The Week In Review


Feb 8, 2013
The S&P 500 punctuated a somewhat volatile week by adding 0.6%. Though the benchmark index ended firmly in the black, the bulk of its advance took place during the initial minutes. After notching a session high in the 1518 area, the index spent the remainder of the day in a two point range. While the S&P held its levels, the Dow Jones followed its morning rally with a partial retreat which was halted near the middle of its range. Quiet trade unfolded as snowstorm Nemo envelops the East Coast. With forecasts calling for up to a foot of snow in New York, and more than 25 inches in Boston, today's volume paced well below average. The final tally indicated less than 600 million shares changed hands on the floor of the New York Stock Exchange. Storm preparation was also reflected in individual stocks as Briggs & Stratton (BGG 24.37, +0.57) and Generac (GNRC 40.54, +0.80) settled with respective gains of 2.4% and 2.0%. The two manufacturers of power generators saw some buying interest as the Northeast prepares for the possibility of interruptions to power delivery. Meanwhile, the broader market was powered by the technology sector. The SPDR Technology Select Sector ETF (XLK 29.93, +0.26) ended higher by 0.9% with outperformance largely due to relative strength of top components. Apple (AAPL 474.98, +6.76), Google (GOOG 785.37, +11.42), and International Business Machines (IBM 201.68, +1.94) all climbed between 1.0% and 1.5% with Google settling at a fresh all-time high. Remaining in the tech sector, LinkedIn (LNKD 150.48, +26.39) soared 21.3% after the company's earnings and revenue eclipsed the Capital IQ consensus estimates. Note that today's surge sent LinkedIn to a fresh all-time high of its own. Energy stocks outperformed as well, but the strength came despite no change in the price of oil. The energy component settled at $95.79. On the downside, utilities weighed, but lifted off their lows during the afternoon session. Sector component Entergy (ETR 64.47, -0.49) shed 0.8% after reporting its revenue below analyst estimates. This morning, the market received two economic data points. The January trade deficit narrowed to $38.5 billion thanks in part to a $3.8 billion increase in industrial supply and material exports. This occurred as imports suffered a $4.2 billion decline in industrial supplies and materials. It should be noted the brief worker strike at the Ports of Los Angeles and Long Beach likely contributed to the lower deficit. Elsewhere, December wholesale inventories decreased 0.1%, which was worse than the increase of 0.3% expected by the consensus. This report carries negative implications for the upcoming revision to fourth quarter GDP growth as the Bureau of Economic Analysis had estimated an inventory growth of 0.7% in the preliminary reading. On Tuesday, the January Treasury Budget will be reported at 14:00 ET. While there is no economic data on Monday's docket, earnings reports will continue pouring in. CNA Financial (CNA 31.80, +0.08) and Loews (L 43.85, +0.11) are scheduled to report their quarterly earnings ahead of the opening bell.

February 7, 2013
Equities ended the day with slim losses causing the S&P 500 to slip 0.2%. Though stocks saw little change at the outset of the session, sellers were able to take control within the first 30 minutes, and drive the major averages to their respective lows. The early broad-based weakness came about as the dollar index spiked to its highs in the 80.20 area. The sharp move took place after European Central Bank President Mario Draghi voiced concerns over the strength of the euro. The common currency weakened immediately following his remarks, falling to its session low near 1.3400 against the greenback. The morning dollar strength had a negative impact on commodities and commodity-related stocks. As such, the materials sector was pressured, and ended as the weakest performer today. The SPDR Materials Select Sector ETF (XLB 39.15, -0.21) shed 0.5%. High-beta sectors underperformed for the duration of the day. Technology stocks lagged despite the outperformance from Apple (AAPL 468.22, +13.52). The largest tech stock saw intraday strength after activist investor, David Einhorn, said the company has a cash problem, thinking it can never have enough of it, and its preferred stock should yield 8.0%. Shares of Apple spiked to fresh highs in afternoon trade after the company responded to Mr. Einhorn's comments by saying it will "thoroughly evaluate" the proposal. Elsewhere in technology, microprocessor manufacturers lagged as disappointing earnings from Peregrine Semiconductor (PSMI 9.41, -1.57) weighed. The broader PHLX Semiconductor Index ended lower by 0.6%. In notable tech earnings, Akamai Technologies (AKAM 35.26, -6.32) plunged 15.2% after the company missed on the top line and issued cautious revenue guidance. Today, retailers reported their same store sales for the month of January. While most names reported results ahead of the Retail Metrics consensus, their stocks received a mixed investor response. The SPDR S&P Retail ETF (XRT 67.47, -0.31) settled lower by 0.5%. While retailers and discretionary stocks traded in-line with the broader market, consumer staples outperformed. The sector was the top advancer thanks to relative strength of cigarette producers. The largest industry component, Philip Morris (PM 89.82, +2.13), rose 2.4% after beating on earnings. Defensive-minded trade also favored the utilities sector which held slight gains throughout the day. Sector component Exelon (EXC 31.37, +0.39) added 1.3% despite guiding first quarter earnings below consensus. However, the electricity producer expects a better second half with full-year 2013 earnings in-line with analyst expectations. As mentioned earlier, the materials (-0.6%) sector was the weakest, followed by energy (-0.5%), financials (-0.4%), and telecoms (-0.4%). Meanwhile, consumer staples (+0.5%), and utilities (+0.2%) outperformed. Volume was below-average with just 664 million shares changing hands on the floor of the New York Stock Exchange. The day's economic data did little to influence the trading sentiment. Initial claims were reported at 366,000, which puts the figure right inside of last year's 350,000-400,000 range. Meanwhile, the 2.0% drop in fourth quarter productivity was the result of a very small increase in output (0.1%) combined with a solid increase in hours worked (2.2%). Lastly, unit labor costs increased 4.5% after declining 2.3% in the third quarter. That was the biggest increase in unit labor costs since increasing 6.4% in Q1 2012. Tomorrow, the December trade balance will be reported at 8:30 ET while December wholesale inventories will be announced at 10:00 ET. Among notable earnings, CBOE Holdings (CBOE 34.30, +0.07) and Louisiana-Pacific (LPX 20.49, +0.25) will report their quarterly results ahead of the opening bell.

February 6, 2013
Equities ended little changed after spending the vast majority of today's session in the red. The major averages began the day on a cautious note as European indices retreated in anticipation of an update from Monte dei Paschi regarding the size of derivative-related losses suffered by the world's oldest bank. Recent reports have suggested the bank's losses will exceed the original estimate of EUR720 million. This caused selling of the Italian 10-yr as its yield climbed 13 basis points to 4.58%, its worst level since mid-December 2012. The S&P 500 staged a morning recovery with the help of Apple (AAPL 457.35, -0.49). The largest tech stock spiked off its lows after rumors suggested the company may raise its quarterly dividend. However, with little substance behind the speculation, Apple followed the jump with a steady slide back near its flat line. While tech shares displayed intraday strength, the discretionary sector hovered in the black throughout the session. Upbeat earnings from Polo Ralph Lauren (RL 174.63, +9.72) as well as Times Warner (TWX 52.01, +2.05) and Walt Disney (DIS 54.52, +0.23) supported the space. In addition, Chipotle Mexican Grill (CMG 322.46, +17.45) added 5.7% after reporting revenue in-line with its January 16 preannouncement. Elsewhere, the materials sector outperformed the broader market thanks to the relative strength among steel producers. Reliance Steel (RS 70.25, +5.56) surged 5.9% following an agreement to acquire all outstanding shares of Metals USA (MUSA 20.65, +2.35) for $20.65 per share. The purchase price represents a 12.8% premium to Metals USA's Tuesday closing price, and the total transaction value is estimated at $1.2 billion. Meanwhile, the broader MarketVectors Steel ETF (SLX 49.38, +0.74) added 1.5%. On the downside, the Dow Jones Transportation Average trailed behind the broader market. The bellwether complex shed 0.2% after CH Robinson (CHRW 60.50, -6.51) reported mixed earnings. The freight carrier fell 9.7%, and was the worst performer within the S&P 500. Relative strength among airlines prevented transportation stocks from registering further losses. Alaska Air (ALK 47.42, +0.56) and United Continental (UAL 25.32, +1.06) saw respective gains of 1.2% and 4.4%. This morning, Alaska Air reported an 11.8% increase in traffic on a 12.2% rise in capacity, as compared to January 2012. Today's trade was centered mostly around the unchanged line. Technology (-0.2%) and health care (-0.1%) sectors weighed on sentiment. Meanwhile, telecoms (+0.3%), utilities (+0.2%), materials (+0.2%), and consumer discretionary (+0.2%) shares outperformed. The CBOE Volatility Index (VIX 13.42, -0.30) spent the bulk of the day in the black, but the near-term volatility measure turned lower into the close. Volume was slightly below average as just over 680 million shares changed hands on the floor of the New York Stock Exchange. Economic data was limited to the weekly MBA Mortgage Index, which rose 3.4% to follow last week's 8.1% decline. Tomorrow, weekly initial and continuing claims as well as preliminary fourth quarter productivity and unit labor costs will all be reported at 8:30 ET. Finally, December consumer credit will be announced at 15:00 ET. Among notable earnings, Credit Suisse (CS 29.55, +0.22) and Sony (SNE 15.82, -0.01) are scheduled to report their results ahead of the opening bell.

February 5, 2013
Today's session brought resilience to the markets as the key averages recovered the majority of their losses from Monday. The S&P 500 settled higher by 1.0% after spending the duration of the day in a steady climb. The morning sentiment was aided by upbeat European trade where Italian and Spanish markets recovered from yesterday's plunge. Domestically, seven of ten S&P 500 sectors registered gains in the neighborhood of 1.0%. Tech shares led the way after the sector felt the brunt of Monday's selling. The largest tech stock, Apple (AAPL 457.84, +15.53), outperformed the broader market and ended higher by 3.5%. The tech sector received some acquisition news today. Dell (DELL 13.42, +0.15) added 1.1% after entering into an agreement to be acquired by Michael Dell-Silver Lake for $13.65 per share. The deal includes a $2 billion loan from Microsoft (MSFT 27.50, +0.05). Meanwhile, Virgin Media (VMED 45.61, +6.92) jumped 17.9% after the company confirmed its discussions with Liberty Global (LBTYA 67.88, -1.58) regarding a possible transaction. Among notable tech earnings, ARM Holdings (ARMH 43.69, +1.74) gained 4.2% after beating on revenue. Meanwhile, the broader PHLX Semiconductor Index advanced 1.6%. In other earnings of note, Archer-Daniel Midlands (ADM 29.38, +0.94) beat on earnings and revenue while Kellogg (K 58.50, +0.40) topped the Capital IQ revenue forecast. The two stocks supported the consumer staples sector, and ended with respective gains of 3.3% and 0.7%. While staple stocks saw strength across the board, the discretionary sector experienced some pockets of weakness. Restaurant operator Yum! Brands (YUM 62.08, -1.86) shed 2.9% after its quarterly report included cautious guidance. This comes as the company attempts to overcome the negative publicity received after two poultry suppliers provided KFC with chicken containing unapproved antibiotic levels. Publisher McGraw-Hill (MHP 44.92, -5.38) was another notable laggard in the discretionary space. Shares of the publishing company plunged after the Department of Justice announced plans to file a civil lawsuit against Standard & Poor's, a unit of McGraw-Hill. The Department of Justice is alleging S&P knowingly defrauded investors with its ratings on collateralized debt obligations and mortgage backed securities. McGraw-Hill is down over 20.0% since the charges were announced. The CBOE Volatility Index (VIX 13.73, -0.94) declined over the course of the session and shed over 7.0%. The near-term volatility measure ended the session at its 20-day average. Floor volume at the New York Stock Exchange was slightly below average as 702 million shares changed hands over the course of the day. Today's economic data had little trading impact as the January ISM Services Index was reported at 55.2, which fell short of the 55.6 forecast by the consensus. Tomorrow, the weekly MBA Mortgage Index will be reported at 7:00 ET. In notable earnings, CVS Caremark (CVS 51.72, +0.72) and Kraft Foods (KRFT 47.02, +0.62) will report their quarterly results ahead of the opening bell.

February 4, 2013
The S&P 500 ended lower by 1.2% after European concerns returned to the forefront. Equities began the day with a broad sell-off as a downbeat European trade weighed. Italian and Spanish indices were the source of continent-wide weakness as controversy continued to plague the troubled sovereigns. In Italy the MIB lost 4.5% as authorities continue to investigate several financials, including the world's oldest bank, Banca Monte dei Paschi di Siena. Today, five of eight banks listed on the Italian MIB experienced trading halts amid the selloff. However, Monte Paschi was not one of affected names. Meanwhile, Spain's IBEX fell 3.8% as 34 of 35 listings ended in the red. The markets were rattled as Prime Minister Mariano Rajoy and other members of the People's Party find themselves in the middle of an alleged kickback scheme uncovered by Spain's largest daily newspaper, El Pais. Recent days have seen Mr. Rajoy face resignation calls from opposition leaders as well as Spanish citizens. European financials saw notable selling pressure with the weakness spilling over to their U.S. counterparts. The SPDR Financial Select Sector ETF (XLF 17.41, -0.20) slipped 1.1% with Bank of America (BAC 11.48, -0.23) and Morgan Stanley (MS 22.88, -0.63) as two of the weakest majors. The pair saw respective losses of 2.0% and 2.7%. In addition to financials, the tech sector was one of the day's biggest laggards. The largest sector component, Apple (AAPL 442.32, -11.30) underperformed, and lost 2.5%. Including today's loss, Apple is the weakest S&P 500 performer year-to-date. The computer company has lost 16.8% since the start of 2013. Elsewhere in tech, Dell (DELL 13.27, -0.36) slipped 2.6% after reports indicated the company's leveraged buyout will likely be near $13.50 per share, with Microsoft (MSFT 27.44, -0.49) investing about $2 billion. Today's reports follow last week's indications suggesting the deal would net between $15 and $16 per share. In acquisition news, Oracle (ORCL 35.13, -1.07) shed 3.0% after agreeing to acquire Acme Packet (APKT 29.59, +5.66) for $29.25 per share. The transaction price represents a 22.2% premium to Acme's Friday closing price. While technology (-1.6%) and financials (-1.3%) were the day's weakest sectors, consumer discretionary (-1.2%), and health care (-1.1%) stocks were not far behind. On the upside, defensively-oriented telecoms (-0.5%) and utilities (-0.7%) outperformed. Yield on the 10-yr note declined almost four basis points and finished at 1.973%, near its session lows. The CBOE Volatility Index (VIX 14.71, +1.81) surged over 14.0% as near-term downside protection received a considerable bid during the session. Looking at the term structure of VIX futures, February and March contracts have seen the most notable buying interest. Volume was slightly below its 50-day average as just under 700 million shares changed hands on the floor of the New York Stock Exchange. Today's economic data was limited to December factory orders, which rose 1.8%. The increase fell below the 2.4% uptick expected by the consensus, and followed last month's unchanged reading. Tomorrow, the January ISM Services Index will be released at 10:00 ET. In notable earnings, ARM Holdings (ARMH 41.95, -0.55) and Toyota Motor (TM 97.83, -0.30) will report their quarterly results ahead of the open.