The Week In Review


November 9, 2012
Stocks began the day in the red after equity futures showed considerable pre-market weakness. The S&P 500 spent the opening minutes just below its flat line. However, the benchmark average began climbing after the Washington Post reported that a plan for a middle class tax freeze will be proposed by the president at this afternoon's press conference. In addition, today's preliminary Michigan Consumer Sentiment Survey was reported at 84.9, which was its highest level since July 2009. The S&P 500 continued advancing through the morning and marked its highs ahead of the president's speech. President Obama's statement called for consensus building, and he stated that spending cuts must be combined with new revenue. The remarks failed to inspire investor confidence and the S&P 500 headed back near its flat line before ending with a slim gain of 0.2%. Note that today's close was one point below the 200-day moving average. Shares of Apple (AAPL 547.06, +9.31) rebounded from recent weakness, and the stock ended higher by 1.7%. Elsewhere in technology, Kayak Software (KYAK 39.67, +8.63) surged 27.8% after agreeing to be acquired by Priceline (PCLN 625.87, -2.00). Per the agreement, PCLN will pay $40.00 per share of KYAK, representing a 28.9% premium to Kayak's Thursday closing price. The consumer discretionary sector was a notable underperformer. J.C. Penney (JCP 20.64, -1.05) lost 4.8% after reporting disappointing earnings. The retailer announced a third quarter loss of $0.93, while the Capital IQ consensus called for earnings of $0.02. Meanwhile, the company's revenue of $2.93 billion fell short of the expected $3.29 billion. Also of note, the company reported a same-store sales decrease of 26.0%. The expectations called for a 17.0% decline. Elsewhere, Groupon (GRPN 2.76, -1.16) slid 29.6% following another round of earnings which failed to please investors. The online coupon site's revenue of $568.6 million fell short of the expected $592.06 million. GRPN is down nearly 90.0% since its initial public offering last year. For-profit education stocks saw weakness after two names reported disappointing earnings. Career Education (CECO 2.93, -0.48) slid 14.1% after the company reported a third quarter loss of $0.47 on $332.8 million in revenue. CECO's bottom line was $0.04 worse than the Capital IQ consensus estimate while its revenue exceeded estimates. Total new student starts fell 23.0% year-over-year and the company announced plans to eliminate approximately 900 positions. Elsewhere, Strayer Education (STRA 46.51, -9.66) plunged 17.2%. The company beat their earnings expectations by $0.05, but downside guidance weighed on the stock. Strayer reported a 5.0% decrease in fall 2012 enrollment. Following earnings, Stifel Nicolaus downgraded the stock to 'hold' from 'buy.' The Dow Jones Transportation Average slipped 0.7%. The five airlines which are a part of the average saw broad weakness. JetBlue Airways (JBLU 5.31, -0.09) and Southwest Airlines (LUV 9.06, -0.12) saw respective losses of 1.7% and 1.3%. Shipper Matson (MATX 22.67, +0.25) was the top performer within the transportation average. The stock trades gained 1.1%. Meanwhile, the other shipping stock, Kirby Group (KEX 53.89, -0.92), was one of the weakest performers in the 20-stock complex and lost 1.7%. Homebuilders were weaker today and the SPDR S&P Homebuilders ETF (XHB 25.67, -0.29) dipped 1.1%. KB Home (KBH 15.69, -0.54) and PulteGroup (PHM 16.80, -0.57) saw notable losses as the two stocks both slid 3.3%. Before Monday's open, two homebuilders will report their quarterly results. The Capital IQ consensus estimate expects Beazer Homes (BZH 16.64, -0.36) to report a loss of $1.05 on $336.66 million in revenue. Elsewhere, DR Horton (DHI 20.60, -0.37) is expected to announce earnings of $0.30 on revenue of $1.38 billion. Wholesale inventories increased by 1.1% in October. That was higher than the increase of 0.4% which had been forecast by the consensus.Export prices, excluding agriculture, increased by 0.2% in September after they had increased by 0.7% in the prior month. Excluding oil, import prices rose by 0.3%, which follows the 0.2% increase experienced in the prior month.

Nov 8, 2012
Equities began today's session on a slightly higher note. However, the bullish bias was dispelled during the opening hour. After marking its session high at 1,401, the S&P 500 reversed and slid to its 200-day moving average near the 1,380 area. The index followed the move with a seven point bounce, before late-day selling drove the index back below the 200-day moving average. As a result, the benchmark average settled lower by 1.2%. Crude oil gained 0.6%, but the energy sector was the biggest laggard of the day. The SPDR Energy Select Sector ETF (XLE 69.57, -1.28) lost 1.8%. Among oil and gas stocks, Carrizo (CRZO 21.71, -1.77) dropped 7.5%. Meanwhile, providers of energy equipment also saw broad weakness. Ensco (ESV 55.12, -2.61) slid 4.5% and Diamond Offshore (DO 65.37, -2.41) lost 3.6%. Yesterday's sell-off in coal stocks saw the Market Vectors Coal ETF (KOL 24.29, -0.16) drop 5.5%. Today, the ETF shed 0.7%. Among individual coal producers, James River Coal (JRCC 3.36, +0.07) outperformed, and settled higher by 2.1%. On the downside, Alpha Natural Resources (ANR 8.15, -0.30) lost 3.6%. Looking at technology stocks, Apple (AAPL 537.75, -20.25) continued its recent weakness. The biggest tech component ended lower by 3.6%. In tech earnings, QUALCOMM (QCOM 60.67, +2.54) advanced 4.4% after beating on earnings and revenue. The company's bottom line of $0.89 beat the Capital IQ consensus estimate by $0.07. Meanwhile, the revenue of $4.87 billion was also ahead of expectations. It should be noted that the company guided first quarter and full-year 2013 earnings and revenue above consensus. Universal Display (PANL 23.12, -5.05) fell 18.0% after reporting disappointing earnings. During the third quarter, the manufacturer of organic LEDs lost $0.12 on $12.5 million in revenue. The company's earnings were $0.17 below expectations, while its revenue also fell short of estimates. In addition, PANL issued downside full-year 2012 revenue guidance. Utility stocks which have seen considerable weakness since Hurricane Sandy, saw relative strength. PPL (PPL 28.73, +0.43) was the top performer among electricity providers. The stock added 1.5% after the company reported earnings of $0.72, which was $0.05 better than the Capital IQ consensus estimate. However, the revenue of $2.4 billion was below expectations. In addition, the company issued in-line guidance. Meanwhile, FirstEnergy (FE 42.91, +0.61) advanced 1.4% after beating on earnings. In addition, the company lowered its full-year 2012 earnings guidance in-line with expectations and also guided full-year 2013 earnings in-line with estimates. Elsewhere, Southern Company (SO 43.26, +0.46) slid 1.1% after RBC Capital Markets upgraded the stock to 'outperform' from 'sector perform.' Looking at the retail industry, the SPDR S&P Retail ETF (XRT 61.24, -1.36) underperformed the broader market and ended lower by 2.2%. Among individual retailers, Kohl's (KSS 51.55, -2.77) lost 5.1% after reporting third quarter earnings of $0.91 on $4.49 billion in revenue. The company's bottom line was $0.04 ahead of Capital IQ estimates, while the revenue was reported in-line with the November 1 preannouncement. However, the company's outlook was a point of concern as the retailer issued downside fourth quarter earnings guidance. Elsewhere, American Eagle Outfitters (AEO 19.69, -0.90) finished lower by 4.4% and Aeropostale (ARO 12.69, -0.88) dropped 6.5% after Detweiler made cautious comments about the apparel retailer. Also of note, McDonald's (MCD 85.13, -1.73) stumbled 2.0% after reporting a 1.8% decline in global same-store sales. The figure was below the expected decrease of 1.0%. In addition, this was the first time the fast food giant saw a monthly decline since 2003. In today's economic data, the latest weekly initial jobless claims count totaled 355,000, which was lower than the 370,000 that had been expected. The tally was below the unrevised prior week count of 363,000. As for continuing claims, they fell to 3.127 million from 3.262 million. The trade deficit narrowed to $41.5 billion during September after a downwardly revised prior month deficit of $43.8 billion. Economists polled by had expected that the deficit would come in at $45.4 billion.

Nov 7, 2012
Stocks began the day firmly in the red after Barack Obama was reelected to a second term as president. Contributing to the bearish sentiment were comments from European Central Bank President Mario Draghi who said that the European debt crisis is starting hurt the German economy. The negative outlook was confirmed by this morning's Eurozone Autumn Forecast, which also pointed to an expected slowdown in the German economy. Further, the country's industrial production report showed a 1.8% month-over-month decrease, while the reading was expected to reflect a more palatable decline of 0.5%. The S&P 500 spent the first two hours of the session in a steady sell-off, before stabilizing near the 1,400 level and ending with a loss of 2.4% on heavy volume. The financial sector saw the widest losses, and the SPDR Financials Select Sector ETF (XLF 15.61, -0.54) fell 3.3%. Among the majors, Morgan Stanley (MS 16.63, -1.56) and Bank of America (BAC 9.23, -0.71) were two of the weakest names as they settled lower by 8.6% and 7.1%, respectively. Real estate investment trusts saw relative strength as compared to the remainder of the financial sector. The Vanguard REIT Index ETF (VNQ 64.68, -0.29) shed 0.5%. Looking at individual REITs, American Tower Corporation (AMT 75.24, +1.47) gained 2.0% after AT&T (T 33.63, -1.16) announced plans to modernize and expand its network. Meanwhile, Public Storage (PSA 143.34, +2.31) advanced 1.6%, and healthcare REIT Ventas (VTR 64.12, +0.21) rose by 0.3%. With crude oil down over 4.5%, energy stocks saw notable weakness. Among major energy producers, Exxon Mobil (XOM 88.18, -2.86), Chevron (CVX 107.51, -2.85), and Anadarko Petroleum (APC 70.41, -2.66) lost between 2.5% and 3.6%. Providers of energy equipment also underperformed. ION Geophysical (IO 6.39, -0.36) and Basic Energy Services (BAS 9.47, -0.56) closed lower by 5.3% and 5.6%, respectively. Coal stocks saw broad losses after presidential challenger and coal proponent, Mitt Romney, was denied his bid for the White House. The Market Vectors Coal ETF (KOL 24.45, -1.42) lost 5.5%. Arch Coal (ACI 7.58, -1.08) was one of the weakest performers, and fell 12.5%. Peers Peabody Energy (BTU 26.24, -2.80), CONSOL Energy (CNX 33.28, -2.16), Walter Energy (WLT 34.26, -3.05) saw respective losses of 9.6%, 6.1%, and 8.2%. The health care sector outperformed the broader market due to strength in hospital operators. During the presidential campaign, the Affordable Care Act was a point of contention, and Mr. Romney threatened to repeal the law if elected. Mr. Obama's reelection bodes well for healthcare stocks which benefit from the law. Community Health Systems (CYH 30.39, +1.71) and Health Management Associates (HMA 8.28, +0.56) gained 6.0% and 7.3%, respectively. Meanwhile, Tenet Healthcare (THC 27.34, +2.39) surged 9.6%. Homebuilders saw narrower losses than the broader market and the SPDR S&P Homebuilders ETF (XHB 26.43, -0.27) slipped 1.0%. Hovnanian Enterprises (HOV 5.50, +0.19) and Lennar (LEN 39.05, +0.16) rose by 3.6% and 0.4%, respectively. Elsewhere, gun maker stocks outperformed. Sturm, Ruger & Co (RGR 47.68, +3.04) gained 6.8% and Smith & Wesson (SWHC 10.36, +0.90) soared 9.6%. The Dow Jones Transportation Average outperformed the remaining industrials. Within the 20-stock complex only United Continental (UAL 20.53, +0.06) traded in the black. The air carrier added 0.3%. Freight carrier Con-way (CNW 28.56, -1.23) was the biggest laggard among transportation stocks, down 4.1%. Railroads also lagged. Kansas Southern (KSU 79.67, -2.53) and CSX (CSX 20.23, -0.63) both lost near 3.0%. Looking at earnings, News Corp (NWSA 24.67, +0.39) finished higher by 1.6% after beating on earnings. During the first quarter, the media company earned $0.43 on $8.14 billion in revenue. The company's bottom line exceeded the Capital IQ consensus estimate by $0.05, while the revenue was in-line with expectations. WellPoint (WLP 57.85, -3.35) slid 5.5% after the health benefits company reported mixed earnings. WLP earned $2.09, which was $0.25 better than the Capital IQ consensus estimate. However, the company's revenue of $15.13 billion was reported below expectations. Following the earnings release, Bank of America/Merrill Lynch downgraded the stock to 'underperform' from 'buy.' In today's economic news, the weekly MBA Mortgage Index showed a 5.0% decrease in new applications. This follows prior week's decline of 4.8%. Meanwhile, consumer credit increased by $11.4 billion in September. This follows prior month's reading of an $18.1 billion increase, and was higher than the $10.6 billion that had been broadly expected among economists polled by Tomorrow, weekly initial and continuing claims and the September trade balance will all be released at 8:30 ET. The U.S. Treasury will auction off $16 billion in 30-yr bonds.

Nov 6, 2012
Equities began the day on a slightly higher note. The early gains were doubled after an erroneous report on the Cincinnati Enquirer Website suggested Mr. Romney had a considerable lead over Mr. Obama in Ohio. The newspaper promptly retracted the claim, and said that the page accidentally showed a template with dummy data. However, the S&P 500 held the bulk of its gains into the late afternoon before ending higher by 0.8%. The materials sector was among the top performers, and gained 1.1%. Looking at earnings within the space, Martin Marietta (MLM 86.98, +1.97) settled higher by 2.3% after the company's earnings of $1.36 exceeded Capital IQ consensus estimate by $0.08. Martin's revenue of $593.90 million also beat expectations. When commenting on future outlook, management said: "For full year 2012, we anticipate high single-digit volume growth in our nonresidential end-use market, driven primarily by increased energy shipments." Other providers of building materials saw similar strength. Texas Industries (TXI 45.59, +1.15) and Vulcan Materials (VMC 48.48, +1.88) advanced 2.6% and 4.0%, respectively. Elsewhere, Louisiana-Pacific (LPX 15.70, -0.35) slipped 2.2% after reporting disappointing earnings. The paper producer's earnings of $0.20 were $0.04 worse than the Capital IQ consensus estimate. Meanwhile, the company's revenue of $467.8 also missed analyst expectations. Other paper manufacturers participated in the sector-wide rally. Neenah Paper (NP 26.78, +1.13) advanced 4.4% and International Paper (IP 35.62, +0.25) added 0.7%. The consumer discretionary sector saw a flurry of earnings this morning. Two providers of satellite television service were among those who reported. DIRECTV (DTV 50.51, -0.15) slipped 0.3% after revealing third quarter earnings of $0.90, which was $0.04 below the Capital IQ consensus. Meanwhile, the company's revenue of $7.42 billion was ahead of the $7.31 billion expected by analysts. Management commented on the quarter by saying: "DIRECTV U.S.' third quarter results reflect successful execution of our long-term strategy to strike a more optimal balance between our top and bottom lines while DIRECTV Latin America continues to profitably increase market share in the rapidly growing Latin America pay-TV market." Peer DISH Network (DISH 36.00, +1.17) rose by 3.4% after reporting a loss of $0.35 on revenue of $3.52 billion. The bottom line may not be comparable to analyst estimates due to high litigation costs, while the top line missed expectations. Office Depot (ODP 2.99, +0.48) and OfficeMax (OMX 8.33, +0.89) both reported mixed third quarter results. The two office store operators beat on their respective bottom lines, and fell short of the consensus revenue expectations. However, it should be noted that a Bloomberg article discussed a possible merger between the two. As a result of the M&A speculation, Office Depot and OfficeMax settled higher by 19.1% and 12.0%, respectively. Luxury retailer Fossil (FOSL 84.24, -9.86) lost 10.5% after reporting mixed earnings. During the third quarter, the luxury retailer earned $1.26, which was $0.09 ahead of the Capital IQ consensus estimate. However, the company's revenue of $684.20 million was below analyst expectations. In addition, Fossil guided fourth quarter earnings in-line with expectations, while revenues are expected to show weakness and come in below consensus estimates. The results weighed on other higher-end apparel retailers. Coach (COH 57.75, +0.15), Ralph Lauren (RL 160.44, -0.79), and Macy's (M 41.38, +0.22) were all down around 1.0% at the start of the session before recovering their losses during the late-morning surge. Utilities have seen considerable weakness in the aftermath of Hurricane Sandy. Since October 31, the SPDR Utilities Select Sector ETF (XLU 35.69, +0.02) is down over 3.0%. Most notably, electricity providers have been pressured as repair costs continue to rise. In addition, the failures in the Northeast are likely to result in calls for more regulatory oversight and better backup systems, which would translate to increased costs for electricity providers. Today, the sector was the weakest performer, and major electricity providers weighed on the group. Southern Company (SO 44.14, -0.48) slid 1.1% and Edison International (EIX 45.68, -0.34) slipped 0.7%. The Presidential election is today's headline event and first exit polls are expected after east coast voting ends at 19:00 ET. Hopefully, the results will be counted without issues and the outcome will be known before tomorrow's open. In tomorrow's economic data, the weekly MBA Mortgage Index will be reported at 7:00 ET.

Nov 5, 2012
Today's session began on a mixed note. The S&P 500 spent the majority of the day in negative territory as cautious trade took place ahead of tomorrow's Presidential election. However, late afternoon buying drove the benchmark average to a higher finish by 0.2%. The technology sector outperformed the broader market. The biggest tech component, Apple (AAPL 584.62, +7.82), gained 1.4% after reporting that sales of its iPad 4 and iPad mini have reached three million units during the first three days of sales. Also of note, shortly before the close reports indicated that the company may be considering a switch from Intel (INTC 21.84, +0.01) processors. Following the news, Intel shares surrendered their gains, while AMD (AMD 2.10, 0.00) and ARM Holdings (ARMH 34.08, +0.88) spiked higher. Netflix (NFLX 78.24, +1.34) added 1.7% after announcing it will issue one right for each current share of outstanding common stock at the close of business on November 2, 2012. The rights will not be exercisable immediately. However, if they do become exercisable, each right will entitle shareholders to buy one one-thousandth of a share of a new series of participating preferred stock at an exercise price of $350 per right. The plan is intended to protect Netflix and its stockholders from efforts to obtain control of company. In technology earnings, Rogers Corporation (ROG 41.90, +2.67) spiked 6.8% after reporting mixed results. The supplier of communications equipment reported earnings of $0.69, which was $0.05 ahead of the Capital IQ consensus estimate. Meanwhile, the company's revenue of $130.20 million was slightly lower than estimated. However, the strength in the stock is likely related to upbeat guidance as the company expects fourth quarter earnings above analyst estimates while revenue is expected to be in-line with expectations. On the downside, Ebix (EBIX 19.26, -3.15) fell 14.1% after Bloomberg reports indicated the software company is facing a Securities and Exchange Commission probe focused on its accounting practices. Since the initial report, company officials have issued the following statement: "The Ebix senior management team has not been advised of nor is it aware of any SEC investigation regarding the Company's previous filings. We stand behind the accuracy of our public filings. The Bloomberg article is inaccurate and misleading in many respects and we intend to evaluate all avenues of recourse." Looking at the financial sector, The SPDR Financial Select Sector ETF (XLF 15.97, -0.03) underperformed the broader market as it settled lower by 0.2%. Among the majors, Goldman Sachs (GS 124.08, +0.83) and Wells Fargo (WFC 34.02, +0.28) outperformed as the two stocks settled higher by 0.7% and 0.8%, respectively. Meanwhile, Bank of America (BAC 9.75, -0.10) and Citigroup (37.32, -0.28) were the notable laggards as the pair saw respective losses of 1.0% and 0.7%. Elsewhere, KBW (KBW 17.47, +1.17) announced a merger with Stifel Financial (SF 32.58, +0.67). Per the agreement, KBW shareholders will receive $17.50 per share, which represents a 7.4% premium to KBW's Friday closing price. In addition, Stifel Financial reported its earnings this morning. During the third quarter, the investment brokerage earned $0.60 on $420.08 million in revenue. Both figures were ahead of the Capital IQ consensus estimates. Also of note, MetLife (MET 34.69, -0.01) has agreed to sell its $70 billion mortgage servicing portfolio to JPMorgan Chase (JPM 42.27, -0.15). The move is aimed at expanding JPMorgan's footprint in the mortgage servicing business, while banks were expected to reduce their exposure in this area. As a result, companies which concentrate on mortgage investment were pressured. Nationstar Mortgage Holdings (NSM 30.20, -2.91) fell 8.8% and Ocwen Financial (OCN 32.95, -2.06) slid 5.9%. The Dow Jones Transportation Average outperformed the broader market and settled higher by 0.3%. Alaska Air (ALK 40.13, +1.09) was the top performer within the complex after the carrier reported an 8.5% increase in traffic on the back of a 5.1% increase in capacity as compared to October 2011. In addition, Hurricane Sandy did not have a material impact on the company's capacity as 38 flights to and from the East Coast were cancelled. The stock rose by 2.8% following the positive report, and traded at its all-time high. Rival United Continental (UAL 20.25, +0.52) advanced 2.6% after the company's first Dreamliner 787 supplied by Boeing (BA 70.41, +0.36) took flight over the weekend. Two automakers reported their quarterly results before today's open. Tesla Motors (TSLA 31.50, +2.58) surged 8.9% after reporting mixed earnings. During the third quarter, the automaker registered a loss of $0.92, which was $0.01 below the Capital IQ consensus estimates. Meanwhile, the company's revenue of $50.1 million represents a 13.2% year-over-year decline, but the figure came in ahead of analyst expectations. Lastly, Tesla reaffirmed its full-year 2012 guidance as well as its full-year 2013 gross margin projections and delivery targets. Note that today's buying has lifted the stock to levels not seen since late September. Elsewhere, Toyota Motor (TM 81.35, +3.55) finished higher by 4.6% after its bottom line exceeded the Capital IQ consensus estimates. The Japanese carmaker reported earnings of JPY81.44, which was JPY8.47 ahead of expectations. Meanwhile, the company's revenue was in-line with analyst estimates. Regarding future outlook, the company raised its full-year 2013 net income guidance and lowered the full-year 2013 revenue expectations. The October ISM Services index was reported at 54.2, which is below the 55.0 consensus, and down from September's reading of 55.1. There is no economic data scheduled for tomorrow. However, the U.S. Treasury will auction off $32 billion in 3-yr notes.