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From Briefing.com: Weekly Recap - Week ending 06-Dec-13Like Maxwell Smart used to say, "Missed it by that much." Less than a point separated the S&P 500 from its ninth straight winning week, but what a finish to the week it was. Sparked by an encouraging employment report for November, the S&P 500 jumped 20 points, or 1.1%, on Friday.

The week in review pretty much begins and ends with Friday since the market was preoccupied all week with the question of whether the November employment report would prompt the Fed to make a tapering decision at its December meeting. The answer to that question was basically yes, no, and maybe.

The report, which featured a 203,000 increase in nonfarm payrolls and a drop in the unemployment rate to 7.0% from 7.3% that was not driven by a decline in the labor force participation rate, was solid enough to convince participants that the labor market is improving but not strong enough necessarily to force the Fed's hand into tapering this month.

Whatever unfolds, the overriding message of the market on Friday was either that it didn't believe there would be a tapering this month or that it doesn't fear a tapering this month (or next month). Both the 10-yr note and the stock market pushed higher on Friday while gold prices and the US Dollar Index were little changed.

They were moves that stood in contrast to the tapering angst that existed earlier in the week after the release of the better-than-expected ISM Index, higher-than-expected auto sales, a 25% increase in new home sales for October, lower-than-expected initial claims, and an upwardly revised 3.6% GDP growth rate for the third quarter (more on that in a bit).

Every sector finished higher on Friday and so did every Dow component. For the week, the best-performing sectors were the utilities (+0.8%), technology (+0.7%), consumer staples (+0.1%), and energy (+0.04%) sectors, so a bit of a cyclical and counter-cyclical mix, which probably reflected some hedging with respect to the tapering idea and the thinking that the market is due for a pullback of some kind after its extraordinary rally.

Still, it was clear that money wasn't in a hurry to leave the stock market this week. That may have been owed to the thinking that another buy-the-dip run would be seen -- and sure enough that ended up being the case.

Now, in terms of the GDP report, it wasn't as robust as it appeared to be at first blush. The change in inventories accounted for 1.68 percentage points of the change in GDP; moreover, personal consumption expenditures were up just 1.4% (lowest since Q4 2009) while real final sales, which exclude the change in inventories, were revised down to 1.9% from 2.0% in the first estimate.

It is almost certain that there will be some inventory payback in the fourth quarter that will act as a big drag on fourth quarter GDP. Briefing.com's current forecast calls for growth of just 0.8%.

The Fed will be cognizant of that inventory drag (New York Fed President Dudley spoke about it in a speech a few weeks ago), which is one reason why there is still room to think it will hold off on a tapering decision for the time being. Another reason embedded in the November employment report is the fact that the number of people unemployed for 27 weeks or more accounted for 37.3% of the unemployed, up from 36.1% in October, demonstrating the ongoing difficulty of finding a new job after being out of work for so long.

Emergency unemployment benefits are due to expire January 1 if Congress doesn't strike an agreement to extend them. On a related note, there were reports this week that negotiators are close to striking a budget agreement that will prevent another government shutdown, but that emergency unemployment benefits are creating a sticking point in those talks.

The budget negotiations promise to be a focal point in the week ahead along with the Retail Sales report for November and Q3 GDP data for Europe.

 
 Index	     Started Week  Ended Week  Change  % Change	 YTD % 
 DJIA	       16086.41	   16020.20   -66.21	 -0.4	 22.3 
 Nasdaq	        4059.89	    4062.52	2.63	  0.1    34.5 
 S&P 500	1805.81	    1805.09    -0.72	 -0.0    26.6 
 Russell 2000	1142.88	    1131.38   -11.50	 -1.0	 33.2

Large Cap Gainers

PH (121.16 +3.99%): Upgraded to Buy from Sell at Goldman
BSX (11.79 +3.97%): Upgraded to Outperform from Market Perform at Cowen; reported favorable results assessing real-world experience with the Precision Spectra SCS System
INFY (55.51 +3.04%): Upgraded to Outperform from Market Perform at Cowen, target raised to $65 from $55

Large Cap Losers

GPS (39.38 -2.14%): Reported November same store sales rose 2% vs +0.7% Retail Metric consensus; downgraded to Hold from Buy at Jefferies, target lowered to $40 from $51
TWC (130.72 -1.37%): WSJ reporting that comments from regulators suggest a deal with Comcast (CMCSA) would not be approved
TWTR (45.28 -0.75%): Initiated with a Market Perform at Bernstein, target $40

Mid Cap Gainers

PBYI (83.39 +7.32%): Continued strength following reporting of positive top line data from the Phase 2 clinical trial of the company's investigational drug PB272 (neratinib) for the neoadjuvant treatment of breast cancer (I-SPY 2 TRIAL)
CONN (74.76 +7.08%): Target raised to $86 from $73 at B. Riley & Co
LL (103.66 +6.25%): Initiated with an Outperform at Wedbush

Mid Cap Losers

ULTA (94.16 -20.20%): Missed quarterly EPS by $0.02 ($0.72 ex items vs $0.74 estimate), revs rose 22.4% yoy to $618.8 mln vs $622.38 mln estimate; sees Q4 EPS of $1.07-1.10 vs $1.24 estimate, revs of $853-867 mln vs $895.01 mln estimate; downgraded to Neutral from Overweight at Piper Jaffray
BIG (31.97 -13.9%): Missed quarterly EPS by $0.08 (-$0.16 ex items vs -$0.08 estimate; US operations adjusted EPS was -$0.07), revs rose 1.6% yoy to $1.15 bln vs $1.16 bln estimate (US operations adjusted revs rose 1.8% to $1.1 bln); comparable store sales for US stores open at least fifteen months decreased 2.5%; target lowered to $34 from $37 at Canaccord Genuity
AEO (15.05 -8.23%): Reported Q3 EPS of $0.19 (in-line with pre-announcement), revs fell 5.8% yoy to $857.3 mln vs $842.43 mln estimate; sees Q4 EPS of $0.26-0.30 ex items vs $0.39 estimate

9:00AM Solar Capital authorizes the extension of a program for the purpose of repurchasing up to $100 mln worth of its common stock to be implemented at the discretion of the co's mgmt team (SLRC) 22.67 : Co announced that its Board of Directors has authorized the extension of a program for the purpose of repurchasing up to $100 million worth of its common stock to be implemented at the discretion of the Company's management team. Unless further extended by the Company's Board of Directors, the Company expects the repurchase program to be in place until the earlier of July 31, 2014 or until $100 million of the Company's outstanding shares of common stock have been repurchased. To date, ~ $17.5 million of repurchases have been made by Solar Capital under the repurchase program.

SeaChange (SEAC) reported third quarter earnings of $0.09 per share, which is worse than expected, while revenues fell 3.8% year/year to $37.77 million which is worse than expected. The company issued guidance for the fourth quarter with EPS of $0.15-0.20 and revenues of $40-45 million which is worse than expected. "Our opportunity funnel remains very robust and we continue to respond to strong interest in our Nucleus gateway software and Adrenalin by many of the world's leading operators. However, we continue to experience some delays in receiving final product acceptances and some agreements expected for the third and fourth quarter are experiencing delays in signing due to expanded scope and the complex nature of the customer decision making process, which involves the customer selecting multiple vendors."
Finisar (FNSR) reported second quarter earnings of $0.43 per share, excluding non-recurring items, which is better than expected, while revenues rose 25.3% year/year and 9.3% sequentially to $290.7 million which is higher than expected. The company issued guidance for the third quarter with EPS of $0.43-0.47 and revenues of $290-305 million which are above estimates.
Rally Software Development (RALY) reported third quarter loss of $0.17 per share, excluding non-recurring items, which is higher than expected, while revenues rose 49.5% year/year to $18.94 million which is higher than expected. GAAP gross margin for the quarter was 76% as compared to 78% from the same period one year ago. Excluding stock-based compensation and amortization of acquired intangible assets, non-GAAP gross margin for the quarter was 77% as compared to 78% from the same period one year ago. The company increased total paid seats by 5,700 in the quarter, bringing total paid seat count to nearly 198,000. The company issued guidance for the fourth quarter with EPS of $(0.26)-(0.24), which is in line with expectations with revenues of $19.2-19.4 million which is higher than expected.