From Briefing.com: 4:35 pm : Action was muted ahead of the latest FOMC policy statement, which spurred buying and sent stocks to their best levels of the year. However, the new highs proved unsustainable as stocks rolled over and closed at session lows with their worst loss since the first of the month.
The tone to premarket trading had been mildly positive, but stocks lost their way after the opening bell and spent most of the morning drifting in mixed fashion. As such, gains and losses in the broader market were relatively contained.
However, telecom steadily outperformed for the entire session. It finished 1.6% higher as the only major sector to post a gain. However, its lack of relative size limited its leadership.
Energy stocks traded with considerable weakness for the entire session. It finished 1.9% lower, hampered by bearish oil inventory data, which showed a build of 2.86 million barrels when a draw of 1.40 million had been expected. Crude prices to finish 3.9% lower at $68.99 per barrel.
Despite the drop in oil prices, airline stocks slumped. In turn, the Amex Airline Index shed 4.3%. US Airways (LCC 4.52, -0.71) disappointed by announcing the sale of 26 million shares of common stock. Meanwhile, AMR Corp (AMR 7.78, -0.66) priced its 48 million common share offering at $8.25 per share, which is slightly below the previous session's closing price.
Financials were the worst performing major sector in the S&P 500, despite trading quietly in the early going. Late pressure sent the sector 2.1% lower.
Materials stocks finished not far behind financials, however. The sector dropped 2.0% amid weakness in commodities stocks and commodities prices. Softer commodities prices sent the CRB Commodity Index down 1.0%.
Weakness among commodities was exacerbated by a stronger dollar, which fell to new 2009 lows immediately after the release of the latest Fed policy statement. However, it was able to rebound to a 0.3% gain. Despite its strong finish, many currency traders continue to bet against the greenback.
The latest FOMC policy statement, which indicated that economic activity has picked up since its severe downturn. Neither that, nor the Fed's belief that economic conditions are likely to warrant exceptionally low levels of the fed funds rate (left unchanged at 0.00% to 0.25%, as expected) for an extended period came as much of a surprise. The FOMC went on to say that it will purchase $1.25 trillion of agency mortgage backed securities and $200 billion agency debt, but it will gradually slow the pace of purchases to promote a smooth transition in markets.
Stocks in the broader market attracted support with the statement's midafternoon release. That drove the S&P 500 to session highs and a gain of 0.8%. Ford (F 7.36, +0.35) and General Mills (GIS 63.80, +2.83) were primary gainers. Ford benefited from its view that the U.S. auto market is looking good and vehicle sales are expected to increase, while General Mills posted better-than-expected earnings for its latest quarter and issued upside guidance.
Still, their strength wasn't enough to stop some late-session selling, which culminated in a 1.0% loss for the S&P 500. This is only the second time this month that the S&P 500 lost at least 1%, though.
Treasuries responded favorably to the Fed's announcement, but were able to hold their gains. The benchmark 10-year Note finished roughly 10 ticks higher, which put its yield back near 3.40%. Prior to the announcement they had been showing weakness, uninspired by news that a $40 billion auction of 5-year Treasuries produced a high yield of 2.47% and a bid-to-cover ratio of 2.4. DJ30 -81.32 NASDAQ -14.88 NQ100 -0.6% R2K -1.2% SP400 -1.5% SP500 -10.79 NASDAQ Adv/Vol/Dec 1023/2.70 bln/1668 NYSE Adv/Vol/Dec 1063/1.32 bln/1958
4:06PM Conexant announces that it intends to sell 7 mln shares of common stock (CNXT) 3.39 +0.07 :
Marvell (MRVL) announces that its Marvell 88DE2710 video processor is a featured component of Sony's BDP-CX7000ES 400-disc Blu-ray Disc MegaChanger, thus furthering the integration of Marvell technology into consumer electronics devices...
8:12AM Xilinx raises Q2 sales outlook (XLNX) 22.72 : Co reports Q2 sales are expected to be up approximately 10% sequentially vs the 4.1% consensus, we calculate this to be revs of $413.8 mln vs the $391.6 mln consensus. This is a revision from previous sales guidance of up approximately 2-6% sequentially. The increased sales guidance is primarily due to broad based strength across nearly all end markets and geographies. Virtex-5 sales are expected to increase significantly in the Sept quarter, surpassing 20% of total sales. They expect to ship the majority of last quarter's delinquencies in the Sept quarter. Co issues gross margin guidance of approximately 61% vs the 61.02% consensus and operating expense guidance of approximately $175 mln, including $5 mln in restructuring charges, both are unchanged.
American Superconductor (AMSC) and LS Cable formed a strategic alliance to advance commercial sales of superconductor cables. Under the alliance, LS Cable and AMSC will work collaboratively to deploy at least 10 kilometers of superconductor power cables in commercial power grids over the next five years...
8:01AM Palm confirms that it prices public offering of 20 mln common shares at $16.25/share (PALM) 17.07 : See original comment from 7:48 ET.
09:37 am Apple ests raised at RBC Capital Mkts on higher Mac/iPhone momentum: . RBC Capital Mkts' survey data shows 25% of respondents bought a Mac laptop last 90 days, up from 18% in July. Firm is raising its Q4 Mac units to 2.8 mln (prior 2.66 mln). On higher Mac momentum, EPS ests become $5.92/F09 and $7.30/F10 (prior $5.90/$7.23 - $5.85/$6.89 consensus). The strong recovery in laptops is likely due to: a) recovering consumer electronics spending; b) iPhone-related store traffic; c) price cuts, promotions; d) Snow Leopard; e) Apple's rising brand awareness and popularity. Apple is now the laptop mkt share leader in its survey, ahead of DELL (24%), HPQ (21%). Surging iPhone Demand is shown in a separate RBC survey with iPhone representing 30% of Smartphone users, up from 25% June. New iPhone buyers are surprisingly strong at 81%.
09:36 am Western Digital ests and tgt raised to $46 at Caris as HDD market continues to rebound: .
Caris is raising their Q3 ests to $1.02 from $0.83 (consensus $0.80) and taking another step up in their FY10 EPS ests to $4.45 from $4.20 (consensus $3.44). Additionally, the firm raises their WDC tgt to $46 from $40 with Seagate (STX) pre-announcing better-than expected Sep-qtr revs/margins as the HDD market continues to rebound. Still the firm's preferred way to invest in a strengthening PC market, they believe: HDD unit demand is now showing upside across segments, pricing remains benign and inventories remain lean. Moreover, the kicker perhaps still underappreciated by investors, the firm believes STX and WDC are uniquely outexecuting their 3-4 remaining Asian competitors in a consolidating market, thereby taking the market's incremental upside and leverage. Already something of a 2-horse race in 3.5in desktop HDDs, the firm continues to see 2.5in notebook as the next area STX and WDC could catapult forward as they now ramp new-gen 320GB/p.
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