The Week In Review


Sept 28, 2012
Equities stumbled out of the gate before the September Chicago PMI added to the risk-off sentiment. The survey revealed a contractionary reading of 49.7, while expectations called for the number to be closer to 52.9. After marking session lows, equities remained near the bottom of the range until the results of Spain's bank stress test were announced. The reported EUR59.3 billion capital shortfall was within the expected range which brought on a round of buyers who took the key averages to their session highs. The brief rally was short lived as the major indices followed it with a return to their opening levels. As a result, the S&P 500 finished lower by 0.5%. Industrial stocks outperformed slightly. Electrical equipment manufacturer AZZ (AZZ 37.98, +3.22) jumped 9.3% after beating on earnings and revenues. In addition, the company issued upside full-year guidance and announced the acquisition of Canadian Galvcast Manufacturing. Pentair (PNR 44.82, +1.44) advanced 3.3% after authorizing an initial stock repurchase program in the amount of $400 million. The program was first announced in March 2012 and will commence immediately. Farm equipment stocks were generally higher following this morning's Department of Agriculture crop report which showed a notable decline in grain inventory. Deere (DE 82.47, +0.37) and AGCO (AGCO 47.47, +0.55) added between 0.5% and 1.2% each. The PowerShares DB Agriculture ETF (DBA 29.41, +0.44) saw notable outperformance as it gained 1.5%. The bellwether Dow Jones Transportation Average has been a notable underperformer on the quarter, and it trailed the broader market again today. Overseas Shipholding Group (OSG 6.60, -0.45) was a notable laggard within the group as shares of the shipping company fell 6.4%. Railroads remained weak as CSX (CSX 20.75, -0.36) and Kansas City Southern (KSU 75.78, -1.18) both lost near 1.5%. Financial stocks showed intraday strength, but ended up mostly in-line with the broader market. The SPDR Financials Select Sector ETF (XLF 15.59, -0.05) shed 0.3%. Bank of America (BAC 8.83, -0.14) slid 1.6% after announcing that it has reached a $2.43 billion settlement in Merrill Lynch acquisition-related class action litigation. Due to the litigation expense, Bank of America sees a third quarter charge of $0.28. American Express (AXP 56.86, +0.29) added 0.5% and was the only major name which ended higher on the day. The University of Michigan's final Consumer Sentiment Survey for September fell to 78.3 from the 79.2 which was posted in the preliminary Survey. Economists had expected the reading to be revised down to 79.0. Personal income increased in August by 0.1%, which was below the expected increase of 0.2%. Personal spending increased by 0.5%, which was in-line with expectations. Core personal consumption expenditures were higher by 0.1%, which was also in-line with expectations.

Sept 27, 2012
Equities got off to a strong start despite a string of negative economic data. The third estimate of second quarter GDP indicated growth of 1.3% which was well below the prior reading of 1.7%. Elsewhere, durable goods orders also showed notable weakness as new orders declined by 13.2% during August. Excluding transportation related items, durable goods orders decreased by 1.6%. Weekly initial claims were the sole bright spot as the reading of 359k was below the broadly-anticipated 379k. The major averages extended their gains after Spain announced its 2013 budget which included spending cuts and no tax hikes. The key averages continued rallying throughout the afternoon and the S&P 500 settled higher by 1.0%. Technology stocks outperformed the broader market. Within the group, Apple (AAPL 681.32, +16.14) started in the red, but ended higher by 2.4%. Among semiconductor producers, AMD (AMD 3.43, +0.11) gained 3.3% as it rebounded from recent weakness. Meanwhile, NXP Semiconductors (NXPI 25.37, +1.61) rose by 6.8% after positive comments about the company were made at JPMorgan.
Two tech stocks headed in opposite directions after reporting their earnings. Progress Software (PRGS 21.23, +2.07) spiked 10.8% after announcing an earnings beat and a revenue miss. On the downside, Comtech (CMTL 27.43, -0.95) slid 3.4% despite beating on earnings and revenues. In addition, the company issued full-year 2013 guidance which was in-line with analyst expectations. OCZ Technology (OCZ 3.41, +0.08) added 2.4% after reports indicated the company held talks with Seagate (STX 31.93, +0.95) regarding a possible acquisition. However, the talks fell apart after OCZ's Chief Executive Officer requested a seat on Seagate's board of directors as part of the merger. Financials also outperformed as the SPDR Financial Select Sector ETF (XLF 15.64, +0.14) rose by 0.9%. Morgan Stanley (MS 16.84, +0.41) and Bank of America (BAC 8.97, +0.15) posted the largest advances among the majors. The two listings finished higher by 2.5% and 1.8%, respectively. Meanwhile, Discover (DFS 39.70, +2.68) surged 7.2% after reporting earnings and revenues ahead of expectations. The health care sector trailed the broader market as a handful of names moved on news. Peregrine Pharma (PPHM 1.11, -0.55) fell 33.1% after disclosing it received a written notice of default from one of its lenders due to the recent discovery of a major discrepancy in treatment group coding for one of its clinical trials. Peregrine complied with the request and issued full payment on September 25, 2012. On the upside, Achillion Pharma (ACHN 10.29, +0.80) gained 8.5% after providing positive proof-of-concept data with ACH-3102. The Dow Jones Transportation Average traded in-line with the Dow Industrials. Railroad and shipping stocks showed strength within the 20-stock group. Kansas City Southern (KSU 76.96, +1.60) was the top performing railroad as it gained 2.1%. Meanwhile, Overseas Shipholding Group (OSG 7.05, +0.34) and Expeditors International (EXPD 36.81, +0.79) advanced 5.1% and 2.2%, respectively. Airline stocks were generally lower after United Continental (UAL 19.36, -0.80) updated its third quarter guidance. UAL slipped 4.0% after reporting that it expects third quarter capacity to be lower by 1.4%, while passenger unit revenues are expected to be down between 1.0% and 2.0%. United Continental peers traded lower on related weakness. JetBlue (JBLU 4.84, -0.06) and Southwest (LUV 8.88, -0.04) lost 1.2% and 0.5%, respectively.
In tomorrow's economic data, personal income, personal spending, and core PCE prices will be released at 8:30 ET. In addition, Chicago PMI will be reported at 9:45 ET while the Final Michigan Sentiment will cross the wires at 9:55 ET.

Sept 26, 2012
Equities began today's session on a down note after Spain and the country's fiscal struggles were put back in the spotlight. The major indices marked session lows during the first hour before reversing and attempting a return to the unchanged line. However, due to the lack of a catalyst, the key averages were unable to sustain a meaningful rally. As a result, the S&P 500 slipped 0.6%. The Nasdaq underperformed and settled lower by 0.8%. Utility stocks led as the defensive sector rose on the back of today's risk-off sentiment. High-yielding major utility producers advanced as a group. Consolidated Edison (ED 60.09, +0.63), Southern Company (SO 46.11, +0.37), and PG&E (PCG 43.00, +0.35) all gained near 1.0%.
Technology stocks were under pressure as the sector trailed the broader market. Apple (AAPL 665.18, -8.36) continued its recent slump as the tech giant slipped 1.2%. Two listings traded lower after reporting earnings. Jabil Circuit (JBL 18.90, -2.07) slid 9.9% after delivering a mixed quarterly report. JBL missed on earnings, but reported revenues above consensus. In addition, the company issued downside guidance for the first quarter and announced the authorization of a $100 million share repurchase program.
SYNNEX (SNX 32.45, -1.80) slipped 5.3% after missing on earnings and reporting in-line revenues. In addition, the company issued downside guidance for the fourth quarter. Following the earnings release, Needham downgraded shares of SNX from 'strong buy' to 'buy' while lowering the price target from $42 to $40. Elsewhere in the sector, semiconductor makers continued selling off. Infineon (IFNNY 6.36, -0.24), which cut its guidance yesterday, was downgraded from 'hold' to 'underperform' by Jefferies. The stock settled lower by 3.3% while its peer Texas Instruments (TXN 27.57, -0.26) lost 0.9% after being downgraded from 'positive' to 'neutral' by Avian. Lastly, GT Advanced Technologies (GTAT 5.35, -0.29) slumped 5.3% after Canaccord Genuity downgraded the stock from 'buy' to 'hold' while lowering the price target from $9 to $6. Major financials continued their post-FOMC weakness. The SPDR Financial Select Sector ETF (XLF 15.49, -0.10) shed 0.6% as it traded in-line with the broader market. Individual components which showed relative weakness include, American Express (AXP 56.14, -0.99), Citigroup (C 32.51, -0.35), and Wells Fargo (WFC 34.42, -0.30). The three names all lost close to 1.0%. Also of note, Santander Mexico (BSMX 12.91, +0.72) closed higher by 6.0% on its first day of trading as an exchange-listed company. The Dow Jones Transportation Average showed little change as it outperformed the broader market. Airlines were relatively strong as the 20-stock group was led by Alaska Air (ALK 35.74, +2.07) which added 6.2% after announcing a $250 million share repurchase program. Meanwhile, Delta (DAL 9.16, +0.14), Southwest (LUV 8.92, +0.08), and United Continental (UAL 20.16, +0.33) all gained between 0.9% and 1.7%. Railroad stocks were down as a group once again. CSX (CSX 21.00, -0.17) shed 0.8%, while Kansas City Southern (KSU 75.36, -1.00), Norfolk Southern (NSC 64.57, -0.50), and Union Pacific (UNP 118.92, -1.46) were all down near 1.0%. Shares of homebuilders were broadly weaker as the SPDR S&P Homebuilders ETF (XHB 24.60, -0.57) lost 2.3%. The ETF began selling off after new home sales indicated 373k new homes were sold in August while a reading of 380k was expected. Shares of major homebuilders declined broadly as Ryland Homes (RYL 30.01, -1.81) fell 5.7%. Meanwhile, PulteGroup (PHM 15.30, -0.76), Standard Pacific (SPF 6.80, -0.35), KB Homes (KBH 13.90, -0.51), and Lennar (LEN 34.64, -1.62) all slipped between 3.5% and 5.0%. In tomorrow's economic data, weekly initial and continuing unemployment claims will be reported at 8:30 ET. Durable orders, durable orders ex-transportation, and GDP-third estimate will also be released at 8:30 ET. Lastly, pending home sales will cross the wires at 10:00 ET.

Sept 25, 2012
Equities began today's session slightly higher before receiving an additional boost from positive consumer confidence data. Despite the upbeat data, stocks were unable to maintain the bullish tone as the major averages slipped into negative territory around midday. Stocks then extended their slide which also coincided with weakness in crude oil and the euro. The selling was broad-based, but financials, materials, industrials, and technology were among the worst performers. As a result, the S&P 500 ended lower by 1.1%. Broadly speaking, today's weakness may have been a reflection of some end-of-quarter profit taking as the S&P has added 6.2% over the last three months and 15.0% since the start of the year. Additionally, the inability to sustain a rally after the strong confidence number may have exposed the idea the market is probably overbought short-term, and certainly in the face of weakening fundamentals. Health care stocks were the top performer as the risk-off trade was today's theme. Neogen (NEOG 42.83, +2.83) jumped 7.1% after reporting mixed earnings. The company beat on earnings, while revenues fell $1 million short of estimates. A handful of health care stocks moved on news. DARA BioSciences (DARA 1.15, +0.07) closed higher by 6.5% after announcing the establishment of a vertically integrated commercial platform for specialty oncology care and support products. Meanwhile, Genetic Technologies (GENE 3.60, +0.25) spiked 7.5% after the company announced its BREVAGen has been cleared for sale in the state of Florida. Lastly, Sinovac (SVA 2.68, +0.19) surged 7.6% after being awarded tenders in Beijing and Shanghai to supply inactivated Hepatitis-A vaccine under an expanded immunization program. The technology sector was generally weaker as its biggest component, Apple (AAPL 673.54, -17.25) settled lower by 2.5%. Cognex (CGNX 34.70, -3.25) fell 8.6% after Piper Jaffray downgraded the shares of from 'neutral' to 'underweight' while also lowering the price target from $30 to $27. Paychex (PAYX 33.41, -0.97) slipped 2.8% despite beating on earnings and reporting in-line revenues. In addition, the company reaffirmed its full-year 2013 guidance. Following the report, Citigroup and UBS downgraded the company. Citigroup cut Paychex from 'neutral' to 'sell' while UBS lowered its rating from 'buy' to 'neutral.' German semiconductor maker, Infineon Technology (IFNNY 6.60, -0.43) slid 6.1% after the company lowered its fourth and first quarter guidance. The management also said it will define and implement measures to improve future profitability. Details regarding these measures will be announced at the company's annual press conference on November 14, 2012. The lower guidance weighed on other semiconductor producers. Atmel (ATML 5.46, -0.45) lost 7.6%, while STMicroelectronics (STM 5.66, -0.22) and Texas Instruments (TXN 27.83, -0.85) shed between 3.0% and 3.7%. The Dow Jones Transportation Average underperformed as the bellwether group finished lower by 0.9%. Despite weakness in the space, two names saw notable outperformance. Shipper Matson (MATX 20.73, +0.21) led the complex, up 1.0%. Meanwhile, CH Robinson (CHRW 59.04, +0.47) advanced 0.8% after announcing the planned acquisition of Phoenix International for $571.5 million in cash and $63.5 million in newly-issued CH Robinson stock. Railroad outperformed in the early going. However, the afternoon selling pressure pushed the group lower. Norfolk Southern (NSC 65.07, -1.21) slid 1.8% while Union Pacific (UNP 120.38, -0.73), CSX (CSX 21.17, -0.19) and Kansas City Southern (KSU 76.36, -0.72) all lost between 0.6% and 0.9%. The latest consumer confidence reading for September came in at 70.3 when economists were expecting a reading of 63.0. Today's number followed prior month's 65.9 print. The July Case-Shiller 20-city Home Price Index rose 1.2% when a 0.8% increase had been generally expected. This comes against a prior month's reading of 0.5%. Separately, the latest Housing Price Index from the FHFA was also just released. For July, the Index increased by 0.2%, which follows a 0.7% increase in the prior month. In tomorrow's economic data, the weekly MBA Mortgage Index will be reported at 7:00 ET, while new home sales will cross the wires at 10:00 ET.

Sept 24, 2012
Stocks began the week on a down note after Germany's Ifo Business Climate Index missed expectations. The major averages marked their session lows during the opening minutes before setting on a day-long climb towards the unchanged line. Due to weakness in Apple, the tech-heavy Nasdaq underperformed with a loss of 0.6%. Meanwhile, the S&P 500 shed 0.2%. The Nasdaq trailed other indices after Apple (AAPL 690.79, -9.30) reported selling just five million iPhone 5s over the weekend, while some expected sales to reach as much as 10 million units. As a result, Apple ended lower by 1.3%. Utility stocks were the top performer as the risk-off trade took hold. Natural gas producer Questar (STR 20.10, +0.73) added 3.8% after shares of the company were upgraded from 'neutral' to 'buy' at UBS. Other utility names which benefited from rotation into safer sectors included AES Corporation (AES 11.24, +0.12), Exelon (EXC 35.87, +0.49), and Pinnacle West (PNW 53.40, +0.84). The three stocks all gained between 1.0% and 1.6%. The Dow Jones Transportation Average rose by 1.0% as it broke its recent streak of underperformance. Within the group, railroad stocks rebounded after Norfolk Southern (NSC 66.28, +1.28) cut its guidance last week. Norfolk Southern ended higher by 2.0% while other railroad names also advanced. CSX (CSX 21.36, +0.23), Kansas City Southern (KSU 77.08, +1.08), and Union Pacific (UNP 121.11, +1.74) all posted gains between 1.0% and 1.5%. In the materials sector, steel stocks were under pressure after Citigroup downgraded a pair of steelmakers. United States Steel (X 19.59, -0.35) shed 1.8% after being downgraded from 'buy' to 'neutral,' while AK Steel (AKS 5.01, -0.24) settled lower by 4.6% after its rating was cut from 'neutral' to 'sell.' The weakness spilled over to other steel names as AM Castle (CAS 12.20, -0.25) and Cliffs Natural Resources (CLF 40.77, -0.16) lost 0.4% and 2.0%, respectively. Paper and packaging stocks traded higher after Credit Suisse raised their targets on select stocks within the group. The firm raised their target on International Paper (IP 36.78, +1.27) from $40 to $44, Packaging Corp of America (PKG 34.95, +1.20) from $36 to $41, and Rock-Tenn (RKT 73.75, +5.03) from $73 to $82. The three stocks all gained between 3.5% and 7.3% following the positive commentary. Elsewhere, KapStone (KS 21.80, +1.19) advanced 5.8% after Stephens upgraded the shares from 'equal weight' to 'overweight.' Questcor (QCOR 19.08, -11.05) slumped 36.7% after disclosing that the U.S. government is investigating the company for its promotional practices. In addition, Leerink Swank downgraded the shares of the company from 'outperform' to 'market perform. Note that Questcor fell 40.0% last week amid concerns around insurance coverage for the company's Acthar gel. Peregrine Pharma (PPHM 1.16, -4.23) plunged 78.5% after announcing discrepancies in its data from its Phase IIb trial of bavituximab in patients with second-line non-small cell lung cancer. The company said that investors should not rely on clinical data that was disclosed on or before September 7, 2012. Since September 7, Peregrine has rallied more than 75.0% on what was previously thought to be encouraging trial data. The Case-Shiller 20-city Index will be reported at 9:00 ET, while consumer confidence and the FHFA Housing Price Index will be released at 10:00 ET.