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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

1/21-25/13

January 25, 2013
Stocks began the final session of the week on a strong note as upbeat European trade supported U.S. equity futures. The positive sentiment across the old continent resulted from a strong German Ifo Business Climate Index, which beat expectations on both componentsbusiness expectations and the current assessment. Meanwhile, a disappointing preliminary GDP report out of the United Kingdom did little to cool investor optimism. The key averages climbed throughout the session and ended near their respective highs. The S&P 500 added 0.5%, and settled above the 1500 level for the first time since December 10, 2007. The Nasdaq was the top performing index despite the relative weakness in the shares of Apple (AAPL 439.88, -10.62). The largest tech stock slipped 2.4% to extend yesterday's 12.4% decline, which followed a disappointing earnings report. Note that today's slide caused Apple to slip below Exxon Mobil's (XOM 91.73, +0.38) market cap. This occurred exactly one year after Apple surpassed Exxon Mobil to claim the title of most valuable company. Sans Apple, the tech sector fared well thanks in part to strength among microprocessor manufacturers. KLA-Tencor (KLAC 56.34, +4.37) surged 8.4% after the company beat on earnings and revenue. Elsewhere, Cirrus Logic (CRUS 29.42, +2.71) soared 10.2% after investors welcomed its quarterly report. The two names contributed to the gains registered by the PHLX Semiconductor Index, which settled higher by 1.3%. Several large cap technology stocks garnered interest as the recent slide in the shares of Apple caused some investors to look elsewhere. Amazon.com (AMZN 283.99, +10.37), eBay (EBAY 56.53, +1.34), and Priceline.com (PCLN 718.82, +39.27) all gained between 2.4% and 5.8%. While Amazon.com and Priceline.com are both part of the Nasdaq, the two stocks are also a component of the S&P 500 consumer discretionary space. The sector was the day's top performer after gaining 1.0%. Discretionary stocks saw general strength, and Starbucks (SBUX 56.81, +2.24) jumped 4.1% after its quarterly earnings indicated same store sales remain healthy. Elsewhere, Netflix (NFLX 169.56, +22.70) spiked 15.5% to follow yesterday's earnings-driven 42.2% jump. Since Tuesday, shares of Netflix have been on fire, gaining nearly 70%. However, there was a pocket of weakness within the discretionary sector. Hasbro (HAS 37.31, -1.14) slipped 3.0% after warning that its fourth quarter revenue will come in below the Capital IQ consensus estimate. Peer Mattel (MAT 37.15, -0.89) lost 2.3% in sympathy. The discretionary sector was closely followed by energy stocks, which climbed higher despite little change in crude oil. Halliburton (HAL 39.72, +1.91) was a notable gainer after the stock advanced 5.1% on the back of a strong quarterly report. Looking at the relative performance of S&P 500 sectors, discretionary (+1.0%) stocks led while energy (+0.9%), and health care (+0.8%) followed closely. On the downside, technology (+0.1%), telecoms (+0.4%), and materials (+0.4%) lagged. It should be noted that while the key indices ended near their highs, the CBOE Volatility Index (VIX 12.89, +0.20) settled in positive territory as well. The move indicates that despite today's advance, near-term downside protection received notable interest during the session. Volume was slightly above its 20-day average with just under 700 million shares changing hands on the floor of the New York Stock Exchange. Looking at today's economic data, the headline number for the December new home sales report was a disappointment. The Department of Housing and Urban Development indicated sales were at a seasonally adjusted annual rate of 369,000 units, while the Briefing.com consensus estimate was pegged at 385,000. In actuality, though, the report was better than expected when taking into account the upward revision to November. Specifically, sales in November were revised up to 398,000 from 377,000. Combined with the sales in December, the average for the two-month period was 384,000 versus an average of 381,000 that was expected prior to the revision. Three out of four regions saw new home sales slip in December. The Northeast led the decline with a 29.4% drop. The Midwest was the standout, enjoying a 21.3% jump in new home sales. Median prices edged up 1.3% to $248,900. For 2012, the median sales price of a new home increased 7.2% from 2011 to $243,600. At the current pace of sales, there is a 4.9 month supply of inventory, which is up from 4.5 months in November and the highest level since April 2012. On Monday, December durable goods and durable goods ex-transportation will be reported at 8:30 ET. In addition, December pending home sales will be announced at 10:00 ET. Among notable earnings, Caterpillar (CAT 95.58, -1.02) is scheduled to announce its quarterly results ahead of the opening bell.

January 24, 2013
The major averages ended today's session near their opening levels. The Dow was an exception as the blue chip index finished higher by 0.3%. The 30-stock average outperformed as 19 components registered gains. The Nasdaq trailed the broader market for the duration of the day after a disappointing earnings report from Apple (AAPL 450.50, -63.50) sent the stock lower by 12.4%. While the largest tech stock suffered its biggest percentage drop in more than four years, its suppliers held up relatively well. Cirrus Logic (CRUS 26.71, -3.24) was an exception, sinking 10.8% ahead of its earnings report scheduled for this evening. As Apple earnings weighed on tech shares, the remainder of the market traded with a generally positive bias. Netflix (NFLX 146.86, +43.60) was a notable standout as the stock soared 42.2% after its fourth quarter results handily beat the Capital IQ earnings and revenue estimate. In addition, the video streaming service guided first quarter top and bottom line above consensus. Even less-than-stellar results were welcomed by investors today as F5 Networks (FFIV 103.22, +4.41) gained 4.5% despite reporting in-line revenue and a bottom line miss. The results were topped off with upside second quarter earnings guidance, which contributed to the buying interest. Peer Cisco Systems (CSCO 21.02, +0.40) added 1.9%. As the market resisted the selling pressure stemming from poor Apple earnings, the Dow Jones Transportation Average ended the session with a gain of 1.7%. The bellwether complex, which has soared over 10% since January 1, saw all-around strength, but trucking stocks outperformed. JB Hunt (JBHT 67.57, +4.11) surged 6.5% after its fourth quarter earnings beat on the bottom line. Meanwhile, peers Con-way (CNW 33.00, +1.88) and CH Robinson (CHRW 67.21, +1.46) settled with respective gains of 6.0% and 2.2%. Looking at the S&P 500 sector breakdown, technology was the biggest laggard (-2.0%), followed by telecoms (-0.3%) and materials (+0.2%). On the upside, discretionary (+0.7%) and health care (+0.7%) stocks saw relative strength. The CBOE Volatility Index (VIX 12.76, +0.30) advanced 2.4% after being up as much as 8.2% intraday. However, the so-called "fear gauge" remains near its 5-year low. Crude oil added 0.8% to settle at $96.00 despite a larger-than-expected inventory build. The market received just two economic reports this morning. The latest weekly initial claims count totaled 330,000, which was lower than the 355,000 that had been expected by the Briefing.com consensus. The tally was below the revised prior week count of 335,000. As for continuing claims, they fell to 3.157 million from 3.228 million. Elsewhere, leading indicators for December increased by 0.5%, in-line with the Briefing.com consensus forecast. Today's figure followed the prior month's unchanged reading. Tomorrow's economic data will be limited to December new home sales. This report will be released at 10:00 ET. Among notable earnings, Honeywell (HON 68.24, -0.03) and Procter & Gamble (PG 70.42, -0.27) are scheduled to report prior to the opening bell.

January 23, 2013
The major averages finished today's session on a positive note despite early weakness in the S&P 500. Today's focus centered on earnings as technology heavyweights Google (GOOG 741.50, +38.63) and International Business Machines (IBM 204.72, +8.64) reported fourth quarter results which were received warmly by the market. Both companies beat their respective Capital IQ earnings expectations, while revenues proved to be more of a mixed bag. Google's top line of $12.16 billion represented nearly 50.0% year-over-year growth, but the figure fell short of analyst expectations. Meanwhile, IBM's revenue slipped 0.6% year-over-year to $29.30 billion. Google and IBM saw respective gains of 5.5% and 4.4%, and their strength resulted in a notable divergence in the major averages. It should be noted that IBM accounts for more than 10.0% of the price-weighted Dow Jones Industrial Average due to its high stock price. This caused the 30-stock average to trade near its session high for the duration of the day. Elsewhere, the Nasdaq spent the entire session in a ten point range as positive tech earnings contributed to the relative strength. Also of note, Apple (AAPL 514.00, +9.24) gained 1.8% prior to reporting its quarterly earnings after the closing bell. The S&P 500 was the last index to cross into the black. After making several morning attempts, the benchmark average turned positive in afternoon trade in a move which coincided with the successful passage of the "No Budget, No Pay" bill in the House of Representatives. The measure, which is aimed at extending the debt ceiling until May 19, comes with a caveat stipulating congressional pay will be suspended if no budget deal is reached by April 15. While technology stocks were the clear leaders today, steel producers lagged as the Market Vectors Steel ETF (SLX 49.33, -0.44) ended lower by 0.9%. Apparel producers were also among the underperformers after Coach (COH 50.75, -9.93) missed on earnings and revenue. In addition, the retailer said its North American comparable store sales fell short of estimates. The stock tumbled 16.4% and peer Fossil (FOSL 103.49, -2.46) was hit hard, falling 2.3%. Crude oil traded with slim losses for the majority of the session before selling off into the close. The weakness caused the energy component to slip 1.1% and settle at $95.60. Today's economic data focused on housing. The weekly MBA Mortgage Index pointed to a 7.0% increase in new mortgage applications. This follows the prior week's increase of 15.2% Elsewhere, the November FHFA Housing Price Index rose by 0.6% to follow the prior month's uptick of 0.5%. Tomorrow, weekly initial and continuing claims will both be reported at 8:30 ET. In addition, December leading indicators will be released at 10:00 ET.

January 22, 2013
Equities managed to finish today's session with slim gains despite a mid-morning stumble. The S&P 500 and Dow were able to overcome the early weakness thanks in part to upbeat earnings from major sector components. The 30-stock Dow Jones led the way as earnings from DuPont (DD 47.82, +0.83), Travelers (TRV 77.95, +1.64), and Verizon Communications (VZ 42.94, +0.40) contributed to the outperformance. Though Verizon missed on the bottom line, its stock added 0.9%. In other earnings of note, Delta Air Lines (DAL 14.01, +0.40) gained 2.9% on the back of an in-line report. Note that Delta, along with its rivals, has soared over 30% since the start of December. The advance has been notable as crude oil gained nearly $10 in the same timeframe. As the S&P 500 and Dow pushed to fresh highs, the Nasdaq was more deliberate in its climb off session lows. Semiconductor manufacturers weighed on the index and the PHLX Semiconductor Index slipped 0.3%. The cautious trade preceded earnings announcements from Advanced Micro Devices (AMD 2.45, -0.01) and Texas Instruments (TXN 33.46, -0.06). The market will receive quarterly reports from the two semiconductor producers after today's close. Additionally, two major tech names, Google (GOOG 702.87, -1.64) and International Business Machines (IBM 169.08, +1.61), will also reveal their earnings after the closing bell. While earnings contributed to today's gains, the market also received some headlines from Washington. Midday reports indicated the White House would welcome a three-month debt ceiling extension. This comes as the House of Representatives prepares to vote on a temporary extension tomorrow. Among stocks moving on news, Boeing (BA 41.16, -0.88) shed 1.2% after Reuters reported that electrical issues with the Dreamliner were not caused by faulty batteries as previously thought. Elsewhere, Caterpillar (CAT 97.72, +0.10) saw little change following the discovery of accounting misconduct at its Chinese subsidiary. As a result of the discovery, Caterpillar will take a fourth quarter non-cash charge of approximately $580 million. Crude oil climbed steadily throughout the session and ended higher by 0.7%. The energy component settled at $96.68. The CBOE Volatility Index (VIX 12.57, +0.22) advanced 0.9%, but the near-term volatility measure remained at its multi-year low. Floor volume at the New York Stock Exchange was in-line with the 50-day average as 700 million shares changed hands during today's session. Today's lone economic data point was the December existing home sales report which pointed to an annualized rate of 4.94 million units, weaker than the rate of 5.10 million units that had been generally expected by the Briefing.com consensus. The pace for December was down from the prior month's revised rate of 4.99 million units. Looking at tomorrow's economic releases, the weekly MBA Mortgage Index will be reported at 7:00 ET while the November FHFA Housing Price Index will cross the wires at 9:00 ET. In notable earnings, McDonald's (MCD 92.95, +0.69) will announce its fourth quarter results ahead of the opening bell.

January 21, 2013
Closed in observance of Martin Luther King Jr. Birthday.