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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

10/24/12

Stocks began the session on an upbeat note, but the bullish sentiment was dispelled in the opening minutes. The S&P 500 and Nasdaq marked their respective highs minutes into the trading day, before sliding back towards the unchanged level. The Dow, however, held its gains a bit longer before recoupling with the other two indices. This afternoon's statement from the Federal Open Market Committee was met with mostly muted reaction, and the S&P 500 finished lower by 0.3%.

The Federal Open Market Committee said, "Information received since the Federal Open Market Committee met in September suggests that economic activity has continued to expand at a moderate pace in recent months. Growth in employment has been slow, and the unemployment rate remains elevated. Household spending has advanced a bit more quickly, but growth in business fixed investment has slowed. The housing sector has shown some further signs of improvement, albeit from a depressed level."

The policy statement indicated that the Committee will continue purchasing agency mortgage-backed securities at a pace of $40 billion per month, and Operation Twist will continue through the end of this year.

Looking at technology earnings, Facebook (FB 23.22, +3.72) spiked 19.1% after reporting earnings of $0.12 on $1.26 billion in revenue. Investors welcomed the results as both numbers came in ahead of the Capital IQ consensus estimates. The company also pointed to improved results from its mobile advertising. Following the earnings report, Bank of America/Merrill Lynch, Citigroup, and Stifel Nicolaus all upgraded the stock to 'buy.'

Netflix (NFLX 60.11, -8.10) slid 11.9% after reporting mixed earnings. The company announced earnings of $0.13 which was $0.09 better than the Capital IQ consensus estimate. Meanwhile, its revenue of $905 million was in-line with Capital IQ estimates. The management commented on their expansion into Latin America by saying, "The biggest issue holding back much stronger growth is payments."

Juniper Networks (JNPR 15.99, -1.58) fell 9.0%. Yesterday, the company reported third quarter earnings of $0.22 on $1.12 billion in revenue. Both numbers were ahead of the Capital IQ consensus estimate. However, the company issued downside fourth quarter earnings and revenue guidance which gave investors cause for concern.

Restaurant stocks were in focus after a handful of industry components reported their earnings. Brinker International (EAT 30.01, -3.44) lost 10.3% after reporting mixed results. During the past quarter, the restaurant operator earned $0.37, which was just short of the $0.38 forecast by the Capital IQ consensus. However, the company's revenue of $683.5 million was ahead of Capital IQ expectations. The management also made cautious comments regarding the current quarter and said beef prices are the biggest concern.

Buffalo Wild Wings (BWLD 74.70, -8.76) fell 10.5% after missing on both earnings and revenues. The company's earnings of $0.57 fell short of the $0.61 expected by the Capital IQ consensus. Meanwhile, the restaurant operator reported revenue of $246.9 million, which was lower than the $254.57 million forecast by the Capital IQ consensus. The management cited rising input prices as the reason for disappointing earnings. Note that today's selling has dropped the stock to levels not seen since middle of August.

Panera Bread (PNRA 168.43, +8.09) advanced 5.1% after exceeding top and bottom line expectations. In addition, the company raised its fourth quarter earnings forecast above the Capital IQ consensus.

The Dow Jones Transportation Average underperformed the broader market, and ended with a loss of 2.0%. The weakness in the bellwether group was a result of disappointing earnings from three components. CH Robinson (CHRW 57.55, -3.42) shed 5.6% after its earnings of $0.72 missed Capital IQ consensus estimates by $0.01. The freight carrier's revenue of $2.88 billion also fell short of Capital IQ analyst expectations.

Delta Air Lines (DAL 10.04, -0.11) also delivered a disappointing quarterly report as its top and bottom line results fell short of the Capital IQ consensus forecast. Shares of Delta settled lower by 1.1% following the release.

Norfolk Southern (NSC 61.09, -4.92) dipped 7.5% after the rail operator's earnings of $1.24 exceeded Capital IQ consensus estimates, while its revenue of $2.69 billion was in-line with expectations. Note that the results are being compared to downside guidance which the company issued on September 19. The remaining railroads in the transportation average were mixed. Kansas City Southern (KSU 79.07, +0.51) added 0.7%, while CSX (CSX 20.59, -0.72) and Union Pacific (UNP 120.87, -2.35) shed 3.4% and 1.9%, respectively.

New home sales in September hit an annualized rate of 389,000, which was up from August's revised rate of 368,000, and better than the rate of 385,000 that had been broadly expected by the Briefing.com consensus.

Separately, the latest Housing Price Index from the FHFA was also released. For August, the Index increased by 0.7%, which follows a 0.1% increase in the prior month.

The MBA Mortgage Index showed a 12.0% decrease in new mortgage applications during the past week. Today's number follows last week's 4.2% decline.

Tomorrow, weekly initial and continuing claims, durable orders, and durable orders --ex transportation will all be reported at 8:30 ET. In addition, September pending home sales will be announced at 10:00 ET.

The U.S. Treasury will auction off $29 billion in 7-yr notes.

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.