The Week In Review


December 28, 2012
Stocks spent today's session in the red as the hope for a timely budget deal becomes more distant. The major averages saw a late-afternoon spike after reports out of Washington indicated President Obama will present a scaled-back budget proposal during his meeting with top lawmakers today. However, shortly after the president began his meeting with lawmakers, further reports indicated no new offer would be made, and President Obama would stand by his original proposal. As a result, the S&P 500 lost 1.1%. The energy sector was the weakest performer and the SPDR Energy Select Sector ETF (XLE 69.83, -1.24) lost 1.7%. Crude oil slipped to session lows after today's inventory data revealed a smaller-than-expected weekly draw. The energy component settled lower by 0.1%, at $90.79. Sector leaders saw comparable losses as Exxon Mobil (XOM 85.10, -1.76) and Chevron (CVX 106.45, -2.07) both lost near 2.0%. Looking at news within the space, Carrizo Oil & Gas (CRZO 20.64, -1.17) slid 5.4% following the sale of its interests in the Huntington Field in the United Kingdom's North Sea for $184 million. The volatility index, or VIX, surged 11.0%. The volatility measure ended at 21.62 after crossing above the 20.00 level yesterday. The move was notable as the VIX has held below 20.00 since late July. At its lowest point, the VIX has flirted with the 13.30 level. However, a steady rise has been observed over the past week as investors seek more downside protection due to the uncertainty resulting from the lack of a budget deal. Today's VIX close marked a six-month high. The Dow Jones Transportation Average slid 0.9% and outperformed the broader market. JB Hunt (JBHT 58.48, -0.16) and Landstar (LSTR 51.62, -0.12) were among the top performers, losing around 0.2% each. Meanwhile, providers of package delivery services weighed on the index. FedEx (FDX 90.39, -1.11) slid 1.2% and UPS (UPS 72.83, -1.08) lost 1.5%. Elsewhere, Barnes & Noble (BKS 14.97, +0.62) gained 4.3% after Pearson (PSO 19.28, -0.09) confirmed plans to invest $89.5 million in NOOK Media, LLC, which is a new company consisting of Barnes & Noble's digital businesses. The NOOK e-reader, tablets, the NOOK digital store, as well as the company's 674 college bookstores across the country will all be included under the umbrella of NOOK Media, LLC. Though Barnes & Noble saw notable gains, it should be noted that in addition to announcing the Pearson investment, BKS said today that holiday sales results will miss expectations, and the NOOK business will not meet the company's earlier projections. Today's economic data revealed a 1.7% increase in pending home sales during the month of November. While the pending sales data does not have a direct impact on homebuilders, strong sales of existing homes bode well for new construction projects. Major homebuilders ticked up in immediate response to the sales data, but were pressured back near their lows. DR Horton (DHI 19.24, -0.24) slid 1.2% and PulteGroup (PHM 17.60, -0.16) finished lower by 0.9%. The December Chicago PMI reading of 51.6 surprised to the upside as economists surveyed by had generally expected a reading of 51.0 to follow the prior month's 50.4.

December 27, 2012
The S&P 500 ended the day with minor losses following a volatile session. Equities began the day on a positive note, but comments from Senate Majority Leader Harry Reid caused a quick change in sentiment. Speaking from the Senate floor, Senator Reid said that all signs suggest the country will go over the fiscal cliff. In addition, the senator said the House of Representatives is being run as a "dictatorship" by Speaker Boehner. The comments caused the major averages to fall to their respective lows. However, an afternoon report out of Washington indicated the House of Representatives will reconvene on Sunday, December 30 at 18:30 ET in hopes of approving a budget. In response, the major averages raced off their lows, ending the day little changed after seeing losses of more than 1.0%. Financial stocks showed the most intraday sensitivity to the headlines, and the sector led the late-morning decline. However, the late-afternoon rally helped the sector recover the bulk of its losses. Among the majors, Bank of America (BAC 11.47, -0.07) shed 0.6% and JPMorgan Chase (JPM 43.63, -0.33) fell 0.8%. The SPDR Materials Select Sector ETF (XLB 37.29, -0.13) lost 0.4%. Provider of construction materials Headwaters (HW 8.18, -0.31) slipped 3.7% despite being upgraded at Avondale to 'Market Perform' with a $10 price target. Elsewhere, steelmakers underperformed. Mechel Steel (MTL 6.72, -0.04) settled lower by 0.6% and United States Steel (X 23.64, -0.62) slid 2.6%. Also of note, AK Steel (AKS 4.38, -0.22) lost 4.8%, and was a notable laggard. Gold miners saw strength after this morning's developments painted a bullish picture for the yellow metal. Newmont Mining (NEM 45.47, +0.39) and Royal Gold (RGLD 80.10, +1.58) settled higher by 0.9% and 2.0% respectively. The Dow Jones Transportation Average shed 0.4% and 17 of 20 components declined. Shipping stocks outperformed and Matson (MATX 24.66, +0.07) added 0.3% after signing an agreement to acquire the assets of Reef Shipping in the South Pacific. Meanwhile, peer Kirby (KEX 61.10, +0.20) settled higher by 0.3%. On the downside, airlines extended their recent weakness. JetBlue Airways (JBLU 5.68, -0.05) and Alaska Air (ALK 43.26, -0.22) declined for a fourth consecutive session and lost 0.9% and 0.5%, respectively. European markets ended on a mixed note. Germany's DAX added 0.3%, France's CAC settled higher by 0.6%, and the United Kingdom's FTSE finished unchanged. The United Kingdom's FTSE ended flat, and most stocks saw little change. However, miners outperformed after the Chinese government revealed plans to boost infrastructure spending. Anglo American rose by 2.1% and Eurasian Natural Resources gained 3.7%. In Germany, financials and carmakers outperformed. Commerzbank gained 1.2% and Deutsche Bank added 0.6%. Among carmakers, BMW advanced 0.8% and Volkswagen finished higher by 0.4%. The two saw strength after Germany's Finance Minister Wolfgang Schaeuble said the country's economy will expand at a "decent" rate next year with exports as the main growth driver. France's CAC was supported by industrials. Schneider Electric gained 2.3% and Vinci tacked on 1.6%. On the downside, STMicroelectronics lost 1.1%. Today's economic news was mixed. The latest weekly initial jobless claims count totaled 350,000, which was better than the 375,000 that had been expected by the consensus. The tally was below the revised prior week count of 362,000. As for continuing claims, they fell to 3.206 million from 3.238 million. The December consumer confidence came in at 65.1, while economists polled by expected a reading of 70.0. This follows the prior month's revised reading of 71.5. Separately, new home sales in November hit an annualized rate of 377,000, which was up from October's revised rate of 361,000, and worse than the rate of 379,000 that had been broadly expected by the consensus.

December 26, 2012
Stocks began the day on a positive note, but the early sentiment failed to hold. The key averages slipped to their respective lows during the first two hours of trade, and held there for the remainder of the session. As a result, the benchmark index finished lower by 0.5%. With only three trading days left in the year, and the budget deadline approaching, elevated volatility in financials can be expected. Today, the SPDR Financial Select Sector ETF (XLF 16.36, 0.00) ended flat, and the majors were mixed. Wells Fargo (WFC 34.33, -0.09) shed 0.3% while Citigroup (C 39.55, +0.17) added 0.4%. Also of note, Bank of America (BAC 11.54, +0.29) outperformed its peers and rose by 2.6%. Consumer stocks were among the worst performers. In the discretionary space, retailers saw general weakness and the SPDR S&P Retail ETF (XRT 61.09, -1.08) lost 1.7%. The softness followed a report from MasterCard Advisors SpendingPulse, which pointed to a 0.7% increase in holiday sales as compared to last year. The number was a disappointment as the general consensus expected sales to rise by as much as 4.0%. Instead, the modest uptick represented the slowest growth in four years. Among individual retailers and apparel producers, Coach (COH 54.13, -3.39), Gap (GPS 30.40, -0.97), Urban Outfitters (URBN 38.24, -1.06), and Macy's (M 37.13, -0.39) all lost between 1.0% and 6.0%. Consumer staples were broadly lower with only a handful of names able to resist the sector-wide pressure. Medifast (MED 25.50, -3.86) slumped 13.2% after Chief Financial Officer, Edward Powers, notified the company of his intent to resign. The resignation will become effective no later than January 4 and Mr. Powers will pursue other interests. On the upside, Inter Parfums (IPAR 19.75, +0.56) rose by 2.9% after the company signed an exclusive license agreement for Alfred Dunhill fragrances. The partnership is set to run for ten years, and Inter Parfums will take over production and distribution of the Alfred Dunhill collection. The materials sector was a notable outperformer. Earlier, China's new leadership said urban development will be a key portion of future economic reforms. The news was welcomed by the market, and a rise in anticipated demand for steel pushed major producers higher. Cliffs Natural Resources (CLF 36.05, +0.69) and United States Steel (X 24.26, +0.20) saw respective gains of 2.0% and 0.8%. The volatility index, or VIX, gained 8.1%, and the index settled at 19.30. Today's surge followed a steady climb observed over the course of the past week as investors sought downside protection in the event Washington lawmakers do not strike a budget deal in time. Note that VIX is now at levels not seen since late July. The October Case-Shiller 20-city Home Price Index rose by 4.3%, while a 3.9% increase had been expected by the consensus. This follows the prior month's increase of 3.0%. Tomorrow, weekly initial and continuing claims will be reported at 8:30 ET. In addition, November new home sales and December consumer confidence will both be reported at 10:00 ET.

December 25, 2012
Closed for the holiday. Merry Christmas.

December 24, 2012
The major averages spent today's abbreviated session in the red as the lack of progress in the budget debate weighed on sentiment. The S&P 500 hovered near its lows for the duration of the day, and the benchmark index lost 0.2% amid low volume. With the holiday break underway, traders turn their focus to Thursday when lawmakers are scheduled to return to the country's capital. The energy sector was the weakest performer and coal producers were pressured. Alpha Natural Resources (ANR 9.03, -0.25) lost 2.7% and CONSOL Energy (CNX 32.67, -0.48) slid 1.5%. Consumer discretionary stocks outperformed the broader market and multiline retailers saw relative strength. J.C. Penney (JCP 19.87, +0.28) settled higher by 1.4% after Oppenheimer said the company's promotional efforts will improve cash generation and will serve as a steady traffic driver for the retailer. Peer Kohl's (KSS 43.46, +0.11) added 0.3%. Elsewhere, TripAdvisor (TRIP 42.45, +0.28) advanced 0.7% after Needham raised its price target for the stock to $51 from $38. In the tech space, the SPDR Technology Select Sector ETF (XLK 28.87, -0.08) shed 0.3%. Within the sector, Apple (AAPL 520.17, +0.84) outperformed and added 0.2%. Elsewhere, Facebook (FB 26.93, +0.67) gained 2.6% after Needham raised its price target for Facebook stock to $33 from $25. Yahoo! (YHOO 19.65, +0.30) advanced 1.6% following a 'Buy' recommendation from Needham. In addition, the investment bank raised its target for Yahoo! to $26 from $19 based on valuation. Microsoft (MSFT 27.06, -0.39) slipped 1.4% after New York Times reported it has not seen an uptick in demand for personal computers following the release of Microsoft's Windows 8 operating system. Computer assemblers Hewlett-Packard (HPQ 14.01, -0.33) and Dell (DELL 10.24, -0.19) both lost near 2.0% on the news. The Dow Jones Transportation Average shed 0.4% and 18 of 20 components registered losses. Railroads were among the biggest laggards as Norfolk Southern (NSC 61.99, -0.56) and Kansas City Southern (KSU 83.21, -0.61) settled lower by 0.9% and 0.7%, respectively. Note that equity markets will be closed tomorrow in observance of Christmas Day. Normal trading hours will resume on Wednesday, December 26. Happy holidays!