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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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The Week In Review

11/12-11/16

November 16, 2012
The major averages began the day on a down note and continued declining for the first two hours of the session. As the S&P 500 reached its lows, Congressional leaders held a press conference regarding the progress of fiscal cliff negotiations. During the public statement, Senator Harry Reid said that officials would not wait until the last day of December, and could agree on the framework for a deal prior to the deadline. The remarks helped the indices surge to session highs, where they spent the majority of the afternoon. The S&P 500 built on its gains and finished higher by 0.5%. High-yielding telecom stocks continued seeing weakness as the country nears the fiscal cliff. Morning reports indicated the White House is considering a package which would delay the mandatory spending cuts scheduled to go into effect on January 1, 2013. However, this was received as a delay of the decision, rather than a step towards a concrete solution. The telecommunications sector slid 0.6% and AT&T (T 33.14, -0.28), Sprint Nextel (S 5.48, -0.06), and Verizon (VZ 41.40, -0.30) all lost between 0.7% and 1.1%. Among technology stocks, Apple (AAPL 527.68, +2.06) registered a gain of 0.4% as the stock attempts to recover from recent softness. A handful of notable technology companies have reported earnings since yesterday's close. Dell (DELL 8.86, -0.70) settled lower by 7.3% after missing on earnings and revenue. During the third quarter, the computer manufacturer saw its top line decline 10.7% year-over-year, to $13.72 billion. In addition, the company issued downside fourth quarter revenue guidance and reaffirmed its full-year 2013 earnings expectations. Meanwhile, Applied Materials (AMAT 10.15, -0.15) reported strong results, but issued cautious guidance. The semiconductor manufacturer earned $0.06 on $1.65 billion in revenue, which beat the Capital IQ consensus estimates. However, forward guidance was a point of concern as the company expects first quarter earnings and revenue below consensus. Lastly, Autodesk (ADSK 31.48, +0.98) rose by 3.2% after reporting mixed earnings. The software provider's earnings exceeded estimates by $0.04, while its revenue of $548 million fell short of estimates. Similar to Applied Materials, Autodesk is cautious about its upcoming quarter as it expects earnings and revenue to miss consensus estimates. Looking at the financial sector, the SPDR Financial Select Sector ETF (XLF 15.28, +0.10) added 0.7%. Even though the proxy ETF traded ahead of the broader market, major financials were mixed. JPMorgan Chase (JPM 39.53, +0.14) added 0.4% after reaching a settlement with the Securities and Exchange Commission regarding Bear Stearns and JPMorgan residential mortgage-backed securities. As part of the settlement, JPMorgan will pay approximately $297 million in penalties. Credit Suisse (CS 21.94, -0.43) was also named in the settlement and will pay approximately $120 million in fines. Looking at other majors, Citigroup (C 34.98, -0.23) slid 0.7% while Wells Fargo (WFC 31.94, +0.37) outperformed with a gain of 1.2%. The Dow Jones Transportation Average underperformed the industrial average and settled lower by 0.5%. Out of the five airlines which are part of the transportation average, four saw notable losses. Delta Air Lines (DAL 9.33, -0.16) fell 1.7%, and JetBlue Airways (JBLU 4.96, -0.07) lost 1.4%. Meanwhile, Southwest Airlines (LUV 8.93, +0.09) outperformed and added 1.0%. As 17 out of 20 transportation stocks settled lower, two listings connected to the trucking industry saw strength. JB Hunt (JBHT 59.32, +0.22) and Ryder System (R 44.22, +0.45) added 0.4% and 1.0%, respectively. Casino stocks were broadly stronger after Penn National Gaming (PENN 48.23, +10.62) announced plans to split its real estate and gaming assets into two separate companies. Under the new structure, a newly-established PropCo will be the first real investment trust focused solely on gaming. Penn National surged 28.2% while peers Ameristar Casinos (ASCA 19.52, +2.67), Pinnacle Entertainment (PNK 12.65, +0.84), and Las Vegas Sands (LVS 42.27, +1.71) all gained between 4.2% and 15.9%. In economic news, the September net long-term TIC flows report indicated a $3.3 billion inflow of foreign capital into U.S. denominated assets. This follows the prior month's $90.0 billion inflow. Industrial production decreased during October by 0.4%, which was worse than the 0.1% increase that had been expected by the Briefing.com consensus. The reading follows the revised 0.2% increase recorded during the prior month. Capacity utilization hit 77.8%, which was worse than the 78.3% expected by the Briefing.com consensus, and down from the revised prior month reading of 78.2%.

November 15, 2012
Equities showed indecision in the early going as trade hovered around the flat line for the first 90 minutes before the S&P 500 slid to a session low near 1350. The level provided some support for the benchmark index which managed to cross into positive territory before sellers retook control and drove it back down to session lows. However, the average received a considerable bid in the final minutes of the session and ended with a loss of 0.2%. Financial stocks felt the brunt of yesterday's sell-off. As the nation's leaders discuss ways to avoid falling off the fiscal cliff, bank stocks will be especially sensitive to hints of a possible agreement. Today, major financials saw gains. Bank of America (BAC 9.09, +0.10), Citigroup (C 35.21, +0.19), and Morgan Stanley (MS 16.26, +0.17) advanced between 0.5% and 1.1%. Looking at technology bellwethers, Apple (AAPL 525.62, -11.26) slid 2.1% to extend its recent slide. Since its September highs, the stock has lost over 25% in value as it searches for its next level of support. Meanwhile, Intel (INTC 20.03, +0.07) advanced 0.4% to snap its nine-day losing streak. The stock has lost nearly 10% since the start of November. Networking companies continued seeing strong earnings. Yesterday, Cisco Systems (CSCO 17.94, +0.28) rallied after its quarterly report. Today, NetApp (NTAP 30.20, +3.07) surged 11.4% after beating on the bottom line. The networking company exceeded earnings expectations by $0.03 and reported in-line revenue. Following the report, Raymond James upgraded shares of NetApp to 'outperform' from 'market perform.' In other earnings news, Wal-Mart (WMT 68.72, -2.59) reported third quarter earnings of $1.08 on $113.93 billion in revenue. The retail giant's bottom line beat the Capital IQ consensus estimate by $0.01, while the revenue missed expectations. The company's guidance was mostly in-line as it expects fourth quarter earnings between $1.53 and $1.58. Wal-Mart lost 3.6% in response to this morning's results while peer, Target (TGT 62.44, +1.06), gained 1.7% after its in-line quarter. Stocks in the materials space traded largely in-line with the broader market. However, weakness among steel producers weighed on the sector. AK Steel (AKS 3.63, -0.39) fell 9.7% after the company announced the pricing of $500 million in senior notes set to mature in 2018 and 2019. In addition, AK Steel priced 22 million shares of common stock at a public offering price of $4.00 per share. Looking at other steelmakers, Steel Dynamics (STLD 12.29, -0.42) and Reliance Steel (RS 53.71, -0.79) settled lower by 3.3% and 1.5%, respectively. The Dow Jones Transportation Average traded in-line with the remaining industrials. The bellwether complex shed 0.2% as 12 out of the 20 transportation stocks saw losses. This morning, United Continental (UAL 19.51, -0.47) experienced technical difficulties which resulted in some flight delays. United lost 2.4%, while rivals Alaska Air (ALK 40.88, +0.36), JetBlue Airways (JBLU 5.03, +0.05), and Southwest Airlines (LUV 8.84, +0.08) all gained between 0.9% and 1.1%. Airline stocks displayed relative strength after yesterday's sell-off weighed on the group and caused Delta and JetBlue to lose near 6.0% each. A number of economic data points were reported today. Most notably, the Philadelphia Fed Survey slipped to -10.7 for November. This follows October's reading of -1.9 while economists polled by Briefing.com had expected that the Survey would improve to a reading of 0.0. The latest weekly initial jobless claims count totaled 439,000, which was higher than the 388,000 that had been expected by the Briefing.com consensus. The tally was ahead of the revised prior week count of 361,000. As for continuing claims, they rose to 3.334 million from 3.163 million. October consumer prices increased by 0.1%, which was in-line with the Briefing.com consensus forecast of a 0.1% increase. Today's reading follows prior month's 0.6% increase. In addition, core prices rose by 0.2% which was slightly hotter than the generally expected increase of 0.1%. Separately, the Empire Manufacturing Survey for November registered a reading of -5.2, which was up from the prior month's reading of -6.2. Economists polled by Briefing.com had expected that the Survey would slip to -8.5. Tomorrow, September net long-term TIC flows will be reported at 9:00 ET. In addition, October industrial production and capacity utilization will both be announced at 9:15 ET. Also note that November options are set to expire tomorrow.

November 14, 2012
Equities began the day on a higher note, but the early strength did not hold past the opening minutes. The S&P 500 marked its session best shortly after the open, and headed lower. The morning slide was accompanied by headlines out of the Middle East, which indicated Israeli forces have killed two top Hamas officials in an operation dubbed "Pillar of Defense." After the first-hour slide, the benchmark average held near the 1,365 level until President Obama held a press conference to further discuss the fiscal cliff. During his remarks, the commander-in-chief said he is "hoping for compromise and hoping for new ideas." The president's statements failed to inspire investor confidence, thus resulting in an afternoon sell-off which saw the S&P 500 settle lower by 1.4%. Earlier, the Federal Reserve released the minutes from its October meeting. The Committee discussed economic and policy implications from implementing various thresholds that would need to be triggered before the target Federal Funds Rate is increased. Meeting participants deliberated whether such thresholds might usefully replace, or augment the date-based guidance that had been provided in the policy statements since August 2011. Participants generally favored the use of economic variables, in place of, or in conjunction with a calendar date. However, they offered different views on whether quantitative or qualitative thresholds would be most effective. The minutes also indicated that a number of committee members believe the current asset purchasing program will need to be expanded once operation twist ends. Technology stocks saw narrower losses than the broader market. The relative strength was largely due to a positive quarterly report from Cisco Systems (CSCO 17.66, +0.81), which beat on the bottom line, and reported revenue in-line with expectations. After reporting earnings, Cisco was upgraded at Pacific Crest to 'outperform' from 'sector perform.' Other networking shares also benefited from the upbeat earnings. F5 Networks (FFIV 87.50, +0.96), JDS Uniphase (JDSU 11.13, +0.18), and Juniper Networks (JNPR 17.55, +0.20) all gained between 1.1% and 1.6%. Elsewhere in tech, Advanced Micro Devices (AMD 1.93, -0.16) slid 7.7% after Reuters reported the company has hired JPMorgan Chase to explore its options, which include a possible sale. Also of note, LinkedIn (LNKD 98.77, -0.49) fell to session lows after Facebook (FB 22.36, +2.50) announced the launch of a jobs page. The move was partially retraced and LinkedIn finished lower by 0.5%. Meanwhile, Facebook settled near its session highs on the day when another 700 million shares held by insiders became available for public trade. Consumer discretionary stocks traded mostly in-line with the broader market. However, apparel retailers saw strength after Abercrombie & Fitch (ANF 41.92, +10.74) reported strong quarterly results. The company's shares gained 34.5% after beating earnings estimates by $0.27. In addition, the retailer's $1.17 billion in revenue also exceeded expectations. The company topped off the strong report by raising its full-year 2013 earnings guidance above consensus. Abercrombie & Fitch is now above its 200-day moving average, trading at levels last seen in the middle of May. In the energy sector, coal stocks continued their recent weakness and the Market Vectors Coal ETF (KOL 23.30, -0.48) slid 2.0%. Arch Coal (ACI 6.59, -0.44) lost 6.3% and was a notable laggard. The stock traded at its worst level in a month after testing, and being rejected by its 200-day moving average. Looking at other coal names, Alpha Natural Resources (ANR 7.27, -0.31) slid 4.1% and Peabody Energy (BTU 25.38, -0.84) fell 3.2%. The Dow Jones Transportation Average underperformed the remaining industrials and lost 2.6%. Airlines saw considerable weakness as Delta Air Lines (DAL 9.56, -0.65) and JetBlue Airways (JBLU 4.97, -0.30) fell 6.4% and 5.8%, respectively. In today's economic news, the weekly MBA Mortgage Index showed a 12.6% increase in new mortgage applications. This follows the prior week's 5.0% decline. During September, inventories rose by 0.7%, which was slightly above the 0.6% increase that had been expected by the Briefing.com consensus. This follows prior month's reading of a 0.6% increase. October retail sales declined by 0.3%, which was slightly worse than the 0.2% decrease that had been broadly expected. The prior month's reading was revised up to show an increase of 1.3%. Excluding autos, retail sales were unchanged, which was below the Briefing.com consensus, which called for a rise of 0.1%. October producer prices declined by 0.2%, which was cooler than the 0.1% increase that had been widely forecast. Core producer prices slipped 0.2% which was lower than the Briefing.com consensus call of a 0.1% increase.

November 13, 2012
Equities began today's session on a lower note. However, the major averages followed the lower open with a steady climb towards session highs. The optimism held the S&P 500 near the 1,385 level for the majority of the session, before late day selling pushed it back into the red. As a result the benchmark average settled lower by 0.4%. Consumer discretionary stocks outperformed after four retailers reported earnings. Michael Kors (KORS 50.98, +0.40) advanced 0.8% after beating on earnings and revenue. The company reported earnings of $0.49, which was $0.09 better than the Capital IQ consensus estimate. Meanwhile, the revenue of $532.9 million was also ahead of expectations. The company's outlook was mixed as it sees full-year 2013 earnings above consensus, while revenue is forecast to fall short of estimates. Saks (SKS 9.92, +0.04) added 0.4% after reporting earnings of $0.12, which was in-line with the Capital IQ consensus estimate. However, the company's revenue of $713 million missed expectations. Regarding its outlook, the company said it expects fourth quarter comparable store sales to be relatively flat year-over-year. TJX (TJX 42.06, +1.09) gained 2.7% after beating on the top line, and reporting earnings in-line with expectations. Note that the company issued downside guidance as it expects fourth quarter earnings to fall below analyst expectations. Home Depot (HD 63.38, +2.22) rose by 3.6% after reporting upbeat earnings. During the third quarter, the home improvement store operator earned $0.74 on $18.13 billion in revenue. Both figures were ahead of the Capital IQ consensus estimate. In addition to reporting strong earnings, Home Depot raised its guidance as it sees an uptick in the housing recovery. While the management expects strong future results, shares of Home Depot have been pricing in the news for quite some time. The stock has added over 52% since the beginning of this year. The technology sector underperformed the broader market. Semiconductor shares contributed to the weakness as the PHLX Semiconductor Index settled lower by 1.0%. Elsewhere in technology, Microsoft (MSFT 27.08, -0.90) lost 3.2% after announcing the departure of Windows and Windows Live President Steven Sinofsky. Following Mr. Sinofsky's departure, Julie Larson-Green will be promoted to lead all Windows software and hardware engineering. In the materials sector, AK Steel (AKS 4.50, -0.96) issued downside fourth quarter guidance. After reducing its earnings expectations for the current quarter, the company expects to report a loss between $0.34 and $0.39. Meanwhile, the Capital IQ consensus called for a loss of $0.19. In addition to the downside guidance, AK Steel announced a registered offering of 25 million shares of its common stock. Also of note, the company has commenced a private offering of $350 million in senior secured notes. Shares of AK Steel slid 17.6% following the news and other steel producers are seeing mixed performance. United States Steel (X 21.31, -0.22) shed 1.0% while Worthington Industries (WOR 21.93, +0.83) advanced 3.9%. The October Treasury Budget showed a $120 billion deficit, which was wider than the deficit of $113 billion expected by the Briefing.com consensus. Looking at tomorrow's economic data, the weekly MBA Mortgage Index will be released at 7:00 ET. In addition, October retail sales, retail sales ex-auto, PPI, and core PPI will all be announced at 8:30 ET. Lastly, September business inventories and the Federal Reserve Open Market Committee minutes will hit the wires at 10:00 ET and 14:00 ET, respectively.

November 12, 2012
Stocks began today's session on a higher note. However, the S&P 500 followed the early strength with a slide into the red. After hovering near its lows for little over an hour, the index staged a steady climb towards fresh session highs. The benchmark average followed the early afternoon strength with another slide towards its flat line, where it remained until the end of the day. Today's volume was well below average and the bond market was closed in observance of Veterans Day. High-yielding telecom stocks have been under pressure during the past week. Today, the sector was the top performer. Within the space, Telephone & Data Systems (TDS 23.38, +0.81) advanced 3.6% after Citigroup upgraded the stock to 'buy' from 'neutral.' Elsewhere in telecommunications, AT&T (T 33.87, +0.33) added 1.0% after announcing the company will subsidize the Apple (AAPL 542.83, -4.23) iPad. Meanwhile, Sprint Nextel (S 5.61, +0.06) also saw relative strength as the stock settled higher by 1.1%. On the downside, Inteliquent (IQNT 2.96, -0.55) fell 15.7% after Morgan Stanley downgraded the stock to 'equal-weight' from 'overweight.' Looking at today's M&A activity, Jefferies Group (JEF 16.27, +2.00) gained 14.0% after confirming plans to merge with Leucadia National (LUK 21.14, -0.66). Per the agreement, Jefferies stockholders will receive 0.81 of a share of LUK for each share of JEF owned. Following the transaction, Jefferies shareholders will hold 35.3% of Leucadia common stock. In the materials sector, Titanium Metals (TIE 16.50, +4.93) surged 42.6% after being acquired by Precision Castparts (PCP 179.48, +8.15) for $16.50 per share. The purchase price represents a 42.6% premium to TIE's Friday closing price, and the total transaction is valued at approximately $2.9 billion. In the health care space, biotechnology names led the group higher following positive trial data. Celgene (CELG 75.66, +4.16) surged 5.8% after its Phase III trial of Abraxane in the treatment of pancreatic cancer showed a statistically significant survival benefit. Meanwhile, Gilead Sciences (GILD 73.92, +8.91) spiked 13.7% after reporting a 100% sustained virologic response rate for an Interferon-free regimen of Sofosbuvir and Ribavirin in treatment of Hepatitis C patients. Homebuilders were broadly weaker and the SPDR S&P Homebuilders ETF (XHB 25.29, -0.38) shed 1.5%. Earlier, DR Horton (DHI 19.40, -1.20) reported mixed quarterly results. During the fourth quarter, the homebuilder earned $0.30 on $1.3 billion in revenue. The company's bottom line exceeded the Capital IQ consensus estimate by $0.01, while its revenue fell short of expectations. In addition, DHI reported a 61.0% increase in the value of its backlog. The account is currently valued at $1.7 billion, up from $1.0 billion during the same period last year. Shares of DR Horton slid 5.8% after trading higher at the start of the session. Elsewhere, Beazer Homes (BZH 13.77, -2.87) slumped 17.3% after reporting a fourth quarter loss of $2.57 on $370.9 million in revenue. The company management commented on the quarter by saying, "Operationally, we generated significant growth in orders, closings and backlog, while seeing improving trends in gross margins. From a balance sheet perspective, we added liquidity, improved our book value, extended debt maturities and reduced interest expense. While our community count will likely decrease for much of the year, we are actively investing in a substantial number of new communities, which we expect to deliver closings starting in fiscal year 2014." The Dow Jones Transportation Average outperformed the remaining industrials. The bellwether complex rose by 0.8% and 17 group components saw gains. Trucking stocks outperformed as Con-way (CNW 28.32, +0.62) and JB Hunt (JBHT 60.04, +1.38) settled higher by 2.2% and 2.4%, respectively. Railroads were also notably stronger. Kansas City Southern (KSU 77.31, +0.40) advanced 0.5% and Union Pacific (UNP 121.77, +1.52) gained 1.3%.