Sector Investing

[ReturntoSender]

From Briefing.com: 4:15 pm : Equities opened lower, but staged a reversal when top lawmakers reiterated their desire to reach a budget agreement. After marking a session low near its 200-day moving average, the S&P 500 reversed 25 handles to session highs. The reversal was aided by comments from House Speaker Boehner who said he is optimistic a deal can be reached in order to avoid going over the fiscal cliff. In addition, the President held a press conference where he reiterated his belief in higher tax rates for top earners. He also stressed that if Congress fails to approve selective tax increases, going over the cliff will result in an across-the-board tax hike. The S&P 500 ended the session with a gain of 0.8%.

The Federal Reserve released its October Beige Book, which pointed to modest growth in seven Districts. Meanwhile, two Districts reported stronger growth while Boston, New York, and Philadelphia saw weak performance. The weakness in New York and Philadelphia was attributed to disruptions caused by Superstorm Sandy. Further, contacts in several regions expressed concerns over the uncertainty surrounding the ongoing budget debate.

Consumer credit was mixed as higher demand for home mortgage loans and auto loans increased consumer lending in some Districts. However, small business loan demand was generally described as weaker to only moderately higher.

Regarding hiring, "most districts reported modest gains while wage and price pressures remained subdued. "

Today's housing data pointed to a 0.3% decrease in October new home sales. The annualized rate of 368,000 fell short of expectations and caused homebuilder stocks to fall to their respective lows. Shares of major builders have enjoyed strong performance since the start of the year, but today's economic data contributed to industry-wide weakness. DR Horton (DHI 19.42, -0.16), PulteGroup (PHM 17.00, -0.11), and Lennar (LEN 38.38, -0.34) all lost between 0.6% and 0.9%.
Despite the weakness in homebuilders, consumer discretionary stocks outperformed after a handful of retailers reported strong earnings. American Eagle Outfitters (AEO 20.77, +1.38) surged 7.1% after beating on top and bottom lines. In addition, the company issued in-line fourth quarter earnings guidance.

PVH (PVH 116.46, +7.17) rose by 6.6% after its third quarter earnings of $2.34 beat the Capital IQ consensus estimate by $0.05. Despite the earnings beat, the company guided fourth quarter earnings below consensus and suggested revenue is expected to come in above analyst expectations. Regarding full-year earnings and revenue, the company expects both figures to be below current expectations.

Express (EXPR 14.15, +1.16) spiked 8.9% following its bottom line beat. In addition, the apparel retailer reported in-line revenue and issued upside fourth quarter earnings guidance.

Movado Group (MOV 35.50, +3.27) soared 10.2% after beating on earnings and revenue. The luxury distributor also raised its full-year earnings guidance in-line with the Capital IQ consensus. Lastly, the company declared a special dividend of $0.75.

Also of note, Green Mountain Coffee Roasters (GMCR 36.86, +7.91) surged 27.3% after reporting strong earnings. During the fourth quarter, the company earned $0.64, which was $0.16 ahead of the Capital IQ consensus estimate. Additionally, the beverage company beat on revenue and issued first quarter and full-year earnings and revenue guidance above consensus.

Elsewhere, Costco Wholesale (COST 102.58, +6.07) gained 6.3% after reporting a 6.0% increase in November comparable store sales. In addition, the wholesaler declared a special cash dividend of $7.00.

Solar stocks saw broad strength after JA Solar (JASO 0.70, +0.05) and Yingli Green Energy (YGE 1.62, +0.19) reported earnings. JA Solar rose by 7.7% after reporting mixed results. During the third quarter, the company recorded a loss of $0.30, which was $0.11 worse than the Capital IQ consensus estimate. However, JASO's revenue of $260.90 million exceeded expectations. Meanwhile, Yingli Green Energy spiked 13.3% after beating on earnings and reporting revenue below consensus. In addition, the company reaffirmed its full-year 2012 shipment guidance. Major solar names all outperformed and the Guggenheim Solar ETF (TAN 14.04, +0.68) rose by 5.1%.

The weekly MBA Mortgage Index reflected a 0.9% decrease in mortgage applications. Today's reading follows the prior week's decrease of 2.2%.

Tomorrow, weekly initial and continuing claims will be reported at 8:30 ET. In addition, the second estimate of third quarter GDP and the GDP deflator will also be announced at 8:30 ET. Lastly, October pending home sales will hit the wires at 10:00 ET.

The U.S. Treasury will auction off $29 billion in 7-yr notes.DJ30 +106.98 NASDAQ +23.99 SP500 +10.99 NASDAQ Adv/Vol/Dec 1505/1.66 bln/946 NYSE Adv/Vol/Dec 2070/711.9 mln/929

3:30 pm : Crude oil traded in negative territory as investors reacted to concerns over the "fiscal cliff". The energy component dipped to a session low of $85.39 per barrel but bounced back slightly following better-than-anticipated inventory data that showed a draw of 0.347 mln barrels when a build of 0.325 mln barrels was expected. It eventually settled with a 0.8% loss at $86.46 per barrel, or just below its session high of $86.54 per barrel.

Natural gas extended overnight losses as it trended lower into the red during today's floor session. It brushed a session low of $3.74 per MMBtu in morning action but managed to inch upwards in afternoon action. It ultimately closed with a 2.3% loss at $3.80 per MMBtu.

Gold sold off sharply from its session high $1735.70 per ounce by about $25, or 1.4%, right as pit trade opened. While there was initial confusion for the drop, Reuters.com pointed out that the fall did not result due to a monetary pause or a "fat finger" trade on the CME. The move was largely driven by large sell orders by funds, given the December contract's rollover to February expiration. The yellow metal dipped even further, brushing a session low of $1705.50 per ounce in morning action. It eventually settled with a 1.6% loss at $1716.20 per ounce. Silver also slid deeper into negative territory as the floor session opened and fell as low as $32.90 per ounce. It recovered most of the earlier loss but still settled 0.9% lower at $33.69 per ounce.DJ30 +100.44 NASDAQ +14.34 SP500 +9.73 NASDAQ Adv/Vol/Dec 1425/1373.5 mln/1010 NYSE Adv/Vol/Dec 1900/478 mln/1072

4:33PM Semtech beats by $0.10, beats on revs; guides Q4 EPS in-line, revs in-line; co reports record cash flow from operations of $55 mln, representing 34% of revs (SMTC) 24.92 -0.01 : Reports Q3 (Oct) earnings of $0.53 per share, excluding non-recurring items, $0.10 better than the Capital IQ Consensus Estimate of $0.43; revenues rose 29.9% year/year to $161 mln vs the $151.72 mln consensus. Co issues in-line guidance for Q4, sees EPS of $0.41-0.45, excluding non-recurring items, vs. $0.42 Capital IQ Consensus Estimate; sees Q4 revs of $146-152 vs. $151.92 mln Capital IQ Consensus Estimate.

4:07PM SunPower: D. E. Shaw Renewable Investments and Bright Plain Renewable Energy announce the acquisition of Kalaeloa Solar Farm from SunPower (SPWR) 4.55 +0.16 : Construction on the project began in July of this year, and is expected to be complete next month. Hawaiian Electric will buy the power produced by the solar farm under a fixed-price contract for 20 years.

Riverbed Technology (RVBD) announced that Riverbed Stingray Traffic Manager is now a certified load balancer for Microsoft (MSFT) Lync 2010.

AMD (AMD) announced a new global distribution agreement with Symmetry Electronics. Symmetry Electronics will immediately begin to promote, sell and support the full line of AMD embedded products.

8:02AM MEMC Elec Closes $314 million (R2.6 Billion) in funding for 58 MW in South Africa solar projects (WFR) 2.82 +0.02 : Co announced that it has closed $314 million (R2.6 Billion) in long-term debt and equity financing for two utility solar projects in Limpopo Province, South Africa. Standard Bank and Futuregrowth Asset Management are the two senior debt providers supporting both projects. The two projects total 58 megawatts MW (AC). Witkop Solar Park and Soutpan Solar Park (28 MW AC) will be the first utility scale solar projects to be implemented in Limpopo Province. Under the terms of the financing agreement, power generated from the two facilities will be purchased by Eskom, the national utility in South Africa, through a 20-year power purchase agreement. The Soutpan Solar Park is expected to interconnect in January of 2014, while the Witkop Solar Park is forecast to interconnect in April of 2014. Construction of both projects is expected to begin in January of 2013.

7:02AM SemiLEDs misses Q4 ests (LEDS) 1.18 : Reports Q4 (Aug) loss of $0.60 per share, excluding non-recurring items, $0.35 worse than the Capital IQ Consensus Estimate of ($0.25); revenues rose 3.8% year/year to $5.5 mln vs the $7.99 mln consensus.

Fourth quarter results reflect the Company's reduction of the carrying amount of its investment in China SemiLEDs to zero, compared to the third quarter ending balance of $8.7 million. The reduction reflects primarily the Company's recognition of its proportionate share of an impairment charge on China SemiLEDs' long-lived assets related to the increased likelihood that shareholders of China SemiLEDs would fail to agree to and implement a restructuring plan for China SemiLEDs.

6:06AM JA Solar misses by $0.11, beats on revs (JASO) 0.65 : Reports Q3 (Sep) loss of $0.30 per share, $0.11 worse than the Capital IQ Consensus Estimate of ($0.19); revenues fell 32.8% year/year to $260.9 mln vs the $230.28 mln consensus. Total shipments in the third quarter of 2012 were 418 MW, above the high end of the co's previously provided guidance of 350 MW to 370 MW, flat from the 418MW shipped in the second quarter of 2012, and a 6.1% decrease from 445 MW in the third quarter of 2011.

Business Outlook
For the fourth quarter of 2012, the co expects total cell and module shipments to be between 380 MW and 420 MW. For the full year 2012, the co now expects total cell and module shipments to be between 1.55-1.65 GW, compared with the previously provided full year guidance of 1.5-1.8 GW.

Analog Devices (ADI) reported fourth quarter earnings of $0.58 per share, $0.01 better than the consensus of $0.57, while revenues fell 3.0% year/year but rose 2% sequentially to $695.0 million versus the $697.5 mln consensus. The company issued downside guidance for the first quarter with EPS of $0.40-0.48 versus the $0.55 consensus and revenues down 6-12%, it is assuming they mean sequentially but it's not entirely clear, which computes to approximately $612-653 mln vs. $687.3 mln Capital IQ Consensus Estimate. Based on YoY, the guidance would be $641-685 million. "Overall orders decreased during the quarter as customers became more cautious and continued to reduce inventories, in many cases to historically low levels. As a result, we began reducing our production levels in the fourth quarter and will reduce them further in the first quarter of fiscal 2013 to keep our inventory at appropriate levels. While this will reduce gross margins in the short term, we believe this should provide significant operating leverage when growth resumes."

Guidewire Software (GWRE) reported first quarter earnings of $0.11 per share, excluding non-recurring items, $0.10 better than the Capital IQ consensus of $0.01, while revenues rose 20.8% year/year to $63.3 million versus the $60.56 mln consensus. "We are reporting revenue and profitability that exceeded our guidance for the first quarter of fiscal year 2013. Term license revenue increased by 67%, contributing to 31% growth in our rolling four-quarter recurring revenue metric. Underlying this strong financial performance is our further penetration into the Tier 1 segment of the market, continued international traction, and multiple go-lives that expand our track record of successful customer deployments. We are pleased with the fact that we continue to see positive returns on the investments we are making in engineering, sales and services."

Symantec (SYMC) target raised to $20 from $17 at FBR Capital. The firm notes while they believe co is slowly getting its arms around its business and will soon take a new strategic direction (announcement expected in late January 2013) with its business, they have concerns regarding competitive and secular headwinds in the co's core security and storage markets and the lack of consistency inherent in the co's near-term profitability profile given the constant digesting of its acquisitions and further investments in the business. They increase price target to reflect the co's new strategic vision, and believes it is appropriate given SYMC's growth rate, profitability, and peer valuations.