Day Traders Diary
12/17/12The major averages registered broad gains during today's session. The S&P 500 followed a modestly higher open with a steady climb to its highs. Shortly before midday, reports out of Washington indicated President Obama and House Speaker Boehner held a 45-minute conversation in an attempt to further the ongoing budget debate. The developments had little effect on the markets as the key indices continued their upward drift. As a result, the S&P 500 finished higher by 1.2%. The financial sector paced the advance, and the SPDR Financial Select Sector ETF (XLF 16.33, +0.33) gained 2.1%. Weekend reports indicated Speaker Boehner offered to accept a tax hike for top earners if the new revenue is met with spending cuts. However, the White House has rejected the offer. While a deal remains elusive, the presence of discussion between the lawmakers is being received as a positive sign by the market. Among the majors, Goldman Sachs (GS 123.49, +4.13) and Morgan Stanley (MS 18.53, +0.48) both advanced near 3.0%. Discretionary stocks also outperformed, and homebuilders contributed to the strength. DR Horton (DHI 19.69, +0.95), PulteGroup (PHM 18.04, +0.90), and Toll Brothers (TOL 32.22, +1.37) all gained between 4.4% and 5.3%. Automakers and manufacturers of auto parts also showed relative strength. Ford Motor (F 11.39, +0.29) and Cooper Tire & Rubber (CTB 25.04, +0.97) finished higher by 2.6% and 4.0%, respectively. In M&A news, Caribou Coffee (CBOU 16.10, +3.78) will be acquired by Joh. A. Benckiser for $16.00 per share. The transaction carries a total value of approximately $340 million, and the purchase price represents a 29.9% premium to Caribou's Friday closing price. Among tech shares, Apple (AAPL 518.83, +9.04) was down as much as 1.5% intraday, but after a brief dip near $500, bargain hunters lifted the largest tech component to a gain of 1.8%. Earlier, Citigroup downgraded the stock to 'Neutral' from 'Buy.' The move came weeks after the company's November 26 initiation with a 'Buy.' In addition, three investment banks lowered their price targets for Apple. Canaccord Genuity dropped its target to $750 from $800, Pacific Crest cut its estimate to $565 from $645, and Mizuho slashed its target to $600 from $750. Apple suppliers saw notable losses on Friday, but the group outperformed today. Skyworks Solution (SWKS 20.75, +0.95) advanced 4.8% and Qualcomm (QCOM 62.04, +2.20) rose by 3.7%. The Dow Jones Transportation Average finished in-line with the remaining industrials. Of the twenty stocks which constitute the transportation complex, seventeen registered gains. Airlines saw broad strength after Dahlman Rose upgraded its outlook on the industry from neutral to bullish. JetBlue Airways (JBLU 5.71, +0.18) and Alaska Air (ALK 43.98, +0.82) outperformed their peers and gained 3.3% and 1.9%, respectively. On the downside, Con-Way (CNW 27.47, -0.60) lost 2.1% after BB&T Capital Markets downgraded the stock to 'Underweight' from 'Hold.' The downgrade comes as BB&T believes Con-Way's consensus estimates are materially too high. Also of note, Ryder System (R 48.82, -0.78) slipped 1.6% after the company announced Chief Executive Officer Gregory Swienton will retire at the time of the company's annual meeting of shareholders on May 3, 2013. European markets ended the day on a mixed note. France's CAC and UK's FTSE saw respective losses of 0.1% and 0.2% while Germany's DAX added 0.1%. In the United Kingdom, Aggreko lost 21.7% and was the weakest performer. The plunge followed cautious comments from the company regarding its 2013 profit expectations. On the upside, International Consolidated Airlines Group led the way with a 3.3% gain. In addition, miners outperformed. Anglo American, Kazakhmys, and Rio Tinto all gained between 1.6% and 3.2%. In France, financials weighed on the index. BNP Paribas shed 0.7% and Credit Agricole lost 0.9%. On the upside, Alcatel-Lucent (ALU 1.32, +0.08) surged 5.8% to extend its recent strength. In Germany, carmakers outperformed. Daimler advanced 1.9% after merging its two Mercedes units in China. Also of note, Infineon Technologies rose by 1.6% after the company's Chief Executive Officer said Infineon may make a handful of small-to-medium acquisitions. Drug makers and suppliers of medical products underperformed. Fresenius Medical, Fresenius SE, and Merck (MRK 43.63, +0.09) all lost near 1.0%. Reviewing today's economic data, the December Empire State Manufacturing Survey registered a reading of -8.1, which was down from the prior month's reading of -5.2, and worse than the reading of 2.0 expected by the Briefing.com consensus. Meanwhile, the October net long-term TIC flows report indicated a $1.3 billion inflow of foreign capital into U.S. denominated assets. This follows the prior month's $3.3 billion inflow.
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