Sector Investing

[ReturntoSender]

From Briefing.com: 4:15 pm : The stock market began October and the fourth quarter on a defensive note. The major averages spent the day in a steady decline with the Nasdaq Composite leading the slide. The tech-heavy index lost 1.6%, while the S&P 500 (-1.3%) sliced through its 100-day moving average (1958) with nine sectors ending in the red.

Equities were pressured from the start with a disappointing set of Manufacturing PMI figures from the eurozone weighing on sentiment. The region-wide reading slipped to 50.3 (expected 50.5) and was driven in part by Germany's decline to 49.9 from 50.3 (consensus 50.3).

Once the U.S. session got going, the key indices slumped amid early weakness in the industrial sector (-1.9%). In turn, the growth-sensitive group suffered from notable losses in airlines, stemming from concerns about the first case of Ebola in the United States. Delta Air Lines (DAL 34.90, -1.25) and Southwest (LUV 32.55, -1.22) both lost near 3.5%, while the Dow Jones Transportation Average tumbled 2.5%.

Elsewhere, the financial sector (-1.2%) was the only cyclical group that ended ahead of the broader market, but its outperformance hardly qualified as "strength."

Meanwhile, the top-weighted sector-technology (-1.6%)-suffered from weakness among high-growth areas like chipmakers and social media stocks. All 30 components of the PHLX Semiconductor Index (-2.4%) ended in the red with Skyworks (SWKS 53.31, -4.74) registering the largest decline. The stock sank 8.2% amid concerns about slowing 4G smartphone demand in China.

As for social media names, Facebook (FB 76.56, -2.48) slumped 3.1%, while LinkedIn (LNKD 203.08, -4.71), Twitter (TWTR 50.06, -1.52), and Yelp (YELP 67.11, -1.14) lost between 1.7% and 3.0%.

While most cyclical groups spent the entire day in the red, the energy sector (-1.9%) made a brief appearance in the green. The short-lived advance took place during a late morning rally in crude oil futures. The energy component was up as much as 2.0%, but slumped into the close to end lower by 0.4% at $90.75/bbl.

Meanwhile, the other commodity-linked sector-materials-ended at the bottom of the leaderboard despite an uptick in mining shares. The Market Vectors Gold Miners ETF (GDX 21.40, +0.04) tacked on 0.2% as gold futures added 0.3% ($1215.40/ozt) and silver futures rallied 1.2% ($17.27/ozt). However, chemical producers struggled after Mosaic (MOS 43.23, -1.18) issued a disappointing forecast.

Unlike the cyclical sectors, the four countercyclical groups ended ahead of the broader market. Health care (-1.0%) was able to finish ahead of the S&P 500 even as biotechnology lagged with the iShares Nasdaq Biotechnology ETF (IBB 269.43, -4.20) surrendering 1.5%.

On the upside, the utilities sector (+0.5%) spent the day in the green to extend this week's gain to 1.3%. The outperformance of the rate-sensitive sector resulted from its defensive nature and a drop in long-term rates, while a 1.4% gain in Exelon (EXC 34.57, +0.48) provided added support. Shares of EXC advanced after being upgraded to 'Buy' at ISI Group.

Treasuries climbed throughout the session with the 10-yr note registering a 27-tick gain. The benchmark yield fell ten basis points to 2.40%.

Today's sell off saw above-average participation as more than 845 million shares changed hands at the NYSE.

Economic data included Construction Spending, ISM Index, ADP Employment Survey, and the MBA Mortgage Index:


Construction spending fell 0.8% in August after increasing a downwardly revised 1.2% (from 1.8%) in July, while the Briefing.com consensus expected an increase of 0.5%
Private construction spending fell 0.8% in August, nearly giving back its entire 0.9% increase from July
Public construction spending fell 0.9% in August after increasing 2.1% in July
The ISM Manufacturing Index fell to 56.6 in September from 59.0 in August, while the Briefing.com consensus expected a drop to 58.5
Most of the regional Federal Reserve manufacturing surveys showed solid gains in September, which contrasted with the pullback recorded in the national index
The Backlog of Orders Index contracted, falling from 52.5 in August to 47.0 in September, while the New Orders Index dropped to 60.0 from 66.7
The ADP National Employment Report revealed that employment in the nonfarm private business sector rose 213K in September, while the Briefing.com consensus expected an increase of 202K
The August reading was revised down to 202,000 from 204,000
The weekly MBA Mortgage Index slipped 0.2% to follow last week's decline of 4.1%

Tomorrow, the Challenger Job Cuts report for September will be released at 7:30 ET, while weekly Initial Claims (Briefing.com consensus 297K) and Factory Orders for August (consensus -9.3%) will be released at 8:30 ET and 10:00 ET, respectively.

Nasdaq Composite +5.9% YTD
S&P 500 +5.3% YTD
Dow Jones Industrial Average +1.4% YTD
Russell 2000 -6.6% YTD

12:34 pm Notable movers of interest (:SCANX) : The following are some of today's most notable movers of interest, categorized by market capitalization (large cap over $10 billion and mid cap between $2-10 billion) and ranked by % change (all stocks over 100K average daily volume).

Large Cap Gainers

EXC (35.29 +3.52%): Upgraded to Buy from Hold at ISI Group, target raised to $39 from $33; NRG Energy (NRG) also upgraded to Strong Buy from Buy at ISI Group, target raised to $40 from $34
GM (32.83 +2.79%): September US sales rose 19% to 223,437 vehicles; co provided long term guidance: expects to achieve EBIT-adjusted margins of 10% in 2016 in North America, expects to return to profitability in Europe in 2016, expects that its joint ventures will maintain net income margins in the 9% to 10% range
GG (23.44 +1.78%): Strength in large cap gold companies: ABX, NEM also higher

Large Cap Losers

PBR (13.48 -5.00%): Continued weakness in Brazilian stocks as recent poll shows support for incumbent president Dilma Rousseff:
BBD, ITUB, UGP, BBDO also lower
HTZ (24.16 -4.84%): Continued weakness in sympathy with Avis Budget (CAR); yesterday Avis warned it may be unable to achieve high end of projected FY14 EBITDA range of $860-910 mln
DAL (35.1 -2.90%): Weakness in large cap airline stocks on concerns that Ebola outbreak will lower demand for travel: AAL, UAL also lower

Mid Cap Gainers

AYI (132.38 +12.46%): Beat quarterly EPS by $0.04 ($1.26 vs $1.22 estimate), revs rose 15.3% yoy to $668.7 mln vs $648.65 mln estimate
BWC (29.68 +7.19%): Co announced its Board is evaluating the separation of the Company's Power Generation Business and Government & Nuclear Operations Business into two publicly traded companies
RAX (33.34 +2.43%): Trading higher on rumors of renewed M&A speculation

Mid Cap Losers

GSAT (2.54 -30.6%): Trading lower on rumors that a negative report on the company will soon be published
CAR (51.76 -5.71%): Yesterday co warned it may be unable to achieve high end of projected FY14 EBITDA range of $860-910 mln
TRN (44.24 -5.31%): Jim Cramer warned that railcare companies may be unable to meet earnings expectations: GBX and ARII also lower

11:53 am Stocks/ETFs that traded to new 52 week highs/lows this session- New lows (47) outpacing new highs (4) (:SCANX) : Stocks that traded to 52 week highs: ATHL, DUK, ETP, KO

Stocks that traded to 52 week lows: ABB, AFL, AGCO, ALB, ALU, ASNA, AVP, BABA, BHP, CBI, CBS, CREE, CZZ, DAR, DISCA, DNR, ETN, FLR, FMC, FULT, GSK, HOG, JMEI, KBR, KN, L, LUK, LXP, MBT, MRC, MT, OI, ORI, PGH, PWE, QIHU, RIG, SBS, SDRL, SID, SINA, SWN, TEX, TPH, VIAB, YOKU, ZNGA

ETFs that traded to 52 week highs: UUP

ETFs that traded to 52 week lows: PPLT, REMX, RJA, URA, XME

Note: To reduce the list of stocks making 52 week highs/lows to a manageable size we have filtered out stocks below $2 bln in market cap and below 1 mln average volume. Without this filter 21 stocks made 52 week highs and 383 stocks made 52 week lows.

10:02 am JDS Uniphase: Sandell Asset Management releases letter to the Board of Directors; proposes strategic review to maximize value, estimates potential company value between $19-$26 per share (JDSU) : Sandell notes its belief that the company must commence a formal auction of its CCOP business. Furthermore, Sandell notes its belief that the JDSU current stock price reflects next to no value for the company's substantial tax assets, which as of June 28 include federal, state, and foreign tax net operating loss carryforwards of approximately $6.1 billion, $1.8 billion, and $1.0 billion, respectively, which constitutes a tax-effected book value in excess of $2.3 billion. Sandell estimates the potential value of the company's various business segments as well as these tax assets at between $19 and $26 per share. Furthermore, Sandell details its submission of a shareholder proposal requesting that the Board task its financial advisors to evaluate further strategic alternatives, in addition to the previously announced proposed spin-off of its CCOP business, to maximize the value of the Company's various business segments as well as its substantial tax assets in a timely manner. The text of the letter is as follows:

9:14 am Trina Solar prices offering of 10,333,785 ADSs, each representing 50 ordinary shares, 2,504,000 of which are being offered and sold by the co and 7,829,785 of which the co will loan to affiliates of the underwriters of the co's concurrent offering of convertible senior notes (TSL) :

The co also priced the concurrent offering of $100 million in aggregate principal amount of convertible senior notes due 2019.In connection with the Notes Offering, co has entered into ADS lending agreements with the ADS Borrowers, pursuant to which co will lend 7,829,785 borrowed ADSs to the ADS Borrowers. 4,996,000 of the borrowed ADSs have been initially offered at $11.75 per ADS in this offering of ADSs, and the remaining borrowed ADSs will be subsequently sold at prevailing market prices at the time of sale or at negotiated prices.

7:32 am SunEdison announces its most advanced polysilicon is now in production; plant will be operating at full capacity by 1Q15 (SUNE) : Co announced that its most advanced polysilicon technology was now in production and on target to produce solar material at the lowest cost in the world. This achievement represents a step-change in technology and will enable SunEdison to deliver a 400 watt peak solar panel at a cost of $0.40 per watt peak by 2016. The capacity of the Korean plant was originally designed for 10,000 metric tons (MT) per year but has been enhanced to 13,500 MT. The plant will be operating at full capacity in the first quarter of 2015.

6:43 am Taiwan Semi and ARM (ARMH) announced FinFET silicon with 64-bit ARM big.LITTLE technology (TSM) : Cos announced the results from a key FinFET silicon validation of the ARM (ARMH) big.LITTLETM implementation, using ARM Cortex-A57 and Cortex-A53 processors on TSMC's advanced 16nm FinFET process technology.

Ongoing collaborative efforts are focused on TSMC's 16FF+ process technology which will deliver an additional 11% gain in performance for the Cortex-A57 at the same power as the 16FF process, along with a further 35% power reduction for the Cortex-A53 when running low-intensity applications.