Sector Investing

[ReturntoSender]

From Briefing.com: Weekly Recap - Week ending 13-Dec-13

Dow +15.93 at 15755.36, Nasdaq +2.57 at 4000.98, S&P -0.18 at 1775.32

The stock market experienced a flat finish to an otherwise-forgettable week. The S&P 500 shed less than one point, maintaining its December loss of 1.7%. Small-caps outperformed as the Russell 2000 gained 0.4%, but the index remains lower by 3.1% this month.

Equities registered opening gains, but the early strength faded during the first 30 minutes of action, sending the major averages to their lows. The key indices spent the rest of the morning near their flat lines before staging a modest afternoon rally. However, selling pressure returned during the late afternoon, sending the S&P 500 back to unchanged for the day.

Today's rally attempts were fueled by the relative strength of four cyclical sectors as consumer discretionary (+0.3%), financials (+0.1%), industrials (+0.4%), and materials (+0.4%) outperformed throughout the session.

The discretionary sector displayed notable strength from the get go as media names advanced in reaction to news Charter Communications (CHTR 131.54, -0.45) is preparing an open letter to purchase Time Warner Cable (TWC 131.41, +0.35) for no more than $140 per share. However, Time Warner narrowed its gain to just 0.3% after a follow-up report indicated the proposed offer would be below $135 per share.

Elsewhere, the industrial sector advanced with help from defense contractors and transports. The PHLX Defense Index gained 0.6% while the Dow Jones Transportation Average added 0.4%.

Also of note, the materials space ended in the lead as steelmakers and miners outperformed. The Market Vectors Steel ETF (SLX 47.71, +0.30) settled higher by 0.6% while the Market Vectors Gold Miners ETF (GDX 21.11, +0.10) gained 0.5% as gold futures increased 0.8% to $1235.10 per troy ounce.

The other commodity-linked sector, energy (-0.4%), ended at the bottom of the leaderboard as crude oil fell 1.0% to $96.53 per barrel. The sector was also pressured by Anadarko Petroleum (APC 78.30, -5.37), which lost 6.4% after the company was held liable for upwards of $14.50 billion in damages in the Tronox bankruptcy case.

Similar to energy, three of four countercyclical groups ended in the red while health care (+0.04%) outperformed.

Despite today's flat finish, the CBOE Volatility Index (VIX 15.77, +0.23) suggested the presence of some demand for volatility protection. The near-term volatility measure registered its third consecutive gain, ending at its highest level since mid-October.

Treasuries registered slight gains, sending the 10-yr yield lower by one basis point to 2.87%.

Participation was well below average as only 627 million shares changed hands on the floor of the New York Stock Exchange.

Among news of note, the House of Representatives passed the budget deal with a 332-94 vote. The bill will now head to the Senate with a vote expected to take place on Tuesday.

Today's economic data was limited to the November PPI report, which pointed to a downtick of 0.1% while core producer prices rose 0.1%. Both readings matched expectations.

On Monday, the December Empire Manufacturing survey as well as the third quarter productivity and unit labor costs will all be reported at 8:30 ET. The October net long-term TIC flows report will be released at 9:00 ET while November industrial production and capacity utilization will be released at 9:15 ET.

Week in Review: Santa Claus Rally on Hold

On Monday, the stock market did not generate too much excitement following a broad-based rally on Friday. The major indices stood their ground (for the most part) amid a lack of conviction from buyers and sellers alike. The day was not a case so much of the stock market going up as it was a case of some influential stocks going up to keep the major indices on a winning path. In fact, decliners were just about even with advancers at the NYSE and led by a 3-to-2 margin on the Nasdaq. Apple (AAPL 554.43, -6.11) and Google (GOOG 1060.79, -9.17) were key drivers of the S&P 500 and Nasdaq Composite while ExxonMobil (XOM 95.31, -0.05), Chevron (CVX 119.90, -1.09), and Goldman Sachs (GS 168.39, +0.06) were key drivers specifically of the price-weighted Dow Jones Industrial Average.

Tuesday's session saw the major averages spend the trading day in a steady downtrend. Despite persistent selling pressure, the losses were limited in scope. The Dow, S&P 500, and Nasdaq shed between 0.2% and 0.3% while the Russell 2000 lagged, falling 0.9%. The underperformance of the Russell 2000 was likely owed in part to tax-loss selling, which tends to pick up this time of year. Small-caps often feel that pinch in a stronger fashion than large-cap issues since individual retail investors factor more prominently in the behavior of small-cap stocks. Countercyclical sectors lagged throughout the day with consumer staples and health care falling 0.9% and 0.4%, respectively.

Wednesday featured a continuation of the selling from the previous day. Similar to Tuesday, small-caps paced the retreat as the Russell 2000 fell 1.6%. The S&P 500 settled lower by 1.1%, widening its month-to-date decline to 1.3%. Seven of ten sectors settled with losses of 1.0% or more while only two groups finished above their respective lows. Top-weighted financial (-1.5%) and health care (-1.6%) sectors trailed throughout the session, which emboldened sellers and prevented dip-buyers from turning the tide. Interestingly, the largest S&P 500 sector, technology, outperformed with a loss of 0.9% even as the tech-heavy Nasdaq (-1.4%) lagged.

The major averages finished the Thursday session on a lower note. The S&P 500 lost 0.4% while the Nasdaq shed 0.1%. The Russell 2000, which paced the retreat on Tuesday and Wednesday, added 0.2%, trimming its December loss to 3.5%. After spending the first half of the session in a steady retreat, the S&P 500 found technical support in the 1772 area. Upon reaching that level, the index reversed sharply, and marched back to its flat line. There was no particular catalyst responsible for the turn, but steady inflows into influential cyclical sectors paved the way for a broad-market rebound. Although the S&P 500 battled back to its flat line, final-hour selling pressured the index to a modest loss.

 
 Index	    Started Week  Ended Week   Change	%Change   YTD % 
 DJIA	      16020.20	   15755.36   -264.84	 -1.7	 20.2 
 Nasdaq	       4062.52	    4000.98    -61.54	 -1.5	 32.5 
 S&P 500	1805.09	    1775.32    -29.77	 -1.6	 24.5 
 Russell 2000   1131.38	    1107.05    -24.33	 -2.2	 30.3

4:48PM IBM states it will vigorously fight lawsuit filed by Louisiana Sheriff's Pension and Relief Fund (IBM) 172.80 -0.57 : Co's Senior Vice President and General Counsel Robert C. Weber announced that, "Yesterday, IBM (IBM) learned of a lawsuit pushing a wild conspiracy theory. This lawsuit seeks to confuse IBM's support for a U.S. cybersecurity legislative proposal -- which has yet to be enacted - with the completely unrelated NSA surveillance program called PRISM. Even a cursory reading of the legislative proposal, known as CISPA, makes clear that it has nothing to do with the recently disclosed NSA surveillance program. The legislation is designed to help protect companies from cyber attacks by encouraging the sharing of technical cyber threat information, such as malware code. The ability for those under attack to work together to help prevent cybercrime is a modern business requirement and an important goal, which is why many companies, including IBM, support such legislation. This bill does not refer to China, and it does not authorize government surveillance, facts that the plaintiff and its attorneys could have easily determined had they bothered to do the slightest fact checking. Starting from this fictitious connection between CISPA and PRISM, the complaint proceeds to make numerous specious and false accusations, and IBM calls upon the law firm that filed this action to do the right thing and dismiss this action immediately. To fail to do so is a profound disservice to the judicial system, to the public, and in this case, to IBM. IBM will vigorously fight this baseless lawsuit."

4:32PM This week's biggest % gainers/losers (SCANX) : The following are this week's top 20 percentage gainers and top 20 percentage losers, categorized by sectors (over $300 mln market cap and 100K average daily volume).

This week's top 20 % gainers

Utilities: UNS (58.94 +24.2%)
Technology: TWTR (59 +21.28%), GSAT (1.97 +15.7%), GRPN (10.24 +14.41%), LOGI (12.63 +12.03%), RMBS (9.54 +11.8%)
Services: WBAI (31.57 +33.45%), GTN (13.57 +13.39%), AER (24.93 +13.26%), ZLC (14.48 +12.79%), RBA (21.95 +11.9%), MEG (21.73 +11.88%)
Healthcare: ENTA (37.16 +33.36%), GIVN (29.89 +27.54%), RLYP (25.92 +25.36%), MDXG (7.77 +15.77%), SEM (9.73 +15.28%), KPTI (19.96 +13.54%)
Financial: NRF (11.86 +17.58%), EJ (13.9 +17.25%)

This week's top 20 % losers

Technology: RALY (16.65 -32.13%), SEAC (11.43 -22.01%), NIHD (1.93 -20.16%), NQ (12.1 -18.54%), LMOS (22.33 -16.77%), SUNE (11.46 -14.78%)
Services: ULTA (91.93 -22.68%), GASS (10.57 -17.87%), BIG (30.92 -16.46%)
Industrial Goods: OSIS (52.08 -29.38%)
Healthcare: AVNR (2.84 -24.64%), GERN (4.77 -18.57%), ARRY (5 -18.46%), PCYC (107.88 -16.46%)
Financial: AFSI (33.64 -16.72%), RSE (20.91 -14.94%)
Basic Materials: IOC (54.64 -38.56%), TPLM (9.12 -17.15%), MTDR (18.67 -15.19%), NFX (23.36 -14.97%)

Large Cap Gainers

ADBE (59.85 +10.85%): Reported Q4 EPS of $0.32 ex items (in-line), revs fell 9.7% yoy to $1.04 bln vs $1.03 bln estimate; sees Q1 EPS of $0.22-0.28 ex items vs $0.33 estimate, revs $950-1000 mln vs $1.01 bln estimate; sees FY14 EPS of $1.10 ex items vs $1.59 estimate, revs flat at ~$4.06 bln vs $4.36 bln estimate; co exited Q4 with ~1.44 mln paid Creative Cloud subscriptions
NLSN (45.2 +5.21%): Sees FY14 adjusted EPS of $2.45-2.55 ex items vs $2.39 estimate; sees FY14 revs +10-12% (~$6.2-6.3 bln), may not compare to $6.32 bln estimate
TWTR (57.62 +4.14%): Target raised to $60 from $33 at RBC Capital Markets after positive advertiser survey results

Large Cap Losers

APC (76.35 -8.75%): Co's Kerr-McGee unit found to have acted improperly in the 2005 spinoff of Tronox, Anadarko to pay $14.5 bln; downgraded to Underweight from Neutral at JP Morgan; downgraded to Neutral from Buy at Citigroup; downgraded to Neutral from Buy at Global Hunter Securities, target lowered to $106 from $133
WFT (14.69 -1.97%): Initiated with a Neutral at Robert W. Baird
CXO (97.83 -1.95%): Announced that the combined effect of two severe winter storms across the Permian Basin in late November and early December significantly impacted production; expects 2013 annual production to fall near the low end of its guidance range

Mid Cap Gainers

CNC (57.82 +6.56%): Reaffirmed FY13 EPS guidance of $2.81-2.87 vs $2.83 estimate, revs of $10.6-10.8 bln vs $11 bln estimate; sees FY14 EPS of $3.50-3.80 vs $3.61 estimate, revs of $13.5-14.0 bln vs $13.73 bln estimate
EA (22.24 +6.07%): Mentioned positively at Piper Jaffray
LDOS (42.98 +5.86%): Announced $300 mln accelerated stock repurchase transaction

Mid Cap Losers

OPK (8.38 -11.04%): Continued weakness following publishing of a negative article by Lakewood Capital Management
DAR (18.98 -5.10%): Priced public offering of 40 mln shares of common stock at $19 per share
SATS (47.31 -3.65%): Co announced that EchoStar Technologies and Vivendi subsidiary GTV are no longer in discussion to form a joint venture for pay TV services in Brazil

INTC -1.7% (Google considering making its own chips with ARMH technology, according to reports),

Great Britain's FTSE displays a gain of 0.2% with ARM Holdings providing leadership. The chipmaker trades higher by 4.7% amid reports Google is considering choosing ARM processors over Intel in its servers. On the downside RSA Insurance is lower by 16.4% after Chief Executive Officer Simon Lee resigned.

Analyst comments: WDC +2.6% (upgraded to Buy from Neutral at Citigroup), STX +2% (upgraded to Buy from Neutral at Citigroup ), CIEN +1.8% (upgraded to Outperform from Mkt Perform at BMO Capital Mkts),

7:05AM SunEdison prices upsized offering of $500 mln aggregate principal amount of 2.00% convertible senior notes due 2018 and $500 mln aggregate principal amount of 2.75% convertible senior notes due 2021 (SUNE) 11.47 : The offering was upsized from the previously announced $400 mln aggregate principal amount of 2018 notes and $400 mln aggregate principal amount of 2021 notes. The 2018 notes will bear interest at a rate of 2.00% per year, payable semiannually in arrears on April 1 and October 1 of each year, or, if any such day is not a business day, the immediately following business day, beginning on Apr 1, 2014. The 2021 notes will bear interest at a rate of 2.75% per year, payable semiannually in arrears on Jan 1 and July 1 of each year, or, if any such day is not a business day, the immediately following business day, beginning on July 1, 2014.

The notes will be convertible, subject to certain conditions, into cash, or, subject to certain shareholder approval requirements, shares of common stock of the Company, or a combination of cash and shares of common stock, at the Company's option. The initial conversion rate for the notes will be 68.3796 shares of common stock per $1,000 principal amount of the notes, which is equal to an initial conversion price of ~ $14.62 per share, representing a conversion premium of ~ 27.5% above the closing price of the Company's shares of common stock of $11.47 per share on Dec 12, 2013.

3:43AM ARM Holdings acquires Geomerics (ARMH) 47.64 : Co announces it acquired Geomerics, a co with in lighting technology for the gaming and entertainment industries. The acquisition expands ARM's position at the forefront of the visual computing and graphics industries. Additionally, the agreement enables Geomerics to build on their existing partnerships as well as accelerate their development in mobile. Financial terms were not disclosed.

Adobe Systems (ADBE) reported fourth quarter earnings of $0.32 per share, excluding non-recurring items, which is in line with estimates, while revenues fell 9.7% year/year to $1.04 billion which is line with estimates. The company issued guidance for the first quarter with EPS of $0.22-0.28 with revenues of $950 million - $1.0 billion which is lower than expected. The company issued guidance for the fiscal year 2014 with EPS of $1.10, excluding non-recurring items and revenues of flat YoY or $4.06 billion which is below expectations. Adobe provided new long-term revenue growth rate targets for its business. The company expects to achieve a 20 percent compound annual growth rate between fiscal year 2014 and fiscal year 2016. To achieve this goal, Adobe said it is targeting a 20 percent CAGR in its Digital Media business and a 25 percent CAGR in its Adobe Marketing Cloud business during that timeframe. As part of these growth targets, the company said it could achieve non-GAAP earnings per share of approximately $2.00 in fiscal year 2015 and at least $3.00 in fiscal year 2016, which are both below expectations. Adobe exited Q4 with 1 million 439 thousand paid Creative Cloud subscriptions, an increase of 402 thousand when compared to the number of subscriptions as of the end of Q3 fiscal year 2013, and enterprise adoption of Creative Cloud was stronger than expected. (co's guidance was for slightly higher growth than Q3 (Q3 added 331K) -- In general Street expectations are in line with ADBE's guidance). Creative Annualized Recurring Revenue grew to $768 million, and total Digital Media ARR grew to $911 million. Adobe Marketing Cloud quarterly revenue was $316.2 million, representing 38 percent year-over-year growth. "We are leading the software industry in transitioning our business to the Cloud, which is enabling us to target higher top-line growth and greater recurring revenue...We are raising our long-term revenue growth targets, with a compound annual revenue growth rate of 20 percent between fiscal year 2014 and fiscal year 2016."

Solera (SLH) announced that one of its subsidiaries has signed a definitive agreement to acquire 100% of Distribution Services Technologies, Inc. ("DST"). The Acquisition is subject to certain conditions to closing and is expected to close by the third quarter of Solera's fiscal year 2014. DST is a provider of B2B e-Commerce, ERP support and analytics solutions for automotive mechanical part distributors in North America. Through its cloud-based procurement solutions, DST connects mechanical aftermarket, heavy duty and OEM parts suppliers with repair shops, dealerships and fleet consumers, driving revenues and lowering operating costs.

BlackBerry (BBRY) announced that it has agreed with Fairfax Financial Holdings Limited and the holders of a requisite majority of the US$1 billion of convertible debentures issued by BlackBerry on November 13, 2013 that the previously-announced investor option to purchase up to an additional US$250 million principal amount of convertible debentures has been extended to January 13, 2014. If the option is exercised, the purchase of the additional convertible debentures will be completed on or before January 16, 2014.