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Leigh Baldwin & Co.

112 Albany Street, Cazenovia, NY 13035 | Phone: (315) 655-2964 Toll Free: 1-800-659-8044

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Day Traders Diary

10/9/12

Equities started the day on a mixed note before a broad sell-off sent the major averages to their session lows. The weakness started in the technology sector where a slew of companies lowered their third quarter guidance. After reaching their worst levels of the day, the key indices traded sideways until late day selling coincided with reports the U.S. Attorney in Manhattan filed a civil mortgage fraud lawsuit against Wells Fargo (WFC 35.12, -0.68). The company has since come out and denied any wrongdoing. As a result, the S&P 500 fell 1.0% while the Nasdaq underperformed with a loss of 1.5%.

The technology sector was the biggest laggard. Early weakness resulted from Apple (AAPL 635.85, -2.32) slipping as much as 2.0% intraday. However, shares of the tech giant proved to be resilient as the stock reversed and closed with a loss of 0.4%. Despite the intraday recovery in Apple, the rest of the technology sector was unable to reclaim its losses.

Technology bellwether Intel (INTC 21.90, -0.61) slipped 2.7% after Bernstein downgraded the stock from 'market perform' to 'underperform.' It should be noted that today's selling dropped Intel to its 52-week low.

Netflix (NFLX 65.52, -7.99) slid 10.9% after Bank of America/Merrill Lynch downgraded the stock from 'buy' to 'underperform' with a $72 price target. The downgrade resulted from valuation questions following the recent rally as well as concerns over the company's domestic streaming business and its international profitability. Today's selling follows yesterday's 10.0% rally which resulted from a Morgan Stanley upgrade.

VASCO Data (VDSI 7.34, -1.60) adds to the list of technology companies who cut their third quarter outlook. The stock sank 17.9% after the company lowered its third quarter and full-year 2012 guidance below consensus. The company commented on the lowered guidance by saying that "the lower than expected order intake in Q3 requires [the company] to lower [its] estimates of full-year revenue and related operating margins."

The energy sector was the top performer as crude oil advanced 3.3%. Within the complex, Gulfport Energy (GPOR 32.65, +2.22) gained 7.3% after reaffirming its 2012 guidance. The company continues to estimate 2012 production to range from 2.9 million to 3.1 million.

Coal stocks were broadly higher and the Market Vectors Coal ETF (KOL 24.35, +0.38) added 1.6%. Among individual coal producers, Alpha Natural Resources (ANR 7.28, +0.50) advanced 7.4% while CONSOL Energy (CNX 33.11, +1.38) and Peabody Energy (BTU 23.93, +1.29) saw gains between 4.3% and 5.7%.

Meanwhile, Penn Virginia (PVA 5.49, -1.04) fell 15.9% after announcing concurrent public offerings of 12 million shares of common stock and $50 million of depositary shares representing convertible preferred equity.

The Dow Jones Transportation Average slid 1.1% to break its recent streak of outperformance. Airlines were among the weakest components as they erased a portion of their recent gains. Delta Air Lines (DAL 9.89, -0.24) slipped 2.4%, while Alaska Air (ALK 36.43, -0.52) and United Continental (UAL 20.49, -0.41) fell between 1.4% and 2.0%. Out of the twenty transportation stocks, only Matson (MATX 21.36, +0.38) advanced. Shares of the shipping company settled higher by 1.8%.

Chinese internet stocks were under pressure after Credit Suisse downgraded Baidu.com (BIDU 106.48, -7.80) from 'neutral' to 'underperform.' In addition, the price target was lowered from $118 to $83. As a result of the downgrade, Baidu.com slid 6.8%, and traded at levels last seen in early September.

Other Chinese internet names also declined in sympathy. SINA (SINA 60.36, -0.77), Sohu.com (SOHU 39.58, -1.12), and Youku Tudou (YOKU 19.16, -0.36) all registered losses between 1.2% and 2.8%.

Tomorrow, the MBA Mortgage Index will be reported at 7:00 ET. In addition, the September Treasury Budget and Federal Reserve's September Beige Book will be released at 14:00 ET.


All comments contained herein are for informational purposes only, and should not be considered as a solicitation to buy or sell any security. The firm does not guarantee the accuracy or completeness of the information or make any warranties regarding results from it's usage.