NEW YORK (TheStreet) -- Benchmark U.S. stock indices slipped on Monday as housing data came in weaker than expected and geopolitical tensions continued to make Wall Street anxious. Investors await this week's Federal Reserve policy announcement and second-quarter GDP figures on Wednesday and July government jobs report on Friday.
June pending home sales slipped 1.1% month on month to 102.7, well below analysts' estimates for a 0.3% gain. Last month's decline compares to May's 6% increase.
Markets were mixed in Europe on a mixed bag of results this morning and with little by way of direction from economic data. Germany's market -- still more sensitive to events in Ukraine than elsewhere in Europe -- was down, while London and Paris were in positive territory.
In Asia, the Shanghai Composite rose 2.41% to 2,177.95, after official data showed industrial profits in China rose 17.9% in the year to June. In Hong Kong the Hang Seng closed up 0.88% at 24,428.63 and in Tokyo, the Nikkei 225 was up 0.46% at 15,529.4.
While the S&P 500 is still higher by 6.8% in 2014 and less than 1% off its latest all-time-high achievement last week with the help of generally-solid earnings reports, the Russell 2000 (IWM) and the Dow Jones Industrial Average did not join the S&P 500 at new records.
"This coming week should provide another major test for markets, as we prepare for another big week of earnings reports, the FOMC statement and a barrage of economic news," noted Gina Martin Adams, senior analyst at Wells Fargo Securities Equity Strategy.
A whopping 152 S&P 500 companies are expected to report this week, including 29 financial companies, 22 energy companies and 21 industrials companies. Currently, the consensus expects 6.7% year-over-year S&P 500 earnings-per-share growth for the second quarter, up from forecasts of 6.3%, according to Wells Fargo Securities Equity Strategy.
Tyson Foods (TSN) was popping nearly 4.1% to $41.17 after posting a quarterly EPS increase of about 9% to 75 cents. It was also revealed that Brazilian meat processor JBS will buy Tyson's poultry businesses in Mexico and Brazil for $575 million in cash.
Goldman Sachs economists say they expect this week's FOMC statement to show very little change. The FOMC might choose to upgrade the language on growth in economic activity somewhat and also strengthen its language on labor market indicators a touch in recognition of the strong June employment report.
For the most part, however, recent data have supported the slightly more-accommodative-than-expected June statement. In particular, the softer June CPI print likely will reinforce the Committee's decision to downplay the firmer inflation prints seen from March to May. Weak housing starts and new-home sales reports will likely underscore concerns about the housing sector, according to Goldman Sachs.
Also out on Wednesday will be second-quarter GDP data, which is expected by economists to show 3% growth after the first quarter's 2.9% contraction. First-quarter upward revisions are anticipated when the Commerce Department this week provides revisions for three years.
Trulia was surging 12.2% to $63.20 and Zillow was down 2.3% to $155.19 after Zillow said it has entered a definitive agreement to acquire Trulia for $3.5 billion in stock. Dollar Tree has agreed to buy Family Dollar for $8.5 billion in cash and stock. McDonald's restaurants in China were offering a much-reduced menu on Monday, as the fast food company reels from the continuing tainted-meat scandal. McDonald's has stuck with the offending supplier, Shanghai Husi Food, and its owner, U.S.-based OSI, out of necessity. French yogurt-maker Danone was reportedly in talks with Hospira to sell Danone's medical and nutritional business to the U.S. injectable-drug maker.
-- By Andrea Tse and Keris Alison Lahiff in New York
TheStreet Ratings team rates TYSON FOODS INC as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:
"We rate TYSON FOODS INC (TSN) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, impressive record of earnings per share growth, compelling growth in net income and reasonable valuation levels. We feel these strengths outweigh the fact that the company shows weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- TSN's revenue growth has slightly outpaced the industry average of 3.0%. Since the same quarter one year prior, revenues slightly increased by 7.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Powered by its strong earnings growth of 36.36% and other important driving factors, this stock has surged by 46.91% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, TSN should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- TYSON FOODS INC has improved earnings per share by 36.4% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, TYSON FOODS INC increased its bottom line by earning $2.32 versus $1.68 in the prior year. This year, the market expects an improvement in earnings ($2.90 versus $2.32).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Food Products industry. The net income increased by 124.2% when compared to the same quarter one year prior, rising from $95.00 million to $213.00 million.
- You can view the full analysis from the report here: TSN Ratings Report
TheStreet Ratings team rates ZILLOW INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate ZILLOW INC (Z) a HOLD. The primary factors that have impacted our rating are mixed ? some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and feeble growth in the company's earnings per share."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Z's very impressive revenue growth greatly exceeded the industry average of 11.5%. Since the same quarter one year prior, revenues leaped by 70.0%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Z has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 8.42, which clearly demonstrates the ability to cover short-term cash needs.
- The gross profit margin for ZILLOW INC is currently very high, coming in at 92.64%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -9.44% is in-line with the industry average.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Internet Software & Services industry. The net income has significantly decreased by 67.0% when compared to the same quarter one year ago, falling from -$3.75 million to -$6.26 million.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Internet Software & Services industry and the overall market, ZILLOW INC's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: Z Ratings Report