The Week In Review


Oct 5, 2012
Equities began the day on a higher note despite mixed jobs data. After reaching session highs within the first hour, the major averages reversed and spent the remainder of the day sliding towards the unchanged level. As a result, the S&P 500 ended flat while the Dow advanced 0.3% to close at its best level in five years. Nonfarm payrolls were reported at 114K versus the 120K consensus. The prior reading was revised up to 142K from 96K. Meanwhile, nonfarm private payrolls added 104K against the 130K consensus. The unemployment rate was reported at 7.8% versus the 8.1% consensus. In addition, hourly earnings increased by 0.3% while the expectations called for an uptick of 0.2%. Lastly, average workweek ticked up to 34.5 from 34.4. The materials sector led the way. Within the group, steel producers outperformed. AK Steel (AKS 4.87, +0.05) and Steel Dynamics (STLD 11.91, +0.18) added 1.0% and 1.5%, respectively. Telecom stocks were the biggest laggard. However, the underperformance was due to notable weakness in a single stock. Inteliquent (IQNT 7.70, -1.36) fell 15.0% after Robert W. Baird downgraded the stock from 'outperform' to 'neutral' and lowered its price target from $15 to $10. Originally, Robert W. Baird upgraded the stock in the spring on the expectation of a financial engineering catalyst. Although that catalyst was achieved, the firm says results have unfortunately deteriorated more than expected and there now appears to be increased material risk to forward estimates. Other telecom names were generally higher and the iShares Dow Jones US Telecom ETF (IYZ 25.76, +0.16) added 0.6%. Two sector components which have been in the headlines recently showed gains. Leap Wireless (LEAP 6.18, +0.33) and Sprint (S 5.20, +0.11) gained between 2.2% and 5.6%. Earlier, reports suggested that Sprint plans on holding a second meeting to discuss a possible offer for MetroPCS (PCS 12.65, -0.04). The Dow Jones Transportation Average continued its recent streak of outperformance and settled higher by 0.7%. Within the bellwether complex, 16 out of 20 stocks advanced and trucking stocks were the top performers. Con-Way (CNW 27.98, +0.27), CH Robinson (CHRW 60.31, +0.41), JB Hunt (JBHT 55.20, +0.94), and Landstar (LSTR 48.96, +0.58) all posted gains between 0.7% and 1.7%. Southwest Airlines (LUV 8.97, -0.13) was the main decliner among transportation stocks, down 1.4%. Despite weakness in Southwest, other air carriers outperformed. China Eastern Airlines (CEA 16.08, +0.28) advanced 1.8% while United Airlines (UAL 21.07, +0.26) added 1.3%. Solar stocks were under pressure after Avian Securities downgraded First Solar (FSLR 20.07, -2.48) from 'positive' to 'negative.' The downgrade results from reliability issues related to the junction box on modules supplied by First Solar. The company commented on the issue by saying approximately 232,000 modules may develop loose cord plates over time, but the issue is not expected to have a material impact on earnings. As a result, FSLR slid 11.0%. Other solar stocks also showed weakness as the Guggenheim Solar ETF (TAN 16.52, -0.49) settled lower by 2.9%. Consumer credit increased by $18.1 billion in August. This follows prior month's reading of a $3.3 billion decrease, and is higher than the $5.0 billion that had been broadly expected among economists polled.

Oct 4, 2012
Stocks began the session with a bullish bias. The rally reached session highs 30 minutes after the open when the August factory orders report indicated a 5.2% decrease. The number was not positive in itself, posting its worst reading since January 2009. However, it was better-than-feared as expectations called for a 6.0% pullback. After marking session highs, stocks spent the remainder of the day hovering near those levels. As a result, the S&P 500 closed with a gain of 0.7%. The Federal Open Market Committee minutes suggested that economic activity continued to increase at a moderate pace in recent months. Employment rose slowly, but the unemployment rate remained high. Consumer price inflation was subdued, while measures of long-run inflation expectations remained stable. The committee also believes that significant additional asset purchases should not adversely affect the ability to tighten the stance of policy when doing so becomes appropriate. The financial sector was the top performer, and the SPDR Financial Select Sector ETF (XLF 16.06, +0.23) settled higher by 1.5%. Major names showed strength across the board as Bank of America (BAC 9.41, +0.30) led its peers with a 3.3% gain. Meanwhile, Citigroup (C 34.96, +0.90), JPMorgan Chase (JPM 41.82, +0.96), and Morgan Stanley (MS 17.47, +0.44) all added in excess of 2.0%. Elsewhere, Invesco Mortgage Capital (IVR 20.99, +0.59) advanced 2.9% after Morgan Stanley upgraded the stock from 'equal-weight' to 'overweight.' The Dow Jones Transportation Average gained 0.9%. Transportation stocks extended their run from yesterday, but today's strength resulted from notable gains made by a couple of individual names. Ryder System (R 41.56, +2.35) jumped 6.0% after Sun Trust Robinson Humphrey upgraded the stock from 'neutral' to 'buy.' Meanwhile, railroads Kansas City Southern (KSU 75.22, +1.49) and Union Pacific (UNP 121.57, +0.93) settled higher by 2.0% and 0.8%, respectively. Airlines showed some weakness after yesterday's broad advances. Southwest Airlines (LUV 9.09, -0.06) and United Continental (UAL 20.81, -0.33) slipped between 0.6% and 1.6%. The technology sector was the biggest laggard of the session. Two names within the space showed weakness after cutting their third quarter guidance below consensus. O2Micro (OIIM 3.54, -0.24) fell 6.4% after lowering guidance due to broad-based weakness in the company's end markets. Meanwhile, Informatica (INFA 26.03, -7.59) sank 22.6% after lowering its earnings and revenue estimates. The company said that softening demand in Europe was the primary reason for the weakness. Qlik Technologies (QLIK 19.54, -1.30) slid 6.2% as it traded down in sympathy. A couple of names saw gains following analyst upgrades. eBay (EBAY 49.49, +0.90) rose by 1.9% after Nomura upgraded the online auction site from ' neutral' to 'buy.' In addition, BCD Semiconductor (BCDS 3.75, +0.20) jumped 5.6% after Raymond James upgraded the stock from 'underperform' to 'market perform.' Earlier, retailers reported same store sales for the month of September. Out of the 18 companies which have already announced their results, ten reported below analyst expectations. The SPDR S&P Retail ETF (XRT 63.55, +0.98) added 1.6% despite the mixed results. Looking at individual names, Costco (COST 101.48, +1.86) and Cato (CATO 30.28, +0.68) advanced 1.9% and 2.3%, respectively. Costco reported a 6.0% increase in September same store sales which was ahead of analyst expectations of a 5.2% increase. Meanwhile, Cato's 4.0% decrease was below expectations which called for sales to slip 0.7%. Bon-Ton Stores (BONT 11.05, -0.91) slid 7.6% after reporting a 0.6% increase in same store sales. The Retail Metrics consensus called for a slightly higher growth of 1.0%. The latest weekly initial jobless claims count totaled 367,000, which was higher than the 365,000 that had been expected. The tally was above the revised prior week count of 363,000. As for continuing claims, they were unchanged at 3.281 million. The September Challenger Job Cuts report indicated a 70.8% year-over-year decrease in job cuts. Tomorrow's economic releases will focus on jobs.

Oct 3, 2012
Equities got off to a slow start as the major averages showed indecision in the early going. After chopping around the flat line during the first hour of trade, the key indices reached their session highs at the midway point. Unable to hold those levels, stocks returned to the middle of the day's range before buyers re-emerged in the final hour. As a result, the S&P 500 added 0.4%. The consumer discretionary sector led the way as a handful of names outperformed. Family Dollar (FDO 68.56, +2.56) gained 3.9% after reporting in-line earnings and revenues. The management also issued mixed guidance as it sees weaker first quarter results and full-year earnings which are expected to be in-line with estimates. Online video rental service Netflix (NFLX 62.58, +6.12) jumped 10.8% after Citigroup pointed to a survey which showed an improvement in customer satisfaction. Elsewhere, DineEquity (DIN 58.40, +1.87) rose by 3.3% after Janney Montgomery Scott upgraded the shares of the restaurant operator from 'neutral' to 'buy.' Homebuilder stocks showed broad strength as the SPDR S&P Homebuilders ETF (XHB 25.38, +0.55) settled higher by 2.2%. Within the group, Standard Pacific (SPF 7.17, +0.60) was the top performer as shares of the homebuilder spiked 9.1%. The Dow Jones Transportation Average added 1.2% as the vast majority of its components displayed strength. Railroads, CSX (CSX 21.18, +0.48) and Norfolk Southern (NSC 65.60, +0.58) advanced 2.3% and 0.9% respectively after Lazard upgraded the two stocks from 'underperform' to 'market perform.' Airline stocks were broadly higher after a handful of carriers reported positive monthly metrics. In addition, significant weakness in crude oil may have contributed to airline strength. United Continental (UAL 21.14, +1.20) jumped 6.0%, while Delta Airlines (DAL 10.16, +0.39) and Southwest Airlines (LUV 9.14, +0.16) gained 4.0% and 1.8%, respectively. The financial sector outperformed the broader market, and the SPDR Financial Select Sector ETF (XLF 15.83, +0.14) settled higher by 0.9%. Bank of America (BAC 9.11, +0.18), Citigroup (C 34.06, +0.80), and Wells Fargo (WFC 35.44, +0.62) were the top performing majors as they registered gains between 1.8% and 2.4%. Elsewhere, Ocwen Financial (OCN 34.88, +5.92) spiked 20.4% after the company announced the acquisition of Homeward Residential from WL Ross & Company for $588 million in cash and $162 million in convertible preferred stock. MetroPCS (PCS 12.24, -1.33) fell 9.8% after the company confirmed its merger with T-Mobile USA. In addition, PCS announced the plans for a 1-for-2 reverse stock split. Prior to the reverse split, the company will make a cash payment of $1.5 billionor $4.09 per shareto its shareholders. Sarepta Therapeutics (SRPT 44.93, +29.94) soared 199.7% after announcing its eteplirsen met the primary endpoints of a trial while achieving significant clinical benefit on a 6-minute walk test. The positive results came after 48 weeks of treatment in phase IIb study focused on patients with duchenne muscular dystrophy. Crude oil extended yesterday's losses despite inventory data that showed a draw of 0.482 million barrels when a build of 1.5 million was anticipated. Although there wasn't any one item to point to for the weakness, contributing factors included a stronger dollar, reports about the highest crude output levels since December of 1996, and weak economic reports out of Europe and China which signaled demand concerns. The energy component fell off its session high of $90.67 per barrel, and brushed a session low of $87.96 moments before it settled with a 4.0% loss at $88.20. The September ISM Non-manufacturing Index was reported at 55.1, which was above the 53.0 consensus, and up from August's 53.7 reading. According to today's ADP National Employment Report, employment in the nonfarm private business sector rose by 162K in September. This was above the 133K increase expected by consensus. In addition, the prior month's increase was revised down by 17k, to reflect an addition of 156k jobs. In tomorrow's economic releases, Challenger Job Cuts will be reported at 7:30 ET. Initial and continuing claims will hit the wires at 8:30 ET, while factory orders will be released at 10:00 ET. In addition, the Federal Reserve will release the minutes from its September 12 Federal Open Market Committee meeting. Also of note, retailers will release their monthly comparable store sales reports.

Oct 2, 2012
The major averages got off to a strong start, but the bullish bias faded shortly after the open. Headlines out of Europe provided another risk-off signal as reports suggested that a Spanish aid request is not imminent. After marking their session highs during the first five minutes of trade, the key indices spent most of the session trending lower. However, a rally in the final hour of trading lifted the S&P 500 and Nasdaq into positive territory while the Dow closed with a small loss of 0.2%. The health care sector was the day's top performer. Within the space, biotech stocks showed strength which was reflected by the iShares Nasdaq Biotechnology ETF (IBB 145.18, +1.54) adding 1.1%. Looking at individual names, Amgen (AMGN 86.35, +1.27) traded at its all-time high before closing higher by 1.5%. Meanwhile, Gilead (GILD 69.17, +1.73) also marked a fresh all-time best as the shares gained 2.5%. On the downside, ArQule (ARQL 2.18, -2.81) fell 56.3%. The weakness followed the company's announcement regarding the discontinuation of Phase 3 MARQUEE clinical trial in non-small cell lung cancer after determination that study would not meet its primary endpoint. As a result of the announcement, Needham downgraded ArQule from 'buy' to 'hold.' Telecom stocks also outperformed as buyout speculation lifted one name to its best level since July 2011. MetroPCS (PCS 13.57, +2.05) spiked 17.8% after a Bloomberg TV report suggested the company may be nearing a deal with Deutsche Telecom/T-Mobile. Peer, Leap Wireless (LEAP 7.59, +0.59) surged 8.4% while Sprint (S 4.90, -0.28) slipped 5.4%. The materials sector was the weakest performer as steel and aluminum producers were under pressure. AK Steel (AKS 4.79, -0.09), Cliffs Natural Resources (CLF 38.55, -0.33), and United States Steel (X 18.99, -0.32) all posted losses between 0.8% and 1.8%. Elsewhere in the sector, Mosaic (MOS 55.76, -2.25) slid 3.9% after missing on both earnings and revenues. The company's earnings per share were reported $0.15 below consensus estimates, while revenues fell $180 million short of estimates. In its defense, the company cited longer annual maintenance shut-downs and challenges posed by hurricanes, noting demand for products outpaced Mosaic's ability to produce and deliver. Wassau Paper (WPP 8.67, -0.49) slid 5.4% after lowering its full-year guidance due to lower profitability at its facility in Brainerd, Minnesota. Other paper names were mixed as Neenah Paper (NP 27.91, -0.67) shed 2.3% while Louisiana-Pacific (LPX 13.00, +0.32) gained 2.5%. The Dow Jones Transportation Average edged up as it outperformed the remaining industrials. Airline stocks enjoyed their second consecutive day of gains as Delta Airlines (DAL 9.77, +0.30) and JetBlue Airways (JBLU 4.98, +0.11) rose by 3.2% and 2.4%, respectively. Meanwhile, shipping stocks led the transportation complex. Overseas Shipholding Group (OSG 7.08, +0.59) jumped 9.1% after its joint venture with Euronav secured a new charter deal. Peer, Matson (MATX 20.50, +0.34) added 1.7% on related strength. Financial stocks showed some relative outperformance. Citigroup (C 33.26, +0.51) was the top performer among the majors. The financial giant gained 1.6% after Keefe Bruyette upgraded shares of Citigroup from 'market perform' to 'outperform.' Elsewhere in the sector, JPMorgan Chase (JPM 40.92, -0.05) shed 0.1% after New York Attorney General, Eric Schneiderman announced he would file a lawsuit against the bank over mortgage-backed securities sold by Bear Stearns.

Oct 1, 2012
Today's session began with an extension of the bullish sentiment observed in overseas action. Following a higher open, U.S. equities got an additional boost from the ISM Index which was reported at 51.5 against the expectations of a 49.7 reading. After rallying to session highs, the Dow held the bulk of its gains, while the S&P 500 and Nasdaq spent the remainder of the session in a slow retreat towards the unchanged line. As a result, the Dow climbed 0.6%, the S&P 500 added 0.3%, and the Nasdaq slipped 0.1%. The financial sector was one of the day's top performers. The SPDR Financial Select Sector ETF (XLF 15.66, +0.07) advanced 0.5% as major names within the sector all showed gains. Goldman Sachs (GS 116.86, +3.18) ended higher by 2.8%, while Bank of America (BAC 8.96, +0.13) added 1.5%. Meanwhile, Citigroup (C 32.75, +0.03) finished flat after its shares were downgraded from 'buy' to 'neutral' at Sterne Agee. European financials also rallied. Credit Suisse (CS 21.67, +0.52) advanced 2.5%, while Barclays (BCS 14.14, +0.27) and Deutsche Bank (DB 40.21, +0.56) registered gains near 1.7% each. Despite the outperformance of financials, those names specializing in real estate investment trusts were relatively weaker. The iShares Dow Jones US Real Estate ETF (IYR 63.92, -0.46) slipped 0.7%. Among individual names, Prologis (PLD 34.58, -0.45), Vornado (VNO 80.29, -0.76), and Weingarten (WRI 27.66, -0.45) all fell between 0.9% and 1.6%. The health care space also displayed relative strength as a handful of stocks moved on analyst comments. Healthcare Services Group (HCSG 23.81, +0.95) gained 4.2% after UBS initiated coverage of the stock with a 'buy' rating. Meanwhile, Allscripts (MDRX 12.84, +0.42) advanced 3.4% following an upgrade from 'neutral' to 'outperform' at Cowen. In addition, Allscripts was also upgraded by ISI Group. Blyth (BTH 26.77, +0.78) added 3.0% after announcing that it bought back 283,300 shares between September 26-28. Tenet Healthcare (THC 6.48, +0.21) rose by 3.4% after unveiling a four-point plan to drive shareholder value creation. A $500 million authorization to repurchase common stock in open market transactions was one of the key points of the plan. In addition, effective October 11, 2012, a reverse stock split will occur. As a result of the reverse split, one new Tenet share will be issued in exchange for every four existing shares. The Dow Jones Transportation Average trailed the broader market. The bellwether group added 0.1% as trucking and shipping stocks weighed on the complex. Overseas Shipholding Group (OSG 6.49, -0.11) and Matson (MATX 20.16, -0.75) lost 1.7% and 3.6%, respectively. All five airlines listed in the transportation average showed relative outperformance. Alaska Air (ALK 35.17, +0.11) added 0.3% while Delta (DAL 9.47, +0.31), JetBlue (JBLU 4.86, +0.07), Southwest (LUV 8.86, +0.09), and United Continental (UAL 19.79, +0.29) posted gains between 1.0% and 3.4%. Chinese internet stocks were broadly weaker today. Baidu (BIDU 112.77, -4.12) shed 3.5% after its shares were downgraded from 'buy' to 'hold' at Jefferies. In addition, the price target was lowered from $135 to $125. Peers, (SOHU 41.33, -0.76) and Qihoo (QIHU 21.81, -0.24) slipped 1.8% and 1.1%, respectively. Meanwhile, Youku (YOKU 18.70, +0.31) rose by 1.7% as it outperformed its peers. August construction spending fell 0.6% month-over-month, against the expected increase of 0.4%. Tomorrow's economic data is limited to just two releases. Auto and truck sales will be reported at 14:00 ET.