Sector Investing

[ReturntoSender]

From Briefing.com: Weekly Recap - Week ending 16-Sep-11Quadruple Witching options expiration made for choppy action on Friday, but stocks still scored their fifth straight gain. That string of advances resulted in a weekly gain of 5.4%, which is the best weekly performance since late June, but only the second weekly gain in eight weeks.

Trade this week started on a negative note as participants reacted to speculation that some of France's primary financial institutions would have their debt downgraded. Such speculation would eventually prove prescient later in the week, when analysts at Moody's cut ratings on Societe Generale and Credit Agricole, but on Monday the attention turned to rumors that a sovereign wealth fund from China was talking with Italy about a bond purchase. That news helped stocks stage a rally, which gained traction as short sellers were squeezed out of their positions.

A similar scenario played out on Tuesday, when stocks benefited from headlines that suggested BRIC countries -- that is, Brazil, Russia, India, and China -- began talks to purchase eurozone debt. The headlines supported the notion that some now see value in Europe, which has been a source of weakness for several weeks because of its precarious fiscal and financial conditions.

That said, participants gained further confidence that the dealings in Europe are headed in the right direction because of news that the European Central Bank has coordinated with other central banks, including the Fed, to make dollar loans available to European banks.

By the end of the week, sentiment had improved to the extent that many traders were compelled to make bids for no better reason than to chase gains. In doing so, many shrugged off underwhelming data.

Among this week's major economic releases, retail sales for August were flat, which is less than the 0.2% increase that had been broadly expected. Excluding autos, retail sales increased by 0.1%, but that still failed to meet the 0.3% increase that had been widely anticipated.

The Producer Price Index for August was flat, as had been generally forecasted. Core producer prices increased by a mere 0.1%, which is essentially on par with the 0.2% increase had been anticipated. Meanwhile, overall consumer prices for August increased by 0.4%, which is greater than the 0.2% increase that had been broadly expected. Core consumer prices increased by 0.2%, as had been anticipated, however.

The latest weekly initial jobless claims tally totaled 428,000, which exceeded the 410,000 initial claims that had been broadly expected. Moreover, the latest initial claims total is up 11,000 from the prior week.

As for manufacturing activity, the Empire State Manufacturing Survey for September fell to -8.8 from -7.7 in the prior month. It had been expected to come in at -4.0, based on the Briefing.com consensus. In a similar vein, the Philadelphia Fed Survey for September came in at -17.5, which is an improvement from the -30.7 that was posted in the prior month, but still below the -10.0 that had been expected among economists surveyed by Brieifng.com.

In the corporate space, news that Broadcom (BRCM 35.67, +0.35) will acquire NetLogic (NETL 48.33, +0.22) for $50 per share, which represents a hefty premium over last week's closing price, helped semiconductor stocks lead the tech sector to a strong week. As a sector, tech climbed about 7% this week, but the Philadelphia Semiconductor Index advanced almost 10%.

Strength among semiconductors helped the Nasdaq outperform the Dow and S&P 500 in a few sessions, but not everything in the Nasdaq was so cheery. Netflix (NFLX 155.19, -8.31) and Research In Motion (RIMM 23.93, -5.61) both saw their market caps slashed this week in response to disappointing forecasts.

Best Buy (BBY 25.43, -0.25) was another poor performer. The company had the structure of its business model called into question after it reported earnings that failed to meet what Wall Street had expected.

Nasdaq 100 0.9%. ..S&P Midcap 400 0.0%. ..Russell 2000 0.1%. ..NYSE Adv/Dec 1521/1465. ..NASDAQ Adv/Dec 1396/1224.

 
 Index	  Started Week  Ended Week  Change  % Change  YTD % 
 DJIA	    10992.13	 11509.09   516.96     4.7   -0.6 
 Nasdaq	     2467.99	  2622.31   154.32     6.3   -1.2 
 S&P 500	     1154.23	  1216.01    61.78     5.4   -3.3 
 Russell 2000  673.96	   714.31    40.35     6.0   -8.9

5:18PM AnalogicTech announces developments relating to its pending acquisition (AATI) 4.67 +0.19 : Co announced developments relating to its pending acquisition by Skyworks Solutions (SWKS). As detailed in the S-4 filing made by Skyworks on September 9, 2011, two meetings were scheduled in an effort to resolve the matters in dispute between the two companies relating to requested business and financial information, and access to an AnalogicTech officer. These meetings took place on September 13, 2011 and September 15, 2011, respectively. While AnalogicTech believes it had never been in breach of any of its obligations under the merger agreement, to the extent Skyworks asserted there was a breach of the merger agreement, the co believes any such claimed breach was cured by its actions in conjunction with these meetings. The co cannot provide further commentary beyond the information that is in the SEC filings and will continue to keep investors updated through appropriate disclosures.

8:01AM Chipmos Technology reaffirms Q3 rev, gross margin guidance; Aug sales +3.3% QoQ, -9.1% YoY (IMOS) 6.02 : Co reaffirmed Q3 rev to be flat-to-down in the single digits QoQ (no rev est), while maintaining gross margin on a consolidated basis in the range of 4.0% to 9.0%. Revenue for the month of August 2011 was NT$1,474.1 mln or US$50.8 mln, an increase of 3.3% QoQ, -9.1% YoY.

Last night, Research in Motion (RIMM $24.00 -5.54) reported second quarter earnings of $0.80 per share, excluding non-recurring items, $0.09 worse than the Capital IQ Consensus of $0.89, while revenues fell 9.8% year/year to $4.17 billion versus the $4.48 billion consensus. RIMM reports second quarter gross margins were 38.7%. RIMM shipped 10.6 million handheld devices in the second quarter, range of expectations was 11.0-12.5 million units. RIMM ships 200,000 Playbooks in second quarter, shipped approximately 500,000 in first quarter. The company issued guidance for the third quarter with EPS of $1.20-1.40 versus the $1.38 consensus and revenues of $5.3-5.6 billion versus the $5.27 billion consensus. Gross margin percentage for the third quarter is expected to be approximately 37%. BlackBerry Smartphone shipments are expected to be between 13.5 million and 14.5 million units. The company sees guidance at low end for fiscal year 2012 with EPS at low end of $5.25-6.00 versus the $5.06 consensus.

1:06 pm S&P Financial Sector Shows Losses; One of the Worst Performing Sectors Today

The S&P 500 Financial Index is trading lower today as we see some profit taking ahead of the weekend. The index had rallied approx 10% during the week so a pullback from this 176 area should not come as a surprise. News was relatively light with the markets following the buzz around the UBS rogue trader that is likely to cost the bank $2 bln this quarter. Still there were some defenses for UBS with S&P saying that they could still turn a profit. There has been little news out of the Ecofin meeting in Poland surrounding a European TARP which has also aided the decline. But, there was little expected from the meeting so this should hardly come as a surprise.

News of Note

1) On September 14, 2011, St. Joe Company (STJ) entered into a Stockholder Agreement with Fairholme permitting it to acquire beneficial ownership of up to 50% of outstanding common stock. Co had previously approved, in 2009, Fairholme's acquisition of beneficial ownership of up to 30% of outstanding common stock. Pursuant to the terms of the Stockholder Agreement, Fairholme has agreed that, until September 14, 2016, it will vote any shares that it beneficially owns or has proxy voting authority in excess of 33.33% of outstanding common stock in proportion to the manner in which all outstanding shares of common stock are voted. However, the proportional voting requirement will not apply in connection with any public solicitation of proxies for the removal of the directors or nominees by a person or group other than Fairholme.

2) Transatlantic (TRH) and Allied World Assurance (AWH) have mutually terminated their previously announced merger agreement. Consistent with the terms of the merger agreement, Transatlantic has agreed to pay Allied World, within two business days, a termination fee in the amount of $35 mln (and expense reimbursement in the amount of $13.3 mln), and has agreed to pay an additional fee in the amount of $66.7 mln in the event that, prior to September 15, 2012, Transatlantic enters into any definitive agreement in respect of any competing transaction or recommends or submits a competing transaction to its stockholders for adoption, or a transaction in respect of a competing transaction is consummated. TRH's plans includes the approval of a $600 mln open market or negotiated share repurchase program, which adds $455 mln to the co's existing share repurchase authorization.

3) Bloomberg.com reports that sources believe Bank of America (BAC), the lender burdened by its Countrywide Financial takeover, would consider putting the unit into bankruptcy if litigation losses threaten to cripple the parent. The option of seeking court protection exists because the bank maintained a separate legal identity for the subprime lender after the 2008 acquisition. A filing isn't imminent and executives recognize the danger that it could backfire by casting doubt on the financial strength of the largest U.S. bank, the people said. But BAC does want to hold this nuclear option open in case litigation expenses get out of hand.

4) Austria's Finance Minister says Geithner rejected the idea of financial transaction tax.

5) Lloyds Banking (LYG) added to Conviction Buy List at Goldman.

1:02 pm S&P Tech Sector Trading Higher; EBAY Upgraded, ADBE Downgraded (EBAY)

The tech sector is trading higher today, outperforming the broader market. Semiconductors are outperforming the rest of the tech space with the Philly Semi Index trading 2.0% higher. Among chips in the index, CREE (+1.0%) and TSM (+2.9%) are notable leaders, while VECO (-3.2%) is under pressure. Among other major indices, the S&P 500 is trading 0.5% higher, while the NASDAQ is trading 0.5% higher. The QQQ is also trading 0.8% higher. Among tech bellwethers, AAPL (+1.8%) is a leader while NFLX (-5.1%) is lagging.

In earnings RIMM (-17.7%) missed by $0.09 on EPS and guided FY12 EPS at the low end of the previous range. In news, QPSA (+3.6%) and myYearbook reaffirmed commitment to completing merger.

Among notable ratings calls this morning, Wedbush upgraded EBAY (+4.3%) to Outperform, JMP downgraded ADBE (-1.7%) to Market Perform, and Caris downgraded NFLX (-5.1%) to Average.

There are no notable tech names set to report tonight after the close.

09:59 am Texas Instruments Will Raise Quarterly Dividend 31% (TXN)

Texas Instruments (TXN $27.96 +0.25) will raise its quarterly cash dividend 31% to $0.17/share, up from the prior $0.13/share.