Sector Investing

[ReturntoSender]

From Briefing.com: Weekly Recap - Week ending 28-Jan-11The major indices were poised to gain for the eighth out of nine week, but sharp selling Friday resulted in modest losses. Earnings reports acted as the primary drivers of equities. Economic data continued to paint of picture of recovery as annualized real GDP in the fourth quarter rose 3.2%.

The S&P 500 declined -0.5%. Seven of the 10 of the sectors settled in the red, though selling interest was mixed with only 51% of S&P 500 stocks trading lower. Consumer discretionary, consumer staples and health care were the worst performing sectors.

Energy (+1.2%) and materials (+0.9%) outperformed thanks to better-than-expected results from the likes of Halliburton (HAL, +12.0%) and AK Steel (AKS, +10.5%).

The flood of earnings reports this week included 14 Dow components. Results for the latest quarter were generally ahead of estimates, with 11 Dow companies posting better-than-expected EPS. But several companies missed on revenue and issued tepid guidance.

Cyclical names DuPont (DD, +4.0%) and Caterpillar (CAT, +3.2%) outperformed on the heels of strong earnings reports as revenue surged 15% and 68%, y/y, respectively.

On the downside, American Express (AXP, -4.7%) fell after missing EPS expectations. Boeing (BA, -3.4%) was also a laggard after coming up short on revenue as the company's new flagship airliner remains muddled in delays.

Outside of the Dow, high flyer Netflix (NFLX, +19.7%) rallied after reporting strong results and issuing upside guidance. Netflix is now worth a whopping $11.3 bln and trades at a forward price-to-earnings multiple of 50x.

Fellow high flyer Amazon (AMZN, -3.5%) failed to meet the market's lofty expectations. The company topped estimates for the current quarter, but a moderate earnings forecast was met with selling pressure.

Ford Motor (F, -9.4%) shares plunged following a disappointing earnings report. Revenue declined by a smaller-than-expected 6.6%, though earnings came well short of expectations as costs increased and European operations posted a loss.

In economic news, Real GDP increased 3.2% from the previous quarter on a seasonally adjusted rate. Although this figure was slightly below the consensus, the data are extremely strong after stripping out the inventory impact-real final sales skyrocketed 7.1%, the fastest quarterly increase since Q2 1984. Impressively, widespread growth drove the expansion.

New home sales for December increased 17.5% month-over-month and existing home sales climbed 12.3, both ahead of expectations. The uptick in sales reflect why housing starts were on an upward path in the second half of 2010.

Durable goods orders for December dropped 2.5% in an ugly follow up to the 0.1% decline that was recorded in the prior month. The sharp decline in December was well below the Briefing.com consensus that called for a 1.5% increase. Nondefense aircraft orders declined an unheard of 99.5% during the month from $5.085 bln to $24 mln. When we look at the nonseasonally adjust data, we say that aircraft orders actually increased from $5.7 bln to $10.6 bln. The drastic difference between the seasonally and nonseasonally adjusted figures suggest there will be a upward revision.

Importantly, business investment remained strong as orders for nondefense capital goods excluding aircraft increased 1.4% in December as we saw in the GDP report.

The latest initial jobless claims tally for the week ended January 22 came in at a three-month high of 454,000, which is worse than the 410,000 claims that the consensus called for. Continuing claims came in at 3.99 million, up from 3.90 million.

Separately, the latest FOMC statement didn't contain any major surprises. The FOMC left rates unchanged at 0.00-0.25% and maintained the expansion of its asset purchase program, with a continued intention to purchase $600 bln of longer-term Treasury securities by the end of Q2 2011.

In overseas news, Standard & Poor's lowered its sovereign debt rating on Japan by one notch to from AA to AA-. That matches Fitche's rating, but is one ahead of Moody's current rating. Meanwhile, massive protests in Egypt continue to draw attention.

The coming week brings more earnings releases and the January employment report.

 
 Index	   Started Week	 Ended Week  Change  % Change	YTD % 
 DJIA	     11871.84	  11823.70  -48.14     -0.4	2.1 
 Nasdaq	      2689.54	   2686.89   -2.65     -0.1	1.3 
 S&P 500	      1283.35	   1276.34   -7.01     -0.5	1.5 
 Russell 2000   773.18	    775.40    2.22	0.3    -1.1

9:02AM Motorola Solutions: Telit Wireless Solutions to purchase MSI's M2M modules line of products; financial terms not disclosed (MSI) 38.58 :

09:27 am General Electric upgraded to Buy at Argus; tgt $26: . Argus upgrades GE to Buy from Hold and sets target price at $26 saying GE's industrial businesses have reported higher equipment orders over the past three quarters, and they expect this trend to continue due to growing demand for healthcare imaging products and increased commercial air traffic. In addition, the firm expects a reduction in loan losses at GE Capital based on recent performance and prospects for further improvement in the financial markets.