Sector Investing

[ReturntoSender]

From Briefing.com: Weekly Recap - Week ending 23-Aug-13

Dow +46.77 at 15010.51, Nasdaq +19.08 at 3657.79, S&P +6.54 at 1663.50

The major averages registered modest gains and the S&P 500 retook its 50-day moving average. All ten sectors ended in positive territory after a final-hour surge pulled today's underperformers into the green. For the week, the S&P added 0.3%, Nasdaq rose 1.4%, and the Dow shed 0.6%.

Stocks spiked at the open with the technology sector leading the way after Microsoft (MSFT 34.75, +2.36) announced Chief Executive Officer Steve Ballmer will retire from the company within a year. Shares of the software company surged 7.3%, contributing to the outperformance of the Nasdaq, which gained 0.5%.

The S&P followed the opening surge with a brief slip into the red after it was reported that new home sales collapsed in July, falling 13.4% to 394,000 from a downwardly revised 455,000 (from 497,000) in June. The Briefing.com consensus pegged new home sales at 485,000. In terms of percentage, the drop in sales was the largest since May 2010 and brought levels down to their lowest point since October 2012.

Home builders tumbled in reaction to the data and the iShares Dow Jones US Home Construction ETF (ITB 21.07, -0.55) lost 2.5%. This weighed on the discretionary sector, which ended with a razor-thin gain of 0.02%.

Discretionary shares were also pressured by retailers. The SPDR S&P Retail ETF (XRT 78.89, -0.25) lost 0.3% after Aeropostale's (ARO 8.76, -2.22) earnings report continued the recent trend of disappointing results from teen apparel retailers.

Recent weeks have entertained much discussion over when the Federal Reserve will begin cutting back the pace of its asset purchases. While comments from many Fed speakers have suggested the first taper may occur as early as September, their remarks have often included reminders that the Fed intends to remain data-dependent. To that end, today's new home sales report revealed a notable drop-off in sales, which speaks against tapering in the immediate term.

Treasuries, foreign exchange, and precious metals appeared to agree with this assessment as the benchmark 10-yr yield fell seven basis points to 2.82%. The dollar weakened in the wake of the report while gold futures surged 1.9% to $1396.70 per troy ounce. Meanwhile, silver futures spiked 4.3% to $24.04 per troy ounce.

Today's sector leadership was a bit scattered. Three cyclical groups--energy (+0.7%), materials (+0.9%), and technology (+0.6%)--outperformed throughout the day while the remaining three--consumer discretionary (+0.02%), financials (+0.1%), and industrials (+0.1%)--traded in the red until the closing surge.

With regard to countercyclical sectors, rate-sensitive consumer staples (+0.6%), telecom services (+1.4%), and utilities (+0.8%) rallied in reaction to the retreat in yields while health care (+0.2%) lagged.

Today's trading volume was well below average, and with 572 million shares traded at the NYSE, today's total was one million below the tally from yesterday's session that included a three-hour halt of all Nasdaq-listed issues.

On Monday, July durable orders will be reported at 8:30 ET.

Week in Review: Stocks Chop as Rates Climb

Monday marked the beginning of a new week for the stock market, yet the story played out much the same way it did during the prior week. Long-term rates continued to rise, the stock market continued to sink, and trading volume remained light. The major averages were mixed and little changed for much of the session, but they broke down in late trading as the technology sector gave up its leadership post and other sectors bowed to selling interest. There wasn't a specific news catalyst for the late-day breakdown, which led some to conclude it was a function of technical factors at work. Outside of some specific names, buyers didn't want much to do with the market. The stocks that benefited were familiar names like Boeing (BA 105.48, +0.34), Johnson & Johnson (JNJ 88.41, +0.81), Google (GOOG 870.21, -3.50), and Apple (AAPL 501.02, -1.94).

On Tuesday, the S&P 500 settled higher by 0.4% to snap its streak of four consecutive losses. Small caps outperformed as the Russell 2000 rose 1.5% after registering five declines in a row. Unaffected by another round of losses across emerging markets, stocks climbed at the open, but gains were limited as the S&P could not retake its 50-day moving average. The benchmark index made a brief midday appearance above the key level before spending the entire afternoon just below it. A retreat in Treasury yields contributed to the relative strength of equities as the benchmark 10-yr yield fell seven basis points to 2.82%. The pullback in yields helped rate-sensitive sectors such as telecom services (+0.5%), utilities (+0.8%), and home builders. The iShares Dow Jones US Home Construction ETF added 3.1% as most major builders gained between 2.0% and 4.0% apiece.

Wednesday's session saw the S&P 500 settle lower by 0.6% despite making a brief appearance in positive territory following the release of the FOMC minutes. Although the minutes from the July meeting offered few changes from prior statements, they did indicate broad support for Chairman Bernanke's timeline, which would likely call for tapering as early as September. However, this was coupled with cautious comments regarding the labor market as the minutes noted, "The June employment report showed continued solid gains in payrolls. Nonetheless, the unemployment rate remained elevated, and the continuing low readings on the participation rate and the employment-to-population ratio, together with a high incidence of workers being employed part time for economic reasons, were generally seen as indicating that overall labor market conditions remained weak." Overall, the minutes did not provide a clear-cut signal regarding the Fed's tapering schedule and the mixed reaction across markets suggests a certain level of uncertainty remains present. The reaction in Treasuries was consistent with expectations of tapering in the near-term as the benchmark 10-yr yield jumped four basis points to 2.86%. The selling had the biggest impact on the belly of the curve as the 5-yr yield jumped more than 6 bps to 1.606%. However, the yield still managed to close just below Monday's two-year high.

On Thursday, the major averages registered gains across the board, but a three-hour halt of all Nasdaq-listed issues prevented normal trading from taking place throughout the afternoon. Stocks climbed out of the gate after upbeat survey data from China and the eurozone reassured investors. China's HSBC Manufacturing PMI jumped to 50.1 from 47.7 (48.3 expected) while the eurozone Manufacturing PMI improved to 51.3 from 50.3 (50.8 forecast). In addition, the Services PMI reading rose to 51.0 from 49.8 (50.2 expected). The economic data provided a boost to growth-sensitive sectors as five of six cyclical groups registered gains larger than 1.0%. The technology sector lagged with an advance of 0.5%. The largest sector component, Apple, ended little changed and Dow member Hewlett-Packard (HPQ 22.40, +0.18) endured its worst session in two years, falling 12.5%, after reporting in-line results and saying it is unlikely to experience revenue growth in 2014.
Index Started Week Ended Week Change % Change YTD %
DJIA 15081.47 15010.51 -70.96 -0.5 14.5
Nasdaq 3602.78 3657.79 55.01 1.5 21.1
S&P 500 1655.83 1663.50 7.67 0.5 16.6
Russell 2000 1024.30 1038.24 13.94 1.4 22.2

This week's top 20 % gainers

Technology: TSL (9.44 +29.89%), CSIQ (13.16 +18.98%), SOL (4.62 +17.74%), NTES (75.42 +17.18%), QIHU (73.13 +16.5%), YGE (4.28 +15.43%), SUNE (7.83 +14.37%)
Services: TUES (13.9 +26.79%), BBY (35.08 +14.25%), NXST (36.11 +13.8%)
Industrial Goods: TASR (11.39 +16.02%)
Healthcare: INCY (34.76 +30.3%), INSY (30.92 +20.36%), INSM (13.57 +15.21%), CLDX (23.59 +15.15%), CGEN (9.98 +15.03%), XOMA (4.42 +14.5%)
Financial: LTS (1.84 +14.2%)
Basic Materials: PLG (1.19 +13.73%), ALJ (13.01 +13.65%)

This week's top 20 % losers

Technology: TLK (39.09 -14.59%), HPQ (22.4 -14.37%), OIBR (1.6 -13.71%), NTLS (16.28 -11.19%)
Services: LITB (9.86 -49.21%), ANF (38.67 -21.13%), BKS (13.99 -19.31%), SPLS (14.2 -15.9%), ARO (8.75 -12.16%), SSI (19.94 -11.98%)
Industrial Goods: GFA (2.61 -12.78%)
Healthcare: MNKD (5.52 -11.3%)
Financial: IBN (27.67 -13.16%), CYS (7.57 -11.52%), ARR (3.98 -9.6%)
Consumer Goods: TTM (23.61 -9.86%)
Basic Materials: CIE (24.52 -16.67%), ANW (8.65 -15.58%), GFI (5.65 -12.42%), HMY (4.01 -9.7%)

Large Cap Gainers

MSFT (34.08 +5.20%): CEO Steve Ballmer to retire within the next 12 months
FB (39.99 +3.74%): Reiterated with an Overweight rating and $44 price target at JP Morgan; mentioned positively at ITG
PBR (14.85 +3.41%): Brazil's central bank has announced a new $60 bln currency intervention program

Large Cap Losers

LOW (46.85 -1.14%): Weakness following disappointing July New Home Sales data
GPS (41.65 -0.86%): Reported Q2 earnings of $0.64 per share (in-line), revs rose 8.1% yoy to $3.87 bln vs $3.81 bln estimate; comparable store sales +5% vs +4% in prior year; sees FY14 EPS of $2.57-2.65 vs $2.78 estimate
BIDU (138.47 -0.77%): Signed agreement with Renren (RENN) for strategic investment in Nuomi

Mid Cap Gainers

ADSK (39.72 +9.92%): Beat quarterly EPS by $0.03 ($0.45 vs $0.42 estimate), revs fell 1.2% yoy to $561.7 mln vs $560.57 mln estimate; sees Q3 EPS of $0.36-0.40 vs $0.50 estimate, revs of $540-555 mln vs $580.94 mln estimate; upgraded to Buy from Neutral at B. Riley & Co
DAR (20.97 +8.54%): To acquire the Rothsay rendering business from Maple Leaf Foods for ~C$645 mln in cash
EXPE (49.14 +5.75%): Announced strategic marketing agreement with Travelocity

Mid Cap Losers

P (19.17 -11.7%): Beat quarterly EPS by $0.02 ($0.04 vs $0.02 estimate), revs rose 55.4% yoy to $157.4 mln vs $155.71 mln estimate; total listener hours grew 18% to $3.88 bln; sees Q3 EPS of $0.03-0.06 ex items vs $0.08 estimate, revs of $174-179 mln; sees FY14 EPS of $0.00-0.05 ex items vs $0.05 estimate, revs of $640-655 mln; downgraded to Market Perform from Outperform at Raymond James; downgraded to Hold from Buy at Stifel
MRVL (12.23 -5.63%): Beat quarterly EPS by $0.04 ($0.23 ex items vs $0.19 estimate), revs fell 1.1% yoy to $807 mln vs $791.3 mln estimate; sees Q3 EPS of $0.23-0.27 ex items vs $0.24 estimate, revs of $850-890 mln vs $845.23 mln estimate;
DHI (18.63 -3.40%): Weakness in home builders following disappointing July New Home Sales data

12:02PM Netflix pops to new session high of 275.66 to break above the early week multi-year high. (NFLX) 275.01 +5.26

10:02AM Plug Power awarded a $650,000 contract from the U.S. Dep. of Energy to demonstrate the use of hydrogen-based fuel cells to power the refrigeration units in semi-trailer trucks that transport perishable and frozen foods (PLUG) 0.43 +0.01 :

7:31AM Qualcomm signs definitive agreement to sell its North and Latin American transportation and logistics business to Vista Equity Partners for $800 mln in cash (QCOM) 67.13 : Co announced that it has signed a definitive agreement to sell Omnitracs, a subsidiary of Qualcomm, to Vista Equity Partners, a U.S.-based private equity firm. Subject to the terms and conditions of the definitive agreement, Vista will purchase Omnitracs for $800 million in cash. The acquisition will include all of Omnitracs operations in the United States, Canada and Latin America, including Sylectus and FleetRisk Advisors, which were acquired by Omnitracs in 2011.

2:01AM Advanced Micro announces proposed sale and lease-back of Singapore Facility to Sabana Shari'ah Compliant Industrial Real Estate Investment Trust (AMD) 3.63 : Co announces that its Singapore subsidiary has entered into a conditional put-and-call option agreement to sell and lease-back its Singapore facility located at 508 Chai Chee Lane, Singapore 469032 to HSBC Institutional Trust Services, in its capacity as trustee of Sabana Shari'ah Compliant Industrial Real Estate Investment Trust.

The transaction is expected to generate proceeds of ~59 million Singapore dollars ($46 million), net of all fees, which will be reflected in AMD's third quarter 2013 financial statements when reported on Oct. 17, 2013. AMD expects to record a gain of ~$16 million in the third quarter of 2013.

1:42AM Plug Power sells 123 Hydrogen-based GenDrive Fuel cells to Mercedes Benz (PLUG) 0.42 : Co announces that Mercedes-Benz US International has ordered 123 additional hydrogen-based GenDrive fuel cell units to power new forklift trucks for its material handling fleet at a logistics hub now under construction in Tuscaloosa, Alabama.

Microsoft (MSFT $35.13 +2.73) announced that Chief Executive Officer Steve Ballmer has decided to retire as CEO within the next 12 months, upon the completion of a process to choose his successor. In the meantime, Ballmer will continue as CEO and will lead Microsoft through the next steps of its transformation to a devices and services company.

The Board of Directors has appointed a special committee to direct the process. This committee is chaired by John Thompson, the board's lead independent director, and includes Chairman of the Board Bill Gates, Chairman of the Audit Committee Chuck Noski and Chairman of the Compensation Committee Steve Luczo. The special committee is working with Heidrick & Struggles International and will consider both external and internal candidates.

07:36 am Marvell shares rise 1% following better than expected earnings
Marvell (MRVL $13.05 +0.09) reported second quarter earnings of $0.23 per share, excluding non-recurring items, which is better than expected, while revenues fell 1.1% year/year to $807.1 million which is better than expected. The company issued third quarter guidance with EPS of $0.23-0.27, which is line with estimates, with revenues of $850-890 million which is above expectations.

Management expects viral mobile and wireless end markets to grow double digits sequentially. In Q2 storage was better than expected, mobile and wireless was in-line, and networking was below expectations. The company continues to gain share in HDDs and SSDs and remains committed to returning cash to shareholders through dividends and buybacks.

07:35 am AutoDesk shares rise 2% following better than expected earnings
Autodesk (ADSK $36.75 +0.62) reported second quarter earnings of $0.45 per share, which is better than expected, while revenues fell 1.2% year/year to $561.7 million which is in line with expectations. Non-GAAP operating margin decreased by approximately 100 basis points to 24 percent, compared with 25 percent in the second quarter of fiscal 2013. Deferred revenue increased 7 percent to $806 million, compared to the second quarter of fiscal 2013. The company issued guidance for the third quarter with EPS of $0.36-0.40 versus which is below expectations, revenues of $540-555 which is below expectations.

"Our second quarter was marked by strength in our Architecture, Engineering and Construction (AEC) business segment and continued growth in suites," said Carl Bass, Autodesk president and CEO. "Growth in these vital areas was offset by mixed contributions from other parts of the business. On the product side, we strengthened and expanded our leading product portfolio with new desktop, cloud and mobile offerings."

Mentor Graphics (MENT) reported second quarter earnings of $0.26 per share, excluding non-recurring items, which is better than expected, while revenues rose 5.1% year/year to $253.2 million which better than expected. Mentor Graphics increases share repurchase program. The company issued guidance for this third quarter with EPS of $0.19, which is better than expected, with revenues of $260 million which is better than expected. The company raised fiscal year 2014 with EPS of $1.59, excluding non-recurring items, up from $1.55, which is above expectations, with revenues of $1.155 billion which is line with expectations.