $30 price target on the stock. "We believe the mild winter weather shifted dollars from boots and cold weather products to athletic footwear and apparel," Sterne Agee said. "We are forecasting a GM
gross margin increase of 90bps basis points. Our GM estimate assumes merchandise margins improvement of 25bps due to enhanced systems and better product flow which is above the company's implied guidance of a 50bp GM increase with flattish merchandise margins."
Looking further out, the firm believes the company will benefit from a long-term bullish trend in the industry, helped along by innovation and competition between names like Nike ( NKE) and Under Armour ( UA), as well as major global sporting events on the horizon. "We expect the athletic footwear cycle to accelerate in the coming years as we believe that we are in the second year of a four- to five-year cycle," Sterne Agee said. "Companies such as Nike, Under Armour and Adidas are continuing to improve technology and add innovations, and develop compelling new products. We expect that the Olympics and the European Championships will help to sustain top-line momentum in both Europe and domestic markets." Check out TheStreet's quote page for Foot Locker for year-to-date share performance, analyst ratings, earnings estimates and much more. Early reporters on Thursday will include A.M. Castle ( CAS), Big Lots ( BIG), Bluefly ( BFLY), Cell Therapeutics ( CTIC), DineEquity ( DIN), James River Coal ( JRCC), Kenneth Cole Productions ( KCP), Kroger ( KR), Martha Stewart Living Omnimedia ( MSO), Midas ( MDS), Progressive Corp. ( PGR), ReneSola ( SOL), and Wendy's International ( WEN). The late roster is pretty thin but it features AuthenTec ( AUTH), Cenveo ( CVO), DepoMed ( DEPO), SatCon Technology ( SATC), and Sunrise Senior Living ( SRZ). The continued ascendance of Apple ( AAPL) will be a topic again on Thursday as well as the stock wasn't caught in the downdraft of Bernanke's testimony, and notched its highest close ever at $542.44, putting the company's market cap above $500 billion. FactSet Research took a look at the company's options for its vast cash holdings on Wednesday, noting that Microsoft ( MSFT) was in a similar situation back in 2002, the last time the company with the largest market cap in the S&P 500 didn't pay a dividend. Microsoft went on to establish an annual dividend of 8 cents a share in the first quarter of 2003 (that's grown to 80 cents), and later paid a special dividend of $3 per share in the fourth quarter of 2004. The firm says a special dividend of a similar scope to what Microsoft ultimately paid would be a "high bar" for Apple, primarily because it's got more of its assets in long-term marketable securities -- less liquid than short-term investments and cash -- than Microsoft did at the time. Another factor to consider is the potential for taxation of dividends to increase.
"Aside from Apple's heavier weighting in long-term assets, another potential difference relative to the decision to pay a dividend is qualified dividend tax rates," FactSet said. "This issue was a tailwind in Microsoft's decision to initiate a regular dividend, but it could potentially be a headwind for Apple." The note continued: "Microsoft announced its initial dividend during government discussions involving the possible reduction, or even elimination of, the dividend tax rate (shortly after Microsoft announced its first dividend, the qualified rate was reduced to the current rate of 15%). Future dividend tax policy is again uncertain--only this time rates could be moving in the other direction." Thursday is a big data day. There's the usual weekly initial and continuing jobless claims at 8:30 a.m. ET; personal income and spending figures for January at 8:30 a.m. ET; the Institute of Supply Management manufacturing index for February at 10 a.m. ET; construction spending for January at 10 a.m. ET; and auto and truck sales for February at 2 p.m. ET. And finally, Finisar ( FNSR) was a big downer in Wednesday's after-hours session after the optical networker missed on the top line in its latest quarter and gave a below-consensus outlook for the current period. The news weighed on competitors like Ciena ( CIEN) and JDS Uniphase ( JDSU), who trade at forward price-to-earnings multiples of 13.7X and 15.8X respectively vs. 15.3 for Finisar, whose shares have rallied more than 30% so far in 2012 but saw a 7% drop in Wednesday's regular session followed by an 11% tumble in late trades. Check out TheStreet's quote page for Finisar for year-to-date share performance, analyst ratings, earnings estimates and much more. -- Written by Michael Baron in New York. >To contact the writer of this article, click here: Michael Baron.