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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

8/15/13

Equity futures point to a heavy open as last night's disappointing guidance from CSCO weighed early, and this morning's data ignited another wavwe of selling. The downbeat guidance from CSCO casts a shadow on on the prospects of a pickup in the second half of the year, and has the tech-heavy Nasdaq (-1.0%) leading the major averages lower. Futures dropped to their worst levels of the morning after this morning's data slate renewed concerns the Fed may begin tapering its bond buying plan as early as the September meeting. Initial claims fell to 320K, their lowest since October 2007. The heavy open will likely push the S&P 500 below 1680 support, which had been able to withstand several tests over the past month. Prior to today, the benchmark index has fallen in six of the past eight sessions, but the drop has been limited to just 1.5%

Overnight, markets across Asia were lower as the disappointing guidance from CSCO weighed on technology shares. Japan's Nikkei (-2.1%) was the laggard in the region despite the government suggesting the country's battle with deflation is progressing. Trade across the rest of the region was rather with China's Shanghai Composite ending little changed. Elsewhere, India's Sensex and South Korea's Kospi were closed for holiday.

The major European bourses trade in the red, piggybacking the action in Asia. Britain's FTSE (-1.1%) is leading the region lower despite the country's strong retail sales report (1.1% MoM actual v. 0.7% MoM expected). However, action is rather limited due to Assumption Day.

U.S. Treasuries came under significant selling pressure following this morning's data with longer dated yields surging to their highest levels in more than two years. The benchmark 10-yr yield crossed the 2.800% threshold before seeing some let up. Meanwhile, light selling has the Dollar Index has reversed to its best levels of the session with trade now looking to retake the 81.90 mark. Notable is the greenback's strength against the Japanese yen (USDJPY +50 pips @ 98.50) and weakness against the British pound (GBPUSD +40 pips @ 1.5545). CSCO, NTAP, KSS, WMT are names to watch following the release of their quarterly reports...The following are the most important factors influencing the market this morning:

Asia: Nikkei -2.1%, Hang Seng -0.9%, Shanghai UNCH

In regional economic data:

Japan's weekly foreign bonds buying report indicated net purchases of JPY1.61 trillion to follow last week's net purchases of JPY690.30 billion.

Australia's MI inflation expectations declined to 2.3% from 2.6%.

New Zealand's Business PMI rose to 59.5 from 54.7.

Singaporean retail sales fell 4.0% year-over-year (3.8% expected, 3.1% prior)

Looking at news:

Japan's chief cabinet secretary Yoshihide Suga said reports of Prime Minister Shinzo Abe calling for lower corporate tax rate are erroneous. In addition, finance minister Taro Aso said lowering the tax rate would have a minimal impact.

Europe: FTSE -1.1%, CAC -0.4%, DAX -0.7%, IBEX -0.1%, MIB CLOSED

Economic data was limited:

Great Britain's retail sales rose 1.1% month-over-month (0.6% expected, 0.2% previous) while the year-over-year reading increased 3.0% (2.5% forecast, 1.9% prior). Core retail sales increased 1.1% month-over-month (0.6% consensus, 0.3% previous) while the year-over-year reading indicated growth of 3.1% (2.7% expected, 1.8% prior).

In news:

Today's participation in the European session is limited with many participants away due to Assumption day.

Great Britain's retail sales report posted its best reading since January 2011, but the FTSE trails behind the remaining indices.

BRK.A Q2 portfolio holdings recap: New stakes in DISH (~37.3 mln shares), SU (~17.8 mln); Increased - USB (~78 mln from ~61 mln in Q1); Decreased - MDLZ (~600K from ~8 mln in Q1), KFT (~200K from ~1.6 mln); Liquidated - GCI (~1.7 mln)

DF announces 1 for 2 reverse split

DailyMail discusses speculation that Bill Ackman will soon be working with PE firms to take JCP private at 'substantial premium', while George Soros wants to double his stake

PBI discloses it expects to take $25 mln charge in Q3

TMUS agrees to sell $500 mln 5.25% senior notes due 2018

WY increases quarterly div by 10% to $0.22 from $0.20

Earnings/guidance of interest:

CSCO is -7.8% after beating its earnings expectations by one cent and guiding first quarter revenue below consensus. In addition, the company said it will reduce its workforce by about 5.0%.

NTAP is -5.5% after reporting better-than-expected earnings on below-consensus revenue.

KSS is +0.7% after reporting in-line earnings and revenue and guiding third quarter earnings below consensus.

WMT is -1.8% following its in-line earnings on below-consensus revenue. The retailer also lowered its full-year 2014 earnings and revenue guidance below analyst expectations.

Select analyst actions of interest:

Upgrades: NVAX tgt raised to $11 from $4 at Lazard, JKS upgraded to Buy from Neutral at ROTH Capital, MMLP upgraded to Outperform from Market Perform at Raymond James

Downgrades: SWHC downgraded to Underweight from Hold at KeyBanc Capital Mkts, MT initiated with a Underweight at Barclays, MU downgraded to Neutral from Outperform at Robert W. Baird, INTC downgraded to Neutral from Outperform at Robert W. Baird

Technical factors: A weaker tone persisted throughout but there has been no S&P chart damage of note as it formed an inside within the now six day trading range (Dow slipped under, tested 50 ema). However, the S&P did close under its 20 day ema for the first time in six weeks and ended just three points above the Aug/range low (1682). For the short term the index needs to sustain a breach of resistance at 1690/1691 and the highs of the last two days (1695/1696) in order to improve the price patterns. Minor support below the range is at 1680 with the next zone of note at 1676/1675.

Looking ahead: July industrial production and capacity utilization are scheduled to be reported at 9:15 ET while the August Philadelphia Fed Survey and the NAHB Housing Market Index are set to cross the wires at 10 ET. AMAT, AZPN, BYI, DELL, JWN will report following today's closing bell while EJ is set to release its quarterly results ahead of tomorrow's open. 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.