The Week In Review

4/22-4/26/13

4/26/13

The major averages entered the weekend on a mixed note as the S&P 500 slipped 0.2% while the Dow Jones Industrial Average added 0.1%.
The final session of the week began on a cautious note as downbeat overseas trade and mixed corporate earnings pressured equity futures. In addition, a disappointing first quarter GDP report contributed to the lower open.
According to the advance report, first quarter GDP grew at an annualized rate of 2.5%. That was up from a 0.4% gain in the final quarter of last year, but below the Briefing.com consensus expectation of a 2.8% gain.
A deeper look into the data sets the tone for a likely severe deceleration in trends during the second quarter.
Just about all of the gains in the first quarter came from consumption and inventories, both of which are likely to experience a pullback over the next three months. Furthermore, government spending, which fell 4.1% in the first quarter after declining 7.1% in Q4 2012, is set to fall by a larger amount during the second quarter as the effects of the sequestration become more pronounced.
With below-consensus growth, the growth-sensitive materials sector was the weakest performer of the day as steelmakers weighed. The Market Vectors Steel ETF (SLX 41.35, -0.71) settled lower by 1.7%. Metal prices also saw a decline as gold slipped 0.4% to $1456.60 per troy ounce while silver declined 1.2% to $23.86 per troy ounce. Also of note, copper futures fell 1.8% to $3.180 per pound.
While the sluggish GDP report weighed on producers of basic materials, the materials sector was the only group which slumped more than 1.0%. Meanwhile, the second weakest sector, financials, ended with a loss of just 0.4%.
Although first quarter economic growth missed expectations, the broader market appeared unconcerned as market participants are well aware of the Federal Reserve's commitment to maintain its accommodative monetary policy for as long as conditions warrant continued easing. As such, the disappointing report resulted in a morning dip, which was met with enough afternoon buying interest to bring the S&P back to its flat line. Those levels held until the final 20 minutes when sellers reemerged and pushed the benchmark average back into the red.
As mentioned earlier, quarterly earnings were in focus this morning. The discretionary sector underperformed as retailers displayed some weakness. Amazon.com (AMZN 254.81, -19.89) lost 7.2% after its above-consensus results were overshadowed by disappointing operating income guidance.
In addition, Starbucks (SBUX 60.00, -0.50) shed 0.8% after its revenue fell short of the Capital IQ consensus estimate. Guidance was also a point of concern as the company lowered its third quarter earnings expectations below consensus.
On the upside, the industrial sector outperformed the broader market as Dow components, Boeing (BA 92.85, +1.18) and General Electric (GE 22.21, +0.26) ended with respective gains of 1.3% and 1.2%. Shares of Boeing rallied following reports indicating Japan will allow the 787 Dreamliner to return to service after the jet experienced battery problems in recent months.
Transportation-related stocks also traded ahead of the broader market. The Dow Jones Transportation Average added 0.1% with airlines providing the leadership. Delta Air Lines (DAL 16.81, +0.52) rose 3.2% after the House of Representatives passed a bill to end sequester-related Federal Aviation Administration furloughs.
Today's economic data also included the University of Michigan Consumer Sentiment Index, which was revised up to 76.4 from 72.3 in the final April reading. That is still down from 78.6 in March and the weakest reading since January. The Briefing.com consensus expected the sentiment index would be essentially unchanged at 72.4.

On Monday, March personal income, personal spending, and core PCE prices will all be reported at 8:30 ET while March pending home sales will be announced at 10:00 ET

4/25/13

Equities settled with modest gains as the S&P 500 climbed 0.4% while the Dow added 0.2%.
The S&P was cruising near its highs before a late afternoon headline from German Handelsblatt cited a confidential Bundesbank opinion paper, which strongly opposed the European Central Bank's implementation of Outright Monetary Transactions.
Until the news hit, quarterly earnings were in focus after more than 250 companies covered by Briefing.com reported their results between yesterday's closing bell and today's open.
The Dow underperformed the broader market as two of its largest components weighed. 3M (MMM 104.88, -2.99) lost 2.8% after missing on earnings and revenue. In addition, Exxon Mobil (XOM 88.07, -1.36) shed 1.5% after the company posted a 12.3% year-over-year revenue decline.
The materials sector was a strong performer throughout the day as the SPDR Materials Select Sector ETF (XLB 39.46, +0.43) settled higher by 1.1%. Better-than-expected earnings from Cliffs Natural Resources (CLF 20.95, +2.73) supported other steelmakers as the Market Vectors Steel ETF (SLX 42.06, +0.55) settled higher by 1.3%.
In addition, miners also showed relative strength as precious metals rallied. Gold futures advanced 2.8% to $1462.80 per troy ounce while silver futures spiked 6.2% to $24.25 per troy ounce. Also of note, copper rose 2.8% to $3.247 per pound.
While the materials sector was the clear leader throughout the day, other cyclical groups outperformed as well.
Discretionary stocks were supported by retailers and homebuilders. The SPDR S&P Retail ETF (XRT 73.31, +1.17) added 1.6% while the SPDR S&P Homebuilders ETF (XHB 30.40, +0.42) rose 1.4% on better-than-expected earnings from Ryland Group (RYL 44.94, +3.24) and PulteGroup (PHM 20.79, +1.10). While both builders surpassed bottom-line expectations, revenues proved to be more of a mixed bag as Ryland was able to beat estimates while PulteGroup's top-line fell short of analyst expectations.
Technology stocks showed intraday strength, but the sector sold off into the close as cautious earnings and revenue guidance from Qualcomm (QCOM 62.44, -3.56) weighed.
With most growth-oriented groups contributing to today's advance, defensively-geared sectors lagged behind the broader market. However, the telecom space bucked the trend after reports indicated Verizon Communications (VZ 53.22, +1.42) may be preparing a $100 billion bid to gain full control of Vodafone's (VOD 30.43, +0.84) stake in Verizon Wireless. However, speculation regarding Verizon's attempt to gain full control of Verizon Wireless has circulated before.
Today's economic news was limited to weekly claims data. The initial claims level fell to 339,000 for the week ending April 20 from an upwardly revised 355,000 (from 352,000) for the week ending April 13. The Briefing.com consensus expected the initial claims level to drop to 351,000.
After several weeks of volatility following seasonal adjustment problems associated with the Easter holiday period, the initial claims level has again returned to its previous trend. The Department of Labor announced that the period of large swings in the weekly claims level is ending.
Tomorrow, first-quarter advance GDP will be reported at 8:30 ET while the final April Michigan Sentiment Survey will be released at 9:55 ET

4/24/13


The major averages ended today's session on a mixed note. The Dow shed 0.3% while Nasdaq and S&P 500 ended flat.
Defensively-oriented groups were among the leaders of the first-quarter market rally. Today, however, three defensive sectors finished firmly lower after top-line results from major components failed to justify the considerable first-quarter gains.
Consumer staples, telecom, and health care sectors all registered losses of at least 1.7%.
Consumer staples lagged after Procter & Gamble (PG 77.12, -4.82) reported revenue below the Capital IQ consensus estimate. In addition, the company issued cautious fourth quarter earnings and revenue guidance.
Elsewhere, telecoms were pressured by AT&T (T 37.04, -1.96) after the carrier missed on revenue. In addition, Citigroup and Morgan Stanley both downgraded the stock.
The top performing sector of the year, health care, declined steadily throughout the day after Amgen (AMGN 104.93, -7.83), Edwards Lifesciences (EW 64.60, -18.21), and Eli Lilly (LLY 56.05, -2.28) all reported below-consensus revenues.
In addition, Amgen's 6.9% decline weighed on biotech companies as iShares Nasdaq Biotech ETF (IBB 169.67, -5.11) settled lower by 2.9%.
The underperformance of biotechnology names kept the Nasdaq near its flat line even as technology stocks displayed relative strength. Apple (AAPL 405.46, -0.67) ended little changed after beating on earnings and revenue. Although the company's results surprised to the upside, its gross margin was reported on the low end of estimates. In addition, Apple lowered its third quarter revenue and gross margin guidance below consensus. Also of note, the company raised its quarterly dividend by 15%. However, the increased capital return program will be funded by taking on debt rather than repatriating its cash, which would be subject to U.S. corporate taxes.
Chipmakers were some of the top performing tech components after Broadcom (BRCM 35.08, +2.11) topped its earnings and revenue estimates. Meanwhile, the broader PHLX Semiconductor Index rose 1.3%.
While the best performing sectors of the first quarter ended firmly lower, three notable Q1 laggards ended in the lead. Energy, industrials, and materials all settled with gains of at least 1.0%.
The economically-sensitive groups were aided by a rebound in commodities. Crude oil ended higher by 2.8% at $91.63 per barrel while copper rose 2.4% to $3.166 per pound, and gold climbed 1.5% to $1429.70 per troy ounce.
Industrials received added support from defense stocks after General Dynamics (GD 71.73, +4.63) beat on earnings. Meanwhile, the broader PHLX Defense Index advanced 1.6%.
Today's volume was right in-line with its 200-day moving average as 706 million shares traded hands on the floor of the New York Stock Exchange.
Durable goods orders continued their streak of sizable up-and-down movements in March. Orders fell 5.7% after increasing a downwardly revised 4.3% (from 5.6%) in February. The Briefing.com consensus expected orders to fall 3.1%.
The wild swings in orders over the last few months have been the result of big moves in aircraft orders. In March, total aircraft orders -- defense and nondefense -- fell 43.5% after increasing 65.0% in February.
Excluding transportation, orders fell 1.4% after dropping a downwardly revised 1.7% (from -0.7%) in February. The consensus expected these orders to remain flat.
The weekly MBA Mortgage Index rose 0.2% to follow last week's increase of 4.8%.
Tomorrow, weekly initial and continuing claims will be reported at 8:30 ET. Among earnings of note, 3M (MMM 107.87, +0.48), Exxon Mobil (XOM 89.43, +0.13), and UPS (UPS 83.50, -0.24) will report their results before the opening bell.
The U.S. Treasury will auction $29 billion in 7-yr notes.

4/23/13

Equities settled with strong gains as the S&P 500 climbed 1.0%.

Although stocks ended near their highs, an afternoon headline from a hacked Twitter account of the Associated Press suggested two explosions occurred at the White House, sending the S&P lower by 15 points and back to its flat line before returning to session highs. The entire episode unfolded within the matter of five minutes.
Overseas developments primed U.S. equities for an upbeat start to the session. Although economic data from the old continent was largely disappointing, commentary from the region overshadowed the data.
Manufacturing and Services PMI reports from France and Germany came in below 50, a level which indicates contraction. This fueled speculation about a possible European Central Bank rate cut at its upcoming policy meeting. In addition, European Commission President Jose Manuel Barroso was quoted as saying the policy of austerity "has reached its limits."
The talk of further monetary easing combined with Mr. Barroso's comments buoyed European indices, and contributed to an upbeat start to the U.S. session.
Financials and technology led today's advance with bank stocks outperforming notably. The SPDR Financial Select Sector ETF (XLF 18.42, +0.32) settled higher by 1.8% after Discover Financial Services (DFS 44.34, +0.73) and Dow component Travelers (TRV 86.35, +1.77) reported better-than-expected earnings.
Elsewhere, the tech space saw broad gains and Netflix (NFLX 216.99, +42.62) surged 24.4% following its bottom-line beat. Chipmakers also rallied on the back of above-consensus quarterly results from ARM Holdings (ARMH 46.32, +6.08) and Texas Instruments (TXN 35.70, +0.89). Meanwhile, the broader PHLX Semiconductor Index advanced 2.1%. Also of note, the largest tech stock, Apple (AAPL 406.13, +7.46), gained 1.9% ahead of its quarterly report, which will be released this evening.
The discretionary space was another group which displayed considerable strength thanks to retailers and homebuilders. Coach (COH 55.55, +4.96) jumped 9.8% after beating on earnings while the SPDR S&P Retail ETF (XRT 71.56, +0.84) climbed 1.2%.
Also of note, the SPDR S&P Homebuilders ETF (XHB 29.65, +0.74) rose 2.6% after five builders were upgraded at Barclays. In addition, today's economic data contributed to the sector outperformance.
New home sales increased 1.7% in March to 417,000. There was no revision to the February report, which indicated 411,000 new homes were sold. That March number is still down from the recent January peak when 445,000 homes were sold. The Briefing.com consensus expected sales to increase to 415,000.
Inventory levels inched higher, rising from 150,000 in February to 153,000 in March. That represents a 4.4-month supply and is still well below levels considered normal. Like existing homes, new home inventories should trend around a 6.0-month supply when the industry is in good shape.
Tomorrow, the weekly MBA Mortgage Index will be reported at 7:00 ET while March durable orders and durable orders ex-transportation will be announced at 8:30 ET. On the earnings front, Boeing (BA 88.18, +1.24) and Ford Motor (F 13.36, +0.30) will shed light on their first quarter results before the opening bell.
The U.S. Treasury will auction off $35 billion in 5-yr notes.

4/22/13

The S&P 500 ended higher by 0.5% despite enduring some intraday weakness while the Dow added 0.1%, and the tech-heavy Nasdaq gained 0.9%.
Technology stocks led from the start with Microsoft (MSFT 30.83, +1.06) providing considerable support after ValueAct announced a $2 billion stake in the software company. Other tech shares also displayed strength as Apple (AAPL 398.67, +8.14) climbed 2.1%.
Although most large tech names ended with gains, IBM (IBM 187.83, -2.17) shed 1.1% to follow Friday's earnings-driven 8.3% drop. Interestingly, General Electric (GE 21.35, -0.40) and McDonald's (MCD 99.32, -0.60) remained under pressure after the two also provided disappointing earnings on Friday.
The underperformance of those names weighed on the Dow, which spent the bulk of today's session in negative territory.
Two of the weakest sectors of the month, energy and materials, ended atop today's leaderboard. The energy space gained 1.0% as better-than-expected earnings from Halliburton (HAL 39.29, +2.08) and a 1.1% rise in crude oil provided support the sector.
Elsewhere, the materials space settled higher as gold miners shook off their recent weakness. The Market Vectors Gold Miners ETF (GDX 28.97, +0.38) gained 1.3% as gold futures rose 2.1% to $1425.20.
While precious metals were able to rebound from last week's selloff, copper remained under pressure. The red metal shed 0.6% as global growth concerns stayed on the minds of investors.
The ongoing growth concerns were echoed by Caterpillar's (CAT 82.71, +2.28) quarterly report, which missed on the earnings and revenue. In addition, the machinery producer lowered its full-year earnings and revenue guidance below consensus. Although Caterpillar ended higher, the industrial sector settled with a loss of 0.1%.
The utilities sector was the only other group which settled with a loss as the SPDR Utilities Select Sector ETF (XLU 40.68, -0.05) ended lower by 0.1%.
Today's volume was below average as just over 620 million shares changed hands on the floor of the New York Stock Exchange.
Reviewing the day's economic data, existing home sales fell 0.6% from a downwardly revised 4.95 million (from 4.98 million) in February to 4.92 million in March. The Briefing.com consensus expected existing home sales to increase to 5.01 million.
Inventories managed to eke out a small gain, rising 1.6% to 1.93 million. That represents a 4.7-month supply at the current sales rate, which is down from a 6.2-month supply a year ago. According to the National Association of Realtors, an ideal inventory level is around a 6-month supply.
Tomorrow, February FHFA Housing Price Index and March new home sales will be reported at 9:00 ET and 10:00 ET, respectively. Among earnings of note, Delta Air Lines (DAL 15.14, -0.12) and Johnson Controls (JCI 33.15, +0.51) will report their quarterly results ahead of the opening bell.
The U.S. Treasury will auction off $35 billion in 2-yr notes.