The Week In Review

12/10-12/14/12

December 14, 2012

Equities spent the day in the red as weakness in shares of Apple (AAPL 509.79, -19.89) weighed on the markets throughout the session. The S&P 500 held near its opening levels until the final hour when selling pressure pushed the benchmark index to a loss of 0.4%. The technology sector was the biggest laggard due to underperformance from Apple and its suppliers. Earlier, UBS lowered its price target for AAPL to $700 from $780 due to an expected decline in iPhone and iPad shipments. The largest tech company settled lower by 3.8% on the day the iPhone 5 began selling in China. Looking at notable Apple suppliers, Avago Technologies (AVGO 31.13, -2.56), Cirrus Logic (CRUS 25.58, -1.82), Skyworks Solutions (SWKS 19.80, -1.25), and Jabil Circuit (JBL 17.51, -1.02) all lost between 3.7% and 7.6%. Elsewhere in technology, Adobe Systems (ADBE 37.56, +2.03) advanced 5.7% after beating on earnings and revenue. During the fourth quarter, the software company earned $0.61, which was $0.05 better than the Capital IQ consensus estimate. Meanwhile, the company's revenue of $1.15 billion also exceeded expectations. The software developer topped off the report with guidance, which was on the lower end of analyst estimates. Following the earnings report, JMP Securities upgraded Adobe to 'Market Outperform' from 'Market Underperform' with a $42 price target. On the other hand, Janney Montgomery Scott downgraded ADBE to 'Neutral' from 'Buy.' The materials sector outperformed the broader market, and steel suppliers contributed to the strength. Last night, the Chinese HSBC manufacturing PMI survey revealed the second expansionary reading in a row. The data signals a possible rebound in Chinese growth, which would be beneficial to steelmakers. Among the major producers, Cliffs Natural Resources (CLF 33.96, +1.67), Nucor (NUE 42.28, +1.09), and Reliance Steel (RS 59.25, +1.31) all gained between 2.2% and 5.2%. Energy stocks slipped 0.5% despite crude oil adding over 1.0%. Schlumberger Limited (SLB 68.91, -3.65) slid 5.0% following this morning's profit warning. The company said that it is experiencing continued contractual delays and higher-than-usual seasonal slowdowns in activity. In notable analyst rating changes, Exxon Mobil (XOM 88.08, -0.50) shed 0.6% after Goldman Sachs downgraded the company to 'Neutral' from 'Buy.' Elsewhere, BP (BP 41.39, -0.08) finished lower by 0.2% after Credit Suisse downgraded the energy producer to 'Neutral' from 'Outperform.' On the upside, Marathon Oil (MRO 30.82, +0.63) advanced 2.1% after Goldman Sachs upgraded MRO to 'Buy' from 'Neutral.'

December 13, 2012

The major averages began the day on a mixed note before selling pressure pushed the key indices to their respective lows. This morning, House Speaker John Boehner addressed the media in Washington. During his remarks, the speaker suggested President Obama is not serious about cutting spending, and the White House is willing to go over the fiscal cliff. Mr. Boehner's remarks had little impact on the markets, which continued pushing to fresh lows. However, a late-afternoon headline indicated Speaker Boehner and President Obama will meet in person at 17:00 ET. The report lifted the S&P 500 off its worst level of the day, but the benchmark index still finished with a loss of 0.6%. The energy sector underperformed, and the SPDR Energy Select Sector ETF (XLE 71.49, -0.67) lost 0.9%. Looking at notable decliners, Nabors Industries (NBR 13.85, -0.68) fell 4.7% after Jefferies downgraded the stock to 'Underperform' from 'Hold. Anadarko Petroleum (APC 74.75, -0.79) slid 1.1% despite Jefferies making positive comments about the company. The remarks followed the closing arguments in the court case brought against APC by chemical producer Tronox (TROX 15.58, -0.47). Elsewhere in energy, coal stocks were mixed. CONSOL Energy (CNX 33.81, -0.44) shed 1.3% while Walter Energy (WLT 36.26, +0.39) advanced 1.1%. Technology stocks lagged notably and Apple (AAPL 529.69, -9.31) slipped 1.7%. Semiconductor manufacturers also weighed as the PHLX Semiconductor index settled lower by 1.1%. Among individual producers, Cirrus Logic (CRUS 27.41, -1.71) was the biggest laggard, down 5.9%. Consumer staples outperformed the remaining S&P 500 sectors. Boston Beer (SAM 131.94, +17.71) surged 15.5% after the brewer raised its 2012 earnings expectations as well as the 2013 depletion projections. Following the update, the company sees 2012 earnings between $4.30 and $4.60, while the Capital IQ consensus estimate expects earnings at $4.24 per share. Elsewhere, B&G Foods (BGS 29.53, +1.06) rose by 3.7% following an upgrade to 'Outperform' from 'Sector Perform' at RBC Capital Markets. Also of note, CVS Caremark (CVS 48.50, +0.96) added 2.0% after raising its dividend by 38% to $0.22 per share. In addition, the company guided full-year earnings above consensus estimates. Recent strength in defense stocks has lifted the PHLX Defense Sector Index to an all-time high. After reaching fresh highs on Wednesday, the index has been under pressure. Today, the defense index slid 1.0% and 15 of 17 components declined. Aircraft manufacturers Lockheed Martin (LMT 89.99, -1.82) and Embraer (ERJ 25.10, -0.71) were the two weakest performers, down 2.0% and 2.8%, respectively. Earlier, the New York Times reported the Canadian government will reconsider its planned purchase of F-35 fighter jets from Lockheed Martin due to high costs. In notable news, Best Buy (BBY 14.12, +1.94) spiked 15.9% after CNBC reported company founder Richard Schulze is expected to submit a bid worth between $5 and $6 billion in his attempt to take the company private by week's end. Also of note, Chief Financial Officer Sharon McCollam bought over 100,000 shares on December 10, 2012. The market received several economic reports today, and the data points were largely in-line with expectations. The latest weekly initial jobless claims count totaled 343,000, which was lower than the 375,000 that had been expected by the Briefing.com consensus. The tally was also below the revised prior week count of 372,000. As for continuing claims, they fell to 3.198 million from 3.221 million. November retail sales rose by 0.3%, which was slightly worse than the 0.4% increase that had been broadly expected. The prior month's reading pointed to a decrease of 0.3%. Excluding autos, retail sales were unchanged, which was in-line with the Briefing.com consensus. Overall producer prices declined during November by 0.8%, which was cooler than the 0.5% decrease that had been widely forecast. Core producer prices rose by 0.1%, which was in-line with the Briefing.com consensus. During October, inventories rose by 0.4%, which was in-line with the Briefing.com consensus. Today's reading follows the prior month's increase of 0.7%. Tomorrow morning, November CPI and core CPI will be reported at 8:30 ET. Lastly, November industrial production and capacity utilization will be announced at 9:15 ET.

December 12, 2012

Equities began the day on a slightly higher note in anticipation of the latest policy statement from the Federal Reserve. The major averages spiked to session highs upon the release of the central bank's directive. However, stocks surrendered all of their gains, and the S&P 500 finished flat. As expected, the Federal Open Market Committee held its Federal Funds Rate steady at 0-0.25%. In addition, the Fed announced 'Operation Twist' will be replaced by a Treasury purchasing program with an initial rate of $45 billion per month. Also of note, the key interest rate is expected to remain at exceptionally low levels until a target unemployment rate of 6.5% is reached. In addition, the central bank has released its December projections. The outlook painted a cautious picture as the high end of its 2012 GDP growth forecast was lowered to 1.8% from 2.0%. Further, the low end of its 2013 growth expectations was reduced to 2.3% from 2.5%. Inflation expectations remain anchored and PCE inflation is not expected to exceed 2.0% over the next three years. Regarding unemployment, the Federal Reserve projects the rate to decline to 6.5% in 2015. Following the news from the Fed, Ben Bernanke spoke in front of the media. During his press conference, the Chairman said asset purchases are expected to continue until a substantial improvement in the economy is observed. He also noted that if the effectiveness of the purchasing program declines, appropriate modifications will be made. Gold miners have enjoyed a strong start to the session ahead of the Federal Reserve's policy statement. Following the central bank's announcement, mining shares firmed while gold saw little change. AngloGold (AU 30.92, +0.71) and Royal Gold (RGLD 83.64, +2.22) finished higher by 2.4% and 2.7%, respectively. Among technology stocks, Apple (AAPL 539.00, -2.39) finished lower by 0.4%. Elsewhere in the space, Coinstar (CSTR 51.96, +1.15) advanced 2.3% after Northland upgraded the stock to 'Outperform' from 'Market Perform' with a $62 price target. In addition, Coinstar provided an update regarding its joint venture with Verizon Communications (VZ 44.79, +0.35) aimed at improving the offerings at Coinstar's Redbox video rental kiosks. The two companies also announced plans to launch an online video streaming service early next year. Entering today, hard drive makers had risen steadily in recent days. However, Seagate (STX 27.75, -0.90) broke its winning streak and fell 3.1% after JP Morgan downgraded the stock to 'Underweight' from 'Neutral.' Peer Western Digital (WDC 37.86, -0.05) shed 0.1%. Coal stocks saw broad strength and the Market Vectors Coal ETF (KOL 24.90, +0.35) advanced 1.4%. The space registered gains after two major producers received upgrades from Tudor Pickering. Arch Coal (ACI 7.65, +0.16) rose 2.1% after being upgraded to 'Buy' from 'Accumulate.' Meanwhile, Alpha Natural Resources (ANR 9.36, +0.26) advanced 2.9% following the upgrade to 'Accumulate' from 'Hold.' In notable news, Molycorp (MCP 10.99, -0.34) slid 3.0% after announcing the departure of Chief Executive Officer Mark Smith. The company's Board of Directors has appointed Costantine Karayannopoulos as Interim President and Chief Executive Officer. This morning, Wal-Mart (WMT 68.94, -1.95) Chief Executive Officer made cautious comments about the ongoing holiday shopping season. Wal-Mart stock lost nearly 3.0% in reaction to the comments, and the weakness spilled over to apparel retailers. The industry has a heightened sensitivity to discretionary spending, and disappointing holiday sales would prove to be a drag on the space. Abercrombie & Fitch (ANF 46.26, -0.99), Gap (GPS 31.43, -0.39), and Foot Locker (FL 33.39, -1.24) all lost between 1.2% and 3.6%. Export prices, excluding agriculture, decreased by 0.7% in November after they had increased by 0.2% in the prior month. Excluding oil, import prices decreased by 0.2%, which follows the 0.3% increase experienced in the prior month. The November Treasury budget showed a $172.1 billion deficit, which was wider than the deficit of $172 billion expected by the Briefing.com consensus. The report has mattered little to market participants as equity indices did not respond to the news. Looking at tomorrow's economic data, weekly initial and continuing claims will be reported at 8:30 ET. In addition, November retail sales, retail sales ex-auto, PPI, and core PPI will also be released at 8:30 ET. Lastly, October business inventories will cross the wires at 10:00 ET.

December 11, 2012

Today's session was relatively quiet as the major averages followed an upbeat open with a climb to their respective highs. At noon, House Speaker John Boehner said he remains hopeful a budget deal will be reached, but first, Democrats and the President need to outline specific spending cuts. The comments had little effect on the markets as equities saw muted reaction, and continued holding at their best levels. However, 90 minutes before the close, Senate Majority Leader Harry Reid said Democrats do not plan to propose spending cuts, and that reaching a consensus before Christmas would be difficult. In response to Senator Reid's comments, the S&P 500 slipped from its highs, trimming its gain to 0.7%. The technology sector was the top performer and the SPDR Technology Select Sector ETF (XLK 29.23, +0.39) finished higher by 1.4%. The largest tech component, Apple (AAPL 541.38, +11.56), rose by 2.2% in an attempt to halt its slide and establish support in the $550 area. Texas Instruments (TXN 31.01, +1.19) advanced 4.0% despite narrowing its revenue guidance and trimming its earnings guidance to account for restructuring. TripAdvisor (TRIP 40.91, +2.52) spiked 6.6% after Liberty Interactive (LINTA 18.95, -0.19) purchased 4.8 million TRIP shares for $62.50 per share. As a result of the transaction, Liberty Interactive will control a majority voting stake in TripAdvisor. Other online travel sites also gained on the news. Expedia (EXPE 59.99, +2.28) rose by 4.0% and Orbitz Worldwide (OWW 2.38, +0.06) added 2.6%. The health care space was one of the top gainers and biotech companies contributed to the sector strength. Vertex Pharmaceuticals (VRTX 41.84, +1.59) and Gilead Sciences (GILD 76.34, +2.09) led biotech names and saw respective gains of 4.0% and 2.8%. In acquisition news, Somaxon Pharmaceuticals (SOMX 2.65, +1.18) surged 80.3% after announcing it will be acquired by Pernix Therapeutics (PTX 7.65, -0.28). Per the agreement, Somaxon shareholders will receive $25 million in Pernix common stock. Elsewhere, Hill-Rom Holdings (HRC 28.69, +0.62) advanced 2.2% after Goldman Sachs upgraded the stock to 'Buy' from 'Neutral.' Financials traded largely in-line with the broader market until late afternoon comments from Senator Harry Reid indicated an agreement before Christmas is unlikely. Morgan Stanley (MS 17.75, +0.74) settled higher by 4.4% to lead the majors. Earlier reports indicated the company may file for regulatory approval in order to begin a share buyback program. Looking at other majors, Goldman Sachs (GS 118.86, +1.85) and JPMorgan Chase (JPM 42.64, +0.33) gained 1.6% and 0.8%, respectively. Elsewhere, American International Group (AIG 35.26, +1.90) rallied 5.7% after confirming the U.S. Treasury will sell its remaining shares of AIG common stock. The Dow Jones Transportation Average added 0.1% and airlines outperformed. Delta Air Lines (DAL 10.66, +0.52) was the top advancer within the bellwether complex. The air carrier gained 5.1% after confirming plans to invest $360 million in Virgin Atlantic. Following the investment, Delta will hold a 49% stake in Virgin Atlantic. Looking at other airlines, United Continental (UAL 21.71, +0.82) and Southwest Airlines (LUV 10.12, +0.28) finished higher by 3.9% and 2.9%, respectively. In notable quarterly results, Dollar General (DG 42.94, -3.63) reported earnings of $0.63 on revenue of $3.96 billion. The company's bottom line was $0.03 ahead of the Capital IQ consensus, while its revenue met expectations. In addition to reporting an earnings beat, the retailer raised its full-year 2013 earnings guidance in-line with analyst estimates. However, its full-year 2013 revenue is expected to be near the low end of the previous range. Dollar General slid 7.8% in reaction to the results and peers Dollar Tree (DLTR 37.98, -1.46) and Family Dollar (FDO 64.68, -5.90) lost 3.7% and 8.4%, respectively. The trade deficit widened to $42.2 billion during October after a downwardly revised prior month deficit of $40.3 billion. Economists polled by Briefing.com had expected that the deficit would come in at $42.8 billion. October wholesale inventories increased by 0.6%, which was ahead of the 0.4% increase forecast by the Briefing.com consensus. Looking at tomorrow's economic data, the weekly MBA Mortgage Index will be reported at 7:00 ET. Export prices ex-agriculture and import prices ex-oil will both be announced at 8:30 ET. At 12:30 ET, the Federal Open Market Committee will announce the Federal Funds Rate, and the statement will be followed by Ben Bernanke's press conference at 14:15 ET.

December 10, 2012

Equities were little changed during today's session. With no economic data to digest, investors expressed caution after Italy's Prime Minister Mario Monti announced plans to submit his resignation upon the successful approval of the country's budget. However, afternoon reports from the Financial Times indicated Italy's centrist parties are urging Mr. Monti to run on their ticket in next year's election. Domestically, trade was confined to a narrow range and volume was well below-average. As a result, the S&P 500 finished flat. The technology sector outperformed the broader market despite relative weakness in Apple (AAPL 529.82, -3.42). The largest tech component was down near 2.0% during the opening minutes, but reclaimed a portion of its losses and settled lower by 0.6%. Seagate (STX 28.91, +0.57) and Western Digital (WDC 38.45, +0.85) saw respective gains of 2.0% and 2.3%. The two hard drive makers were on the rise once again after both gained more than 10.0% last week. Computer assembler Hewlett-Packard (HPQ 14.16, +0.35) rose by 2.6% following earlier rumors which suggested activist investor Carl Icahn was building a stake in the company. In M&A news, Intermec (IN 9.82, +1.84) surged 23.1% after being acquired by Honeywell (HON 61.86, -0.11) for $10 per share. The transaction price represents a 27.7% premium to Intermec's Friday closing price. Consumer discretionary stocks underperformed the broader market despite the strength in shares of McDonald's (MCD 89.41, +0.93). The fast food giant gained 1.1% after reporting a 2.4% increase in global comparable store sales. Elsewhere in the discretionary space, Priceline (PCLN 625.96, -33.14) slid 5.0% after Deutsche Bank downgraded the stock to 'Hold' from 'Buy.' Peer Expedia (EXPE 57.71, -2.17) shed 3.6% after the company announced a special dividend of $0.52 per share. Gap (GPS 30.89, -0.92) lost 2.9% after Wedbush observed increased promotional activity at Old Navy. An increase in the number of promotions run by the company was viewed as a warning regarding the company's sales. The cautious sentiment was reflected in shares of other apparel retailers as Aeropostale (ARO 13.40, -0.36), Under Armour (UA 50.13, -2.03), and Urban Outfitters (URBN 37.00, -0.37) all lost between 1.0% and 4.0%. On the upside, Abercrombie & Fitch (ANF 47.31, +0.92) advanced 2.0% after Robert W. Baird upgraded the stock to 'Outperform' from 'Neutral. The Dow Jones Transportation Average settled higher by 1.1% and all 20 components advanced. Trucking stocks saw relative strength as CH Robinson (CHRW 61.94, +1.34) finished higher by 2.2%. Meanwhile, Con-way (CNW 28.22, +0.64) added 2.3%. Elsewhere, package delivery services advanced as the group is expected to benefit from increased package volumes during the holiday season. Expeditors International of Washington (EXPD 38.22, +0.64), FedEx (FDX 90.53, +1.17), and UPS (UPS 73.68, +0.51) all gained between 0.7% and 2.5%. Last week, FedEx said it expects a record 19 million packages to move through its network today. Tomorrow's economic data will be limited to the October trade balance and wholesale inventories. The two data points are scheduled to be released at 8:30 ET and 10:00 ET, respectively.