Sector Investing

[ReturntoSender]

From Briefing.com: 4:30 pm : Equities finished today's session on a mixed note. The Dow and S&P 500 gained 0.5% each, while the Nasdaq underperformed, and ended flat. However, looking below the surface revealed the sector rotation which took place today.

The energy space paced today's advance thanks in part to strong earnings from Valero (VLO 43.77, +4.96). In addition, the 1.1% advance in crude oil also contributed to the sector's strength.

After energy, health care, telecoms, and utilities were among the day's top performers as investors rotated into defensive-oriented stocks. In the health care space, Eli Lilly (LLY 54.32, +1.68) and Pfizer (PFE 27.70, +0.86) both gained 3.2% after reporting upbeat earnings.

Today's performance of telecoms expands on the theme of sector rotation. AT&T (T 34.68, +0.55), Sprint Nextel (S 5.64, +0.08), and Verizon Communications (VZ 43.50, +0.73) all gained near 1.5%.

While defensive sectors led the way, the discretionary space underperformed as the SPDR Consumer Discretionary Select Sector ETF (XLY 50.46, -0.20) slipped 0.4%. Ford Motor (F 13.14, -0.64) was a notable laggard after the carmaker shed 4.6% despite an earnings beat. While the company expressed concerns about its European sales, the remarks were in-line with comments made during past earnings calls.

The discretionary sector avoided wider losses thanks to the relative strength observed in homebuilders. This morning, DR Horton (DHI 23.82, +2.51) beat on both earnings and revenue. The strong report was welcomed by investors and shares of DR Horton spiked 11.8%. Meanwhile, the broader SPDR S&P Homebuilders ETF (XHB 29.10, +0.29) gained 1.0%.

Although the technology sector ended with gains, its true performance was masked by the relative strength of Apple (AAPL 458.27, +8.44), which gained 1.9% after announcing a 128GB version of its fourth generation iPad device.

Tech stocks saw broad weakness and VMware (VMW 77.14, -21.18) was a notable laggard. The company, which specializes in technology infrastructure, plunged 21.5% after issuing cautious guidance. In addition, VMware announced plans to cut about 7.0% of its workforce.

Elsewhere in tech earnings, Seagate (STX 33.91, -3.50) fell 9.4% after it too issued guidance which disappointed investors. Note that today's selling came after Seagate rallied nearly 50.0% in the eight weeks leading into yesterday's report.

Volume was slightly above its 50-day average as more than 700 million shares changed hands on the floor of the New York Stock Exchange.

The CBOE Volatility Index (VIX 13.33, -0.24) ended lower by 1.8% after the past two session saw the near-term volatility measure settle in the black.

The market received just two economic data points today. The November Case-Shiller 20-city Home Price Index rose by 5.5%, while a 5.2% increase had been expected by the Briefing.com consensus. This follows the previous month's increase of 4.3%.

Meanwhile, the January consumer confidence reading of 58.6 fell short of the 65.1 expected by the Briefing.com consensus. Though equities slipped immediately after the report hit the wires, the weakness proved to be short-lived.

Tomorrow, the weekly MBA Mortgage Index will be released at 7:00 ET. At 8:15 ET, the January ADP Employment Change will be reported. Fourth quarter advanced GDP growth will hit the wires at 8:30 ET, and the Federal Reserve will top off the busy day of economic releases with its rate decision and policy statement scheduled for 14:15 ET. Among earnings of note, Boeing (BA 73.65, -0.35) will announce its quarterly results prior to the open.DJ30 +72.49 NASDAQ -0.64 SP500 +7.66 NASDAQ Adv/Vol/Dec 1345/1.91 bln/1102 NYSE Adv/Vol/Dec 1746/718.9 mln/1249

3:30 pm :

Mar crude oil extended yesterday's gains as it got a boost from a weaker dollar index. The energy component climbed to a floor session high of $97.82 per barrel and settled at $97.59 per barrel for a 1.2% gain.
Mar natural gas extended losses for a sixth consecutive session as it struggled in negative territory for all of pit trade. Prices rose to a session high of $3.30 per MMBtu but quickly pulled back and eventually settled 1.5% lower at $3.26 per MMBtu.
Feb gold traded higher for the first time in five sessions ahead of tomorrow's Fed decision. In addition, the weaker dollar index following lower-than-anticipated Consumer Confidence data also supported gold's advance. The yellow metal brushed a session high of $1665.00 per ounce and settled for a 0.5% gain at $1660.60 per ounce.
Silver also traded in the black for its entire floor session. It trended higher after brushing a session low of $31.05 per ounce and eventually settled with a 1.4% gain at $31.20 per ounce.

4:55PM Netflix prices $500 mln offering of 5.375% senior notes (NFLX) 169.12 +7.01 : Co announced the pricing of an offering of $500 million aggregate principal amount of its 5.375% senior notes due 2021.
4:43PM Broadcom sees Q1 revenues of approx $1.90 bln +/- 4% (Approx $1.82-1.98 bln), Capital IQ consensus $2.003 bln; sees Non-GAAP product gross margins of flat to down 50 bps q/q (Q4 52.2%) (BRCM) 33.71 -0.35 :

4:10PM Broadcom increases quarterly cash dividend 10% to $0.11 per share from $0.10 per share (BRCM) 33.71 -0.35 :

4:09PM Broadcom beats by $0.02, reports revs in-line; raises quarterly dividend 10% to $0.11 (BRCM) 33.71 -0.35 : Reports Q4 (Dec) earnings of $0.76 per share, excluding non-recurring items, $0.02 better than the Capital IQ Consensus Estimate of $0.74; revenues rose 14.3% year/year to $2.08 bln vs the $2.06 bln consensus.

4:13PM Pericom Semi beats by $0.01, beats on revs; guides Q3 revs below consensus (PSEM) 7.19 +0.21 : Reports Q2 (Dec) earnings of $0.04 per share, excluding non-recurring items, $0.01 better than the Capital IQ Consensus Estimate of $0.03; revenues fell 0.3% year/year to $30.4 mln vs the $29.47 mln consensus. Co issues downside guidance for Q3, sees Q3 revs of $27.5-30.5 mln vs. $31.66 mln Capital IQ Consensus Estimate.

4:06PM Freescale Semi beats by $0.03, beats on revs; guides Q1 revs above consensus (FSL) 12.39 +0.14 : Reports Q4 (Dec) loss of $0.15 per share, excluding non-recurring items, $0.03 better than the Capital IQ Consensus Estimate of ($0.18); revenues fell 5.5% year/year to $957 mln vs the $946.65 mln consensus. Co issues upside guidance for Q1, sees Q1 revs of $945-985 mln vs. $943.14 mln Capital IQ Consensus Estimate; gross margin to increase 75-100 bps sequentially.

2:53PM Floor Talk (TALKX) : The US equity market is mixed in the afternoon trade, with some interesting divergences appearing.

Apple (AAPL, 457.44, +7.61, +1.69%) is outperforming again, but the Nasdaq is underwater as losses in the semiconductor and technology hardware groups are holding back the tech-heavy composite
The Dow and S&P 500 are each up 0.5% and near their best levels of the day, bolstered by leadership from the energy (+1.4%), health care (+1.2%), consumer staples (+0.7%), telecom services (+1.6%), and utilities sectors (+0.7%).
The Treasury market is under pressure again (10-yr -9/32 at 1.99%) despite a weak Consumer Confidence report for January.

There are some telling dynamics in today's trade that so far has been accented with moderate volume.

First, the outperformance of the countercyclical sectors underscores a more defensive mindset among today's traders, yet that is not the same as saying there is a risk-off mindset. On the contrary, we are witnessing a rotation within the stock market as opposed to a rotation out of the stock market.

Secondly, the fact that Treasuries have been unable to catch a bid and are near their lows for the day also speaks to the idea that a risk-off mentality has not taken root.

Third, Apple's rebound effort reflects a buy-the-dip (in this case, a very large dip) disposition in the equity market that has been an enduring source of support for the broader market since the beginning of the year.

Fourth, the energy sector is leading the way today, tracking oil prices higher (+$1.03 at $97.47). The energy sector is the best-performing sector year-to-date (+8.6%) as participants trade the prospect of improved global growth and oil demand. However, higher oil prices and the carryover to gas prices could soon become an added drag on consumer spending when paired with the adverse impact of the higher payroll tax. Accordingly, a buying catalyst today could pivot to a selling catalyst in the near future. This will certainly be the case if a geopolitical event prompts a spike in oil prices above $100 per barrel.

2:38PM Cisco Systems slides to new session low of 20.65, hovering just above its 20 ema and last week's low at 20.63/20.61 (CSCO) 20.67 -0.39 :

McAfee, a subsidiary of Intel (INTC), and SUBNET Solutions have joined together to offer the industry's first unified substation security solution to address the growing cyber security needs for electric utility substation integration and automation systems.

Skyworks Solutions (SWKS) has secured a reference design with Texas Instruments (TXN) for smart energy, industrial and networking applications including electric/gas/water meters, street lighting, telematic and tracking systems.

8:02AM Trina Solar to supply 30MW to gestamp solar for two projects in South Africa (TSL) 4.85 : Co announced that it will supply 30MW of photovoltaic modules to Gestamp Solar, one of the world's leading companies in the development and management of photovoltaic parks, for two projects in South Africa. Large-scale solar systems will be installed in South Africa's Northern Cape Province, in the towns of Prieska and De Aar, with the capacity to generate 20MW and 10MW respectively. According to terms of the agreement, deliveries will be made in the third quarter of 2013.

7:43AM EMC guided FY13 EPS below consensus; rev in-line (EMC) 25.20 : Co issues guidance for FY13 (Dec), sees EPS of $1.85, excluding non-recurring items, vs. $1.90 Capital IQ Consensus Estimate; sees FY13 (Dec) revs of $23.5 bln vs. $23.58 bln Capital IQ Consensus Estimate.

7:11AM EMC beats by $0.02, reports revs in-line (EMC) 25.20 : Reports Q4 (Dec) earnings of $0.54 per share, excluding non-recurring items, $0.02 better than the Capital IQ Consensus Estimate of $0.52; revenues rose 8.2% year/year to $6.03 bln vs the $5.97 bln consensus.

Non-GAAP Gross Margins came in at 66.2% compared to 64.5% in prior year.
Non-GAAP Operating Margin was 27.5% compared to 26.3% in priuor year period.

Yahoo (YHOO) reported fourth quarter earnings of $0.32 per share, $0.04 better than the Capital IQ consensus of $0.28, while revenues rose 4.4% year/year to $1.22 billion versus the $1.21 bln consensus. Search revenue ex-TAC was $427 million for the fourth quarter of 2012, a 14 percent increase compared to $376 million for the fourth quarter of 2011. Paid clicks, or the number of clicks on sponsored listings on Yahoo! Properties and Affiliate sites, increased approximately 11 percent compared to the fourth quarter of 2011 and increased approximately 8 percent compared to the third quarter of 2012. Display revenue ex-TAC was $520 million for the fourth quarter of 2012, a 5 percent decrease compared to $546 million for the fourth quarter of 2011.

VMware (VMW) reported fourth quarter earnings of $0.81 per share, excluding non-recurring items, $0.03 better than the Capital IQ consensus of $0.78, while revenues rose 22.0% year/year to $1.29 billion versus the $1.28 bln consensus. The company issued downside guidance for the the first quarter with revenues of $1.17-1.19 billion versus the $1.25 billion consensus. The company issued downside guidance for fiscal year 2013 with revenues of $5.23-5.35 billion versus the $5.43 billion consensus.

Sanmina (SANM) reported first quarter earnings of $0.29 per share, excluding non-recurring items, $0.05 worse than the Capital IQ consensus of $0.34, while revenues fell 0.5% year/year to $1.5 billion versus the $1.53 billion consensus. The company issued downside guidance for the second quarter with EPS of $026-0.32 versus the $0.32 consensus and revenues of $1.40-1.45 billion versus the $1.49 bln consensus. "First quarter revenue and EPS were below expectations due to weak demand across most of our market segments. Our second quarter guidance reflects seasonality along with continued uncertainty in the macro-environment. Based on the pipeline of new business opportunities and the ramping of new programs in fiscal 2013, we should see improvements in the second half of the year."

Seagate (STX) reported second quarter earnings of $1.38 per share, $0.11 better than the Capital IQ consensus of $1.27, while revenues rose 14.8% year/year to $3.67 billion (co guided rev to at least $3.6 bln on Jan 8) versus the $3.57 billion consensus. "Seagate is executing well in an environment where customer demand forecasting is challenging....Looking ahead, we will continue to manage our business conservatively to the demand environment, focus on profitability and effectively invest for market leadership in storage for mobility..The Board of Directors approved an increase in our quarterly cash dividend to $0.38 per share which was paid on December 28, 2012, rather than in the March 2013 quarter." Seagate Tech Q2 non-GAAP gross margins 27.6% (On Jan 8th company said it expects gross margins to be at least 27% compared to the 31.7% in the same quarter as last year)

Wunderlich upgraded PLX Tech (PLXT) to Buy from Hold and raises their target to $6 from $4. The firm says, with the failed IDT merger now well behind them, PLX has emerged a leaner, more focused and firmly profitable company primarily targeting the PCI express market. Sustainable growth and profitable operating momentum from the Gen2 products should be leveraged by the ramping of Gen3 later this year. They also expect new activist investors to push for another sale of the company and, along with the return to growth and profitability, they expect sentiment in the name to improve.