The Week In Review
11/26-11/30/12November 30, 2012
Equities were on uncertain footing during the first hour of the session. The S&P 500 followed the early indecision by sliding to its lows just above the 1410 level. A familiar theme played out intraday as President Obama and House Speaker Boehner held another round of press conferences. The President reiterated the importance of reaching compromise and expressed hope that enough Republicans can be convinced to break rank and vote in favor of his budget proposal. Meanwhile, House Speaker Boehner maintained his prior stance and said that Republicans are willing to compromise if Democratic lawmakers agree to spending cuts. Until then, the two sides remain at a stalemate. The benchmark average spent the majority of the session in the red, but a buying surge shortly before day's end lifted the index to flat close. Financials saw relative weakness as the budget debate remains in focus. Citigroup (C 34.57, -0.64) lost 1.8% and was the weakest performer among the majors. Though U.S. financials underperformed, their European counterparts advanced. Barclays (BCS 15.83, +0.17) and UBS (UBS 15.70, +0.11) added 1.1% and 0.7%, respectively. Earlier, Reuters reported Barclays may cut as many as 3500 investment bank positions and reduce the scope of its Asian operations. Tech stocks lagged the broader market and large cap names saw weakness. Apple (AAPL 585.28, -4.08), International Business Machines (IBM 190.07, -1.46), and Microsoft (MSFT 26.61, -0.33) all lost between 0.7% and 1.2%. Elsewhere, VeriSign (VRSN 34.15, -5.19) slid 13.2% after its updated agreement with the Department of Commerce limited the company's ability to increase domain registration prices. Also of note, Groupon (GRPN 4.14, -0.40) fell 8.8% after company spokesman said Chief Executive Officer Andrew Mason will not be replaced in the near term. Consumer discretionary stocks saw weakness and carmakers weighed on the sector. Earlier, Ford Motor (F 11.45, -0.08) said it plans to increase its electric car market share to 11.0%, from the current 5.2%. Despite the news, shares of Ford finished lower by 0.7%. Looking at other automakers, Honda Motor (HMC 33.29, -0.30), Toyota Motor (TM 86.08, -0.43), and Thor (THO 37.74, -0.21) all lost between 0.5% and 1.0%. Restaurant operator Yum! Brands (YUM 67.08, -7.39) also weighed on the discretionary space. The restaurant operator slid 9.9% after issuing full-year 2013 guidance and reaffirming its full-year 2012 earnings growth forecast of at least 13%. The guidance proved to be a point of concern as sales in China are expected to continue tracking lower. Following the update, Raymond James, Susquehanna, and UBS all downgraded the stock. On the upside, teen retailer Five Below (FIVE 37.15, +5.76) soared 18.4% after beating on earnings and revenue. In addition, the company issued downside fourth quarter earnings guidance while revenue is expected to come in above consensus estimates. The utilities sector was the top performer and the SPDR Utilities Select Sector ETF (XLU 35.32, +0.37) settled higher by 1.1%. Within the space, electric utilities paced the advance. Duke Energy (DUK 63.82, +1.43) gained 2.3% after reaching settlement with the North Carolina Utilities Commission. The settlement aims to resolve issues following the merger of Duke Energy and Progress Energy. In addition, the company President, Chairman, and Chief Executive Officer Jim Rogers announced his intention to retire by the end of next year. Looking at other utility stocks, Northeast Utilities (NU 38.74, +0.58) and IDACORP (IDA 42.71, +0.47) both advanced near 1.3%. In economic news, the November Chicago PMI reading of 50.4 surprised to the downside as economists surveyed by Briefing.com had generally expected a reading of 50.7 to follow the prior month's 49.9. Personal income was unchanged in October, which was below the 0.2% increase expected by the Briefing.com consensus. Personal spending decreased by 0.2%, which was below the expected 0.1% uptick. Core personal consumption expenditures were higher by 0.1%, which fell short of the broadly expected reading of 0.2%.
November 29, 2012
Today's session started on a positive note after yesterday's comments from House Speaker Boehner were viewed as supportive. However, the Speaker held another press conference today at which he said no "substantive progress" has been made. The S&P 500 responded to Mr. Boehner's remarks by falling back to its flat line. The weakness did not last long, and the benchmark average was able to regain its losses to close higher by 0.4%. The materials sector was one of the top performers, and producers of building materials outperformed. The space was supported by the October pending home sales data which pointed to a 5.2% increase, well ahead of the 1.0% expected by the Briefing.com consensus. Headwaters (HW 7.64, +0.19), Martin Marietta Materials (MLM 90.79, +3.99), and Vulcan Materials (VMC 51.31, +1.62) all gained between 2.6% and 4.6%. Steelmakers saw broad strength, and the Market Vectors Steel ETF (SLX 44.34, +0.65) settled higher by 1.5%. Though most major steelmakers registered gains, Cliffs Natural Resources (CLF 28.89, -0.72) was a notable underperformer, down 2.4%. Tech shares also outperformed, and the SPDR Technology Select Sector ETF (XLK 29.16, +0.14) gained 0.5%. The largest tech component, Apple (AAPL 589.36, +6.42), advanced 1.1% as it attempted to regain its 200-day moving average near $600. Elsewhere, Intel (INTC 19.53, -0.56) slipped 2.8% after Goldman Sachs lowered its price target for the stock to $16 from $20. Meanwhile, peer Advanced Micro Devices (AMD 2.04, +0.08) settled higher by 4.1% as the company sought to sell its campus in Austin, Texas. Also of note, Research In Motion (RIMM 11.54, +0.44) spiked 4.0% after Goldman Sachs upgraded the stock to 'buy' from 'neutral.' The maker of Blackberry phones has been on a strong run recently, gaining nearly 60% since the start of November. As the end of the month nears, retailers have begun to report their November same store sales. Out of the 16 companies which have already reported, only four have beaten their estimates. Of those four, Stein Mart (SMRT 8.56, +0.97) led the way with a 12.8% gain. Today's advance occurred after the company reported a 7.1% growth in same store sales on expectations of a 2.3% increase. On the downside, Kohl's (KSS 45.02, -6.13) sank 12.0% after its same store sales declined by 5.6% on expectations of a 2.1% increase. Like many retailers which missed their estimates, Kohl's blamed the softness on the aftereffects of Superstorm Sandy. As a result of the disappointing data, the SPDR S&P Retail ETF (XRT 63.36, -0.46) shed 0.7%. Overnight, India's Sensex gained 1.8% after Goldman Sachs upgraded Indian stocks. As a result, the iPath MSCI India Index ETN (INP 58.37, +1.90) was the best performing regional ETN, up 3.4%. Indian stocks listed in the U.S. reflected the strength as they registered broad gains. Among financials, HDFC Bank (HDB 42.85, +2.58) and ICICI Bank (IBN 41.54, +2.76) jumped 6.4% and 7.1%, respectively. Elsewhere, automaker Tata Motors (TTM 25.60, +1.39) surged 5.7% and business technology consultant Infosys (INFY 44.66, +1.22) settled higher by 2.8%. The Dow Jones Transportation Average added 0.6% as companies specializing in package delivery led the bellwether complex. Expeditors International of Washington (EXPD 37.35, +0.60), FedEx (FDX 90.80, +1.31), and UPS (UPS 73.56, +0.85) all gained between 1.2% and 1.6%. Earlier, Stifel Nicolaus upgraded Expeditors International to 'buy' from 'hold.' In addition, morning reports indicated UPS may pursue a network sharing agreement with its rivals in order to save the TNT Express deal. The latest weekly initial jobless claims count totaled 393,000, which was lower than the 395,000 that had been expected by the Briefing.com consensus. The tally was below the revised prior week count of 416,000. As for continuing claims, they fell to 3.287 million from 3.357 million. The second estimate of third quarter GDP pointed to growth of 2.7%, up from the 2.0% observed in the preliminary reading. The upwardly revised increase is slightly lower than the 2.8% increase that economists polled by Briefing.com had expected. Also, the third quarter GDP Deflator was revised down, to 2.7%. In Friday's economic data, October personal income and personal spending as well as core PCE prices will all be released at 8:30 ET. Lastly, November Chicago PMI will be reported at 9:45 ET.
November 28, 2012
Equities opened lower, but staged a reversal when top lawmakers reiterated their desire to reach a budget agreement. After marking a session low near its 200-day moving average, the S&P 500 reversed 25 handles to session highs. The reversal was aided by comments from House Speaker Boehner who said he is optimistic a deal can be reached in order to avoid going over the fiscal cliff. In addition, the President held a press conference where he reiterated his belief in higher tax rates for top earners. He also stressed that if Congress fails to approve selective tax increases, going over the cliff will result in an across-the-board tax hike. The S&P 500 ended the session with a gain of 0.8%. The Federal Reserve released its October Beige Book, which pointed to modest growth in seven Districts. Meanwhile, two Districts reported stronger growth while Boston, New York, and Philadelphia saw weak performance. The weakness in New York and Philadelphia was attributed to disruptions caused by Superstorm Sandy. Further, contacts in several regions expressed concerns over the uncertainty surrounding the ongoing budget debate. Consumer credit was mixed as higher demand for home mortgage loans and auto loans increased consumer lending in some Districts. However, small business loan demand was generally described as weaker to only moderately higher. Regarding hiring, "most districts reported modest gains while wage and price pressures remained subdued. Today's housing data pointed to a 0.3% decrease in October new home sales. The annualized rate of 368,000 fell short of expectations and caused homebuilder stocks to fall to their respective lows. Shares of major builders have enjoyed strong performance since the start of the year, but today's economic data contributed to industry-wide weakness. DR Horton (DHI 19.42, -0.16), PulteGroup (PHM 17.00, -0.11), and Lennar (LEN 38.38, -0.34) all lost between 0.6% and 0.9%. Despite the weakness in homebuilders, consumer discretionary stocks outperformed after a handful of retailers reported strong earnings. American Eagle Outfitters (AEO 20.77, +1.38) surged 7.1% after beating on top and bottom lines. In addition, the company issued in-line fourth quarter earnings guidance. PVH (PVH 116.46, +7.17) rose by 6.6% after its third quarter earnings of $2.34 beat the Capital IQ consensus estimate by $0.05. Despite the earnings beat, the company guided fourth quarter earnings below consensus and suggested revenue is expected to come in above analyst expectations. Regarding full-year earnings and revenue, the company expects both figures to be below current expectations. Express (EXPR 14.15, +1.16) spiked 8.9% following its bottom line beat. In addition, the apparel retailer reported in-line revenue and issued upside fourth quarter earnings guidance. Movado Group (MOV 35.50, +3.27) soared 10.2% after beating on earnings and revenue. The luxury distributor also raised its full-year earnings guidance in-line with the Capital IQ consensus. Lastly, the company declared a special dividend of $0.75. Also of note, Green Mountain Coffee Roasters (GMCR 36.86, +7.91) surged 27.3% after reporting strong earnings. During the fourth quarter, the company earned $0.64, which was $0.16 ahead of the Capital IQ consensus estimate. Additionally, the beverage company beat on revenue and issued first quarter and full-year earnings and revenue guidance above consensus. Elsewhere, Costco Wholesale (COST 102.58, +6.07) gained 6.3% after reporting a 6.0% increase in November comparable store sales. In addition, the wholesaler declared a special cash dividend of $7.00. Solar stocks saw broad strength after JA Solar (JASO 0.70, +0.05) and Yingli Green Energy (YGE 1.62, +0.19) reported earnings. JA Solar rose by 7.7% after reporting mixed results. During the third quarter, the company recorded a loss of $0.30, which was $0.11 worse than the Capital IQ consensus estimate. However, JASO's revenue of $260.90 million exceeded expectations. Meanwhile, Yingli Green Energy spiked 13.3% after beating on earnings and reporting revenue below consensus. In addition, the company reaffirmed its full-year 2012 shipment guidance. Major solar names all outperformed and the Guggenheim Solar ETF (TAN 14.04, +0.68) rose by 5.1%. The weekly MBA Mortgage Index reflected a 0.9% decrease in mortgage applications. Today's reading follows the prior week's decrease of 2.2%. Tomorrow, weekly initial and continuing claims will be reported at 8:30 ET. In addition, the second estimate of third quarter GDP and the GDP deflator will also be announced at 8:30 ET. Lastly, October pending home sales will hit the wires at 10:00 ET.
November 27, 2012
Equities opened the session on a lower note. The Greek financing agreement between the International Monetary Fund and the Eurozone finance ministers did little to inspire investor confidence. Instead, market participants remain focused on the U.S. as they wait for any hints of progress in the budget debate. After marking a session low in the 1400 area, the S&P 500 is adding 0.1% at midday. The utilities sector appears to be poised for a rebound after enduring a rough month. Yesterday, utility stocks gained 1.3% on the strength of electricity providers after Deutsche Bank upgraded Exelon (EXC 29.95, +0.63). Today, the story appears to be repeating as the sector heads higher after ISI Group upgraded Exelon to 'buy' from 'neutral.' EXC is adding 2.1% and other electricity providers are registering gains as well. NV Energy (NVE 18.33, +0.27), UNS Energy (UNS 41.16, +0.62), and PPL (PPL 28.77, +0.33) are all up near 1.2%. Technology stocks are performing largely in-line with the broader market and Apple (AAPL 588.70, -0.83), which has been in focus recently, trades lower by 0.1%. Additionally, Seagate (STX 26.21, -1.13) is down 4.2%. The weakness comes after company insiders exercised their options and sold stock. The news is seen as negative for the Seagate as the company was seen as a potential takeover target. Stock sales by insiders suggest that a deal is far from being completed. Western Digital (WDC 35.01, -0.80) is off by 2.2% in sympathy. Also of note, Corning (GLW 12.24, +0.89) is surging 7.8% after the company updated its forecast to reflect better-than-expected fourth quarter LCD volume. The consumer staples sector is outperforming the broader market and the SPDR Consumer Staples Select Sector ETF (XLP 35.53, +0.12) is advancing 0.4%. Among food producers, ConAgra (CAG 29.59, +1.30) is rising by 4.6% after announcing plans to acquire Ralcorp (RAH 88.80, +18.57) for $90 per share, representing a 28.2% premium to RAH's Monday closing price. Elsewhere, Monster Beverage (MNST 51.95, +6.09) is advancing 13.0%. Earlier, a letter sent from the Federal Drug Administration to Illinois Senator Dick Durbin indicated the regulatory body is conducting an investigation into the potential danger of Monster products as well as the possible need for increased regulation. However, the FDA said it does not see a problem with taurine and guarana, which are the two main additives in energy drinks. Lastly, cigarette producers are extending their recent strength. Universal (UVV 49.64, +0.36) is adding 0.7% and Reynolds American (RAI 43.20, +0.27) is firmer by 0.6%. In today's economic news, the September Case-Shiller 20-city Home Price Index rose by 3.0%, while a 3.1% increase had been expected by the Briefing.com consensus. This followed the previous month's increase of 2.0%. The latest consumer confidence reading for November came in at 73.7, while economists polled by Briefing.com expected a reading of 73.0. Today's figure follows last month's reading of 72.2. Separately, the September Housing Price Index from the FHFA increased by 1.1%, which follows a 0.7% increase observed during the prior month.Durable goods orders were unchanged in October, which was better than the 0.4% decrease that had been expected among economists polled by Briefing.com. This follows the downwardly revised prior month increase of 9.2%. Excluding transportation related items, durable goods orders increased in October by 1.5%, which was better than the 0.4% decrease that had been broadly anticipated. Prior month's reading was revised down to reflect an increase of 1.7%.
November 26, 2012
Equities began the week on a cautious note as uncertainty crept back into the markets. Overseas, the Eurogroup continues to discuss the next tranche of Greek aid. Reports from the talks indicate lawmakers remain split over whether or not haircuts should be applied to the outstanding Greek debt. Additionally, elections in the Spanish region of Catalonia resulted in two-thirds of the vote going to parties which support a referendum on independence. The European news combined with some profit-taking following Friday's rally translated into a downbeat session which saw the S&P 500 slip 0.2%. The telecom space was the biggest laggard as traders rotated out of high-dividend stocks. The sector is likely to see further weakness until a fiscal cliff resolution is agreed upon. Even if a timely compromise is reached, it remains to be seen what impact the agreement will have on high-yielding stocks. Today, AT&T (T 33.97, -0.39) and Verizon (VZ 43.30, -0.36), which generate respective yields of 5.2% and 4.7%, both lost near 1.1%. Retailers succumbed to the broad market pressure, and the SPDR S&P 500 Retail ETF (XRT 62.59, -0.61) slid 1.0%. An earlier story by MarketWatch pointed to a 1.8% decrease in Black Friday sales despite a 3.5% uptick in foot traffic. However, it should be noted that two major retailers, Target (TGT 62.77, -1.70) and Wal-Mart (WMT 69.91, -0.29) were closed last year, but opened on Thursday evening this year. Because of this, a portion of sales which would have counted towards Friday's total, were registered on Thursday evening. The weakness was visible across all retailers as no particular group bore sole responsibility for the decline. Grocery store operators SUPERVALU (SVU 2.63, -0.08) and Safeway (SWY 16.41, -0.55) saw seeing respective losses of 3.0% and 3.2%. Looking at apparel retailers, Macy's (M 39.86, -1.87) lost 4.5% and Aeropostale (ARO 13.77, -0.68) ended lower by 4.7% after Janney Montgomery Scott downgraded the stock to 'neutral' from 'buy.' Last week, the SPDR Financial Select Sector ETF (XLF 15.78, -0.06) gained over 4.0% after a brief test of its 200-day moving average in the $15.08 area. Today, the ETF proxy for financial stocks shed 0.4% and most majors underperformed. Wells Fargo (WFC 32.90, -0.30) and Citigroup (C 35.57, -0.46) were among the biggest laggards as the two lost 0.9% and 1.3%, respectively. Meanwhile, Goldman Sachs (GS 120.94, +0.63) and Morgan Stanley (MS 16.61, +0.18) registered gains and outperformed their peers. Elsewhere, European financials also saw relative weakness. Deutsche Bank (DB 43.30, -0.57) and Barclays (BCS 15.51, -0.77) lost 1.3% and 4.7%, respectively. Barclays slumped after Qatar Holdings, LLC sold the remainder of the bank's warrants held since the onset of the financial crisis. As a result of the sale, a $1.19 billion Barclays stock offering was triggered. In addition, the Financial Times indicated some investors are calling on management to split up the company. The utilities sector fell over 7.0% in the aftermath of Superstorm Sandy. Today, the space led the broader market with a gain of 1.3%. Exelon (EXC 29.32, +0.75) gained 2.6% after Deutsche Bank upgraded the stock to 'buy' from 'hold.' Looking at other electric utilities, FirstEnergy (FE 41.77, +0.70) rose by 1.7% and PPL Corporation (PPL 28.44, +0.36) added 1.3%. Technology stocks also managed close in the black. Shares of Apple (AAPL 589.53, +18.03) settled higher by 3.2% as the stock remains in focus after tumbling nearly 20% from its all-time high of $705.07. Earlier, Citigroup initiated coverage of the stock with a 'buy' rating and a $675 price target. In other analyst action, Facebook (FB 25.94, +1.94) surged 8.1% after BTIG upgraded the stock to 'neutral' from 'sell.' Also of note, 3D Systems (DDD 46.55, +4.81) spiked 11.5% after unveiling the next generation of its ProJet 3D printers.