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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

12/21/12

December 21, 2012
Equities spent the duration of today's session in the red. The S&P 500 lost 0.9% after House Speaker John Boehner cancelled Thursday's vote on his 'Plan B' due to a lack of support from his party. In a morning press conference, the Speaker said he is not walking away from negotiations with President Obama. However, an agreement remains distant and the House of Representatives has adjourned until December 27. Upon returning to work, lawmakers will be left with just two business days before the calendar year ends. The financial sector led yesterday's advance as market participants showed optimism ahead of the scheduled vote on 'Plan B.' However, the vote never took place, and legislators will be left with just a couple business days when they return to work next Thursday. After adding nearly 4.0% between Monday's open and Thursday's close, The SPDR Financial Select Sector ETF (XLF 16.40, -0.19) lost 1.2%. Among the majors, Bank of America (BAC 11.29, -0.23) and Citigroup (C 39.49, -0.68) were two of the weakest performers as they finished with respective losses of 2.0% and 1.7%. Looking at tech stocks, the SPDR Technology Select Sector ETF (XLK 28.95, -0.25) settled lower by 1.2% and major sector components registered comparable losses. Apple (AAPL 519.33, -2.40), Google (GOOG 715.63, -6.73), and International Business Machines (IBM 193.42, -1.35) all lost between 0.5% and 0.9%. In notable earnings, Research In Motion (RIMM 10.91, -3.21) slumped 22.7% after reporting its quarterly results. Although the smartphone maker beat on earnings and revenue, the company's subscriber growth was a point of concern. Elsewhere, Micron Technology (MU 6.32, -0.47) slid 6.9% after reporting disappointing earnings and revenue. Utilities traded largely in-line during the first half of the session. However, mid-afternoon buying lifted the SPDR Utilities Select Sector ETF (XLU 35.31, -0.12) well off its lows. The ETF ended with a loss of 0.3% and companies specializing in production of industrial gasses were among the sector leaders. Piedmont (PNY 32.42, +0.25) added 0.8% after reporting earnings and reaffirming guidance in-line with the Capital IQ consensus. Among electricity providers, Entergy (ETR 64.52, +0.11) and FirstEnergy (FE 41.61, +0.07) registered gains following early-session weakness. Defensive stocks have seen strength throughout the year. As a result, the PHLX Defense Sector Index has gained over 15.0% since January 3. Today, the space shed 0.3%, and registered narrower losses than the broader market. This came after the House of Representatives passed the defense budget bill, which would spare the sector from drastic cuts in the event the country goes over the fiscal cliff. In addition, a late-afternoon report from Reuters indicated the bill was also passed by the Senate, and sent to the President for approval. Looking into the 17-stock defense index, GenCorp (GY 9.00, -0.22) lost 2.4% and was the weakest performer. On the upside, Embraer (ERJ 27.70, +0.15) and Lockheed Martin (LMT 93.13, +0.63) added 0.5% and 0.7%, respectively. In M&A news, Ameristar Casinos (ASCA 26.50, +4.43) was bought by Pinnacle (PNK 16.20, +2.85) for $26.50 per share, which represents a 20.0% premium to Ameristar's Thursday close. The deal was received well by investors as ASCA and PNK both gained near 20.0%. The strength in shares of Pinnacle was due to expectations of synergies and an improvement in margins. Today's economic data was plentiful and most figures were reported ahead of expectations. November durable goods orders increased by 0.7%, which was better than the 0.2% increase that had been expected among economists polled by Briefing.com. This comes after the prior month's reading was revised up to reflect an increase of 1.1%. Excluding transportation related items, durable goods orders increased in November by 1.6%, which was better than the 0.2% decrease that had been broadly anticipated. Prior month's reading was revised from +1.8% to +1.9%. Personal income increased by 0.6% in November, which was ahead of the 0.3% increase expected by the Briefing.com consensus. Personal spending increased by 0.4%, which was ahead of the expected uptick of 0.3%. Core personal consumption expenditures were unchanged, which fell short of the broadly expected reading of +0.1%. The University of Michigan's final December Consumer Sentiment Survey fell to 72.9 from the 74.5 that was posted in the preliminary Survey. The Briefing.com consensus expected the reading to rise to 74.8.

December 20, 2012
The major averages finished higher despite showing indecision in the early part of the session. The fiscal cliff remained the focal point, and investors showed optimism in Washington's ability to get a deal done. Lawmakers from both sides of the aisle continued to exchange jabs, and Speaker Boehner said the President and the Democrats have not done enough to avoid falling off the cliff. Mr. Boehner touted the proposal he put forth, which is expected to face a House of Representatives vote tonight around 19:30 ET. The S&P 500 gained 0.6% ahead of this evening's vote. The financial sector was the top performing space in the S&P 500 and the SPDR Financial Select Sector ETF (XLF 16.70, +0.23) settled higher by 1.4%. Of the majors, Bank of America (BAC 11.52, +0.33) gained 3.0%, and was the top advancer. NYSE Euronext (NYX 32.25, +8.20) surged 34.1% after agreeing to be acquired by IntercontinentalExchange (ICE 130.10, +1.79) for $33 per share. The transaction price represents a 37.2% premium to NYSE Euronext's Wednesday close. On the downside, Discover Financial (DFS 38.41, -1.36) slid 3.4% following mixed earnings. During the fourth quarter, the company earned $1.07, which was $0.04 below the Capital IQ consensus estimate. However, Discover's revenue of $2.00 billion exceeded expectations. Technology stocks lagged the broader market and Apple (AAPL 521.73, -4.57) lost 0.9%. Among notable tech earnings, technology consultant Accenture (ACN 69.02, -1.38) slid 2.0% after reporting its quarterly results. While the company beat on earnings, its revenue reflected a slowdown in corporate spending. On the upside, Jabil Circuit (JBL 19.95, +1.38) surged 7.4% after beating on earnings and revenue. In addition, Jabil issued downside second quarter earnings guidance while revenue is expected to be in-line with analyst estimate. The health care space was the weakest performer, and a handful of names moved on news. Allscripts Healthcare (MDRX 9.14, -1.54) sank 14.4% after the company concluded the review of its strategic alternatives, and decided against a sale. In addition, Allscripts named Paul Black as its Chief Executive Officer. Mr. Black will replace Glen Tullman, who will resign. Also of note, Lee Shapiro will step down from his current function of president. Elsewhere, Merck (MRK 42.15, -1.50) shed 3.4% after its trial for TREDAPTIVE yielded disappointing results. On the upside, The Medicines Company (MDCO 23.71, +1.42) surged 6.4% following the announcement of positive trial results for oritavancin in the treatment of acute bacterial skin and skin structure infections. The November existing home sales report saw its annualized rate increase to 5.04 million units. An improvement in the sales of existing homes suggests new homes may face an increase in demand as well. Homebuilders responded generally well to the news. MDC Holdings (MDC 36.87, +1.24) advanced 3.5% and DR Horton (DHI 20.10, +0.15) rose by 0.8%. Elsewhere, KB Homes (KBH 15.60, -1.06) slid 6.4% despite beating on earnings and revenue. During the fourth quarter, the homebuilder earned $0.10, which was $0.04 better than the Capital IQ consensus estimate. Meanwhile, its revenue of $578.2 million also exceeded expectations.

The latest weekly initial jobless claims count totaled 361,000, which was worse than the 345,000 that had been expected by the Briefing.com consensus. The tally was above the revised prior week count of 344,000. As for continuing claims, they rose to 3.225 million from 3.213 million. The third estimate of third quarter GDP showed growth of 3.1%, which was better than the 2.7% that had been expected by the Briefing.com consensus. However, the third quarter GDP Deflator was left unrevised at 2.7%. The November Housing Price Index from the FHFA increased by 0.5%, which follows a 0.2% increase observed during the prior month. The Philadelphia Fed Survey ticked up to +8.1 for December. This comes after November's reading of -10.7. Economists polled by Briefing.com had expected that the Survey would improve to a reading of -1.3. Also of note, leading indicators for October decreased by 0.2%, which followed the prior month's increase of 0.2%. European markets ended today's session on a mixed note. The United Kingdom's FTSE shed 0.1% while France's CAC and Germany's DAX both added 0.1%. In the United Kingdom, Carnival (CCL 36.99, -2.07) was the weakest performer. The cruise-line operator lost 6.1% after reporting disappointing earnings. On the upside, media company ITV gained 3.1%. In France, financials AXA and Credit Agricole led the index with respective gains of 1.1% and 1.3%. Software company Cap Gemini was the weakest index component, and lost 2.7% following disappointing earnings from Accenture. German stocks eked out slim gains and drug makers led the way. Bayer and Merck both added near 1.0%. Meanwhile, ThyssenKrupp was the weakest performer. The steelmaker lost 2.1% after railroad Deutsche Bahn filed a lawsuit which named ThyssenKrupp as one of the defendants.

December 19, 2012
Stocks began the day on a slightly higher note as yesterday's optimism regarding a fiscal cliff resolution lingered. However, the initial strength quickly faded, and the S&P 500 slipped below its flat line where it spent the remainder of the session. A recurring theme played out in Washington where lawmakers held another round of press conferences with both sides pushing back against the other. Most notably, Speaker Boehner said the House of Representatives will vote on his 'plan B' tomorrow. The remarks kept the S&P 500 near its lows before a final round of selling dropped the benchmark index to a loss of 0.8%. The technology sector outperformed the broader market, and Oracle (ORCL 34.09, +1.21) contributed to the relative strength. The software company gained 3.7% after beating on earnings and revenue. Elsewhere, Apple (AAPL 526.31, -7.59) lost 1.4% with today's declined causing the company's market cap to slip below $500 billion. Hard drive makers have seen recent strength, and major manufacturers once again outperformed. Seagate Technology (STX 30.32, +0.96) and Western Digital (WDC 41.20, +1.60) settled higher by 3.3% and 4.0%, respectively. Prior to the open, both stocks were upgraded to 'Buy' from 'Neutral' at Craig Hallum. However, Cleveland Research made cautious comments regarding both names. General Motors (GM 27.18, +1.69) surged 6.6% after the U.S. Treasury announced plans to sell its remaining shares of the company. Of the 500 million shares to be sold, 200 million will be bought by General Motors at $27.50 per share. The remaining 300 million shares will be sold in an orderly fashion over the next 12-15 months. Peer Ford Motor (F 11.73, +0.06) rose by 0.5%. The Dow Jones Transportation Average advanced 0.2% on the strength of airlines. Delta Air Lines (DAL 11.83, +0.30) and United Continental (UAL 23.96, +0.39) finished higher by 2.6% and 1.7%, respectively. It should be noted the two stocks have added nearly 20% since the beginning of December. Elsewhere, FedEx (FDX 93.20, +0.84) settled higher by 0.9% after beating on earnings and revenue. While the company's second quarter result exceeded expectations, forward guidance was a point of concern. The provider of package delivery services expects its third quarter earnings to fall below consensus estimates while full-year earnings are forecast in-line with analyst forecasts. On the downside, railroads underperformed. CSX (CSX 20.01, -0.23) and Union Pacific (UNP 125.77, -1.39) both lost near 1.1%. Today's economic data focused on housing and painted a mixed picture. November housing starts hit an annualized rate of 861,000 units, and were below the 875,000 expected by the Briefing.com consensus. Meanwhile, building permits came in at 899,000, which were ahead of the Briefing.com consensus forecast of 876,000. Homebuilders ended the session on a lower note. Lennar (LEN 39.27, -0.44), PulteGroup (PHM 18.46, -0.15), and Toll Brothers (TOL 32.08, -0.43) all lost between 0.8% and 1.3%.European markets registered gains across the board. Germany's DAX added 0.2% while France's CAC and United Kingdom's FTSE rose by 0.4% each. On the periphery, Greek ASE surged 4.8%. In Germany, HeidelbergCement led the way with a 4.6% gain. The strength followed comments from MainFirst Bank, which expects the producer of building materials to receive a credit rating upgrade next year. Among the decliners, drug maker Merck lost 2.3% after its cancer treatment trial returned disappointing results. France's CAC was supported by financials. BNP Paribas advanced 1.6% and Credit Agricole gained 2.3%. It is worth noting that French Finance Minister Pierre Moscovici has proposed a bill aimed at separating proprietary trading from traditional banking. As part of the legislation, a EUR10 billion resolution fund would also be set up. In the United Kingdom, producer of building materials, CRH, led all shares with a 4.9% surge. The outperformance followed optimistic comments from Deutsche Bank, which upgraded CRH to 'Buy' from 'Neutral.' On the downside, distributor Bunzl lost 4.3% after JPMorgan lowered the 2013 earnings expectations for Bunzl. Greek financials soared after the European Central Bank announced it will once again accept Greek Government Bonds as eligible collateral. Eurobank, Piraeus Bank, and National Bank of Greece all surged between 10.0% and 12.5%.

December 18, 2012
Stocks registered broad gains during today's session as comments from Washington lawmakers indicated the budget debate is intensifying. Though an agreement remains elusive, the markets welcomed the developments and spent the duration of the day in an upward climb. As a result, the S&P 500 advanced 1.2%. Apple (AAPL 533.90, +15.07), which has been in focus recently, supported the technology sector and finished higher by 2.9%. The SPDR Financial Select Sector ETF (XLF 16.57, +0.24) gained over 2.0% yesterday, and the financial sector proxy added another 1.5% today. The space was expected to show heightened sensitivity to hints of progress in the budget debate, and today's developments were received positively by the majors. Goldman Sachs (GS 127.77, +4.28) and Morgan Stanley (MS 19.12, +0.59) outperformed their peers as both saw gains over 3.0%. Energy stocks were supported by strength in crude oil and the SPDR Energy Select Sector ETF (XLE 73.19, +1.32) settled higher by 1.8%. Prior to the open, Baker Hughes Incorporated (BHI 41.93, +1.29) warned that fourth quarter North American revenue and profit margins will likely be lower than previously expected. Baker Hughes was down as much as 2.0% in pre-market trade, but has seen notable strength since. BHI finished with a gain of 3.2% and peers Halliburton (HAL 34.80, +1.26) and Schlumberger (SLB 71.35, +1.67) rallied 3.8% and 2.4%, respectively. In addition, coal stocks outperformed following comments from the International Energy Agency, which said it expects coal to eclipse oil as world's top energy source around 2017. CONSOL Energy (CNX 34.29, +0.62) and Walter Energy (BTU 27.37, +0.74) both gained near 2.0%. In M&A news, Arbitron (ARB 47.03, +8.99) surged 23.6% after agreeing to be acquired by Nielsen (NLSN 30.92, +1.30) for $48 per share. The transaction represents a premium of approximately 26% to Arbitron's closing price on December 17, 2012. Nielsen has secured a financing commitment for the total transaction amount, and the transaction has been approved by the boards of both companies. The NAHB Housing Market Index for December registered a reading of 47. That is up from the prior month's revised reading of 45, and in-line with expectations among economists polled by Briefing.com. Homebuilders benefitted from today's rally, and the SPDR S&P Homebuilders ETF (XHB 26.89, +0.55) finished higher by 2.1%. The year-long strength in homebuilder stocks has lifted the ETF to its best level since July 2007. Among individual builder stocks, DR Horton (DHI 20.08, +0.39) and PulteGroup (PHM 18.61, +0.57) rose by 2.0% and 3.2%, respectively. The current account deficit for the third quarter totaled $107.5 billion, which was wider than the $104.2 billion deficit that had been broadly anticipated. This marks an improvement from the second quarter's $118.1 billion deficit. The major European averages ended the day on a positive note. France's CAC gained 0.3%, United Kingdom's FTSE rose by 0.4%, and Germany's DAX advanced 0.6%. In France, Alcatel-Lucent (ALU 1.38, +0.06) continued its recent strength. The producer of communication equipment surged 8.3% as it attempts to lift off all-time lows. The recent strength came after the company secured EUR1.6 billion in financing from Credit Suisse and Goldman Sachs. On the downside, carmaker Renault lost 1.9%. United Kingdom's FTSE was supported by defense stocks as BAE Systems and Rolls-Royce Holdings finished with respective gains of 2.2% and 2.4%. Rolls-Royce outperformed following the announcement of a $1 billion agreement with Japan's Skymark Airlines. Germany's DAX outperformed the region partly due to strength in financials. Commerzbank gained 3.7% and Deutsche Bank (DB 44.23, +1.12) finished higher by 1.9%. In addition, insurer Muenchener Re rose by 1.7%. Meanwhile, Adidas lost 1.0% and was the biggest decliner. Tomorrow morning, FedEx (FDX 92.36, +1.34), General Mills (GIS 41.77, +0.04), and Navistar (NAV 22.85, +0.93) are all scheduled to report. Most notably, the Capital IQ consensus expects economic bellwether FedEx to announce earnings of $1.41 on $10.82 billion in revenue.

December 17, 2012
The 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.