Day Traders Diary


Stocks began the day in the red after equity futures showed considerable pre-market weakness. The S&P 500 spent the opening minutes just below its flat line. However, the benchmark average began climbing after the Washington Post reported that a plan for a middle class tax freeze will be proposed by the president at this afternoon's press conference. In addition, today's preliminary Michigan Consumer Sentiment Survey was reported at 84.9, which was its highest level since July 2009. The S&P 500 continued advancing through the morning and marked its highs ahead of the president's speech. President Obama's statement called for consensus building, and he stated that spending cuts must be combined with new revenue. The remarks failed to inspire investor confidence and the S&P 500 headed back near its flat line before ending with a slim gain of 0.2%. Note that today's close was one point below the 200-day moving average.

Shares of Apple (AAPL 547.06, +9.31) rebounded from recent weakness, and the stock ended higher by 1.7%.

Elsewhere in technology, Kayak Software (KYAK 39.67, +8.63) surged 27.8% after agreeing to be acquired by Priceline (PCLN 625.87, -2.00). Per the agreement, PCLN will pay $40.00 per share of KYAK, representing a 28.9% premium to Kayak's Thursday closing price.

The consumer discretionary sector was a notable underperformer. J.C. Penney (JCP 20.64, -1.05) lost 4.8% after reporting disappointing earnings. The retailer announced a third quarter loss of $0.93, while the Capital IQ consensus called for earnings of $0.02. Meanwhile, the company's revenue of $2.93 billion fell short of the expected $3.29 billion. Also of note, the company reported a same-store sales decrease of 26.0%. The expectations called for a 17.0% decline.

Elsewhere, Groupon (GRPN 2.76, -1.16) slid 29.6% following another round of earnings which failed to please investors. The online coupon site's revenue of $568.6 million fell short of the expected $592.06 million. GRPN is down nearly 90.0% since its initial public offering last year.

For-profit education stocks saw weakness after two names reported disappointing earnings. Career Education (CECO 2.93, -0.48) slid 14.1% after the company reported a third quarter loss of $0.47 on $332.8 million in revenue. CECO's bottom line was $0.04 worse than the Capital IQ consensus estimate while its revenue exceeded estimates. Total new student starts fell 23.0% year-over-year and the company announced plans to eliminate approximately 900 positions.

Elsewhere, Strayer Education (STRA 46.51, -9.66) plunged 17.2%. The company beat their earnings expectations by $0.05, but downside guidance weighed on the stock. Strayer reported a 5.0% decrease in fall 2012 enrollment. Following earnings, Stifel Nicolaus downgraded the stock to 'hold' from 'buy.'

The Dow Jones Transportation Average slipped 0.7%. The five airlines which are a part of the average saw broad weakness. JetBlue Airways (JBLU 5.31, -0.09) and Southwest Airlines (LUV 9.06, -0.12) saw respective losses of 1.7% and 1.3%.

Shipper Matson (MATX 22.67, +0.25) was the top performer within the transportation average. The stock trades gained 1.1%. Meanwhile, the other shipping stock, Kirby Group (KEX 53.89, -0.92), was one of the weakest performers in the 20-stock complex and lost 1.7%.

Homebuilders were weaker today and the SPDR S&P Homebuilders ETF (XHB 25.67, -0.29) dipped 1.1%. KB Home (KBH 15.69, -0.54) and PulteGroup (PHM 16.80, -0.57) saw notable losses as the two stocks both slid 3.3%.

Before Monday's open, two homebuilders will report their quarterly results. The Capital IQ consensus estimate expects Beazer Homes (BZH 16.64, -0.36) to report a loss of $1.05 on $336.66 million in revenue. Elsewhere, DR Horton (DHI 20.60, -0.37) is expected to announce earnings of $0.30 on revenue of $1.38 billion.

Wholesale inventories increased by 1.1% in October. That was higher than the increase of 0.4% which had been forecast by the consensus.

Export prices, excluding agriculture, increased by 0.2% in September after they had increased by 0.7% in the prior month. Excluding oil, import prices rose by 0.3%, which follows the 0.2% increase experienced in the prior month.

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