From Briefing.com: 4:15 pm : Equities spent the bulk of today's session in the red, but afternoon buying interest helped the major averages end just below their respective flat lines. The S&P 500 shed 0.3% as eight of ten sectors registered losses.
Meanwhile, the Dow (-0.1%) traded ahead of its peers all session long as some of its top components provided support. 3M (MMM 131.39, +3.73) and Boeing (BA 135.88, +1.16) posted respective gains of 2.9% and 0.9% after both increased their quarterly dividends. The price-weighted index also received notable support from its top member, Visa (V 213.25, +5.50), which advanced 2.7%.
In turn, Visa's relative strength helped the technology sector (+0.03%) spend the entire session in the green. Chipmakers also factored into the modest gain as the PHLX Semiconductor Index ended higher by 1.0%.
Even though the tech sector outperformed, the tech-heavy Nasdaq could not stay out of the red as biotechnology weighed. The iShares Nasdaq Biotechnology ETF (IBB 213.66, -2.24) lost 1.0%, widening its December decline to 4.7%.
The losses in biotechnology also pressured the health care (-0.4%) space, which ended among the laggards. The remaining countercyclical groups did not fare much better as consumer staples (-0.5%) and telecom services (-0.8%) underperformed while utilities (-0.2%) ended just ahead of the broader market.
Today's losses among equities translated into a 1.4% gain for the CBOE Volatility Index (VIX 16.25, +0.22), which posted its fifth consecutive increase ahead of tomorrow's FOMC policy directive.
Treasuries climbed throughout the session as the benchmark 10-yr fell four basis points to 2.85%.
Participation was on the light side with only 656 million shares changing hands on the floor of the New York Stock Exchange.
Today's economic data was limited to just a handful of reports. November consumer prices were unchanged while the Briefing.com consensus expected an uptick of 0.1%. Core prices increased 0.2%, above the 0.1% increase expected by the Briefing.com consensus.
Separately, the current account deficit for the third quarter totaled $94.8 billion, which was narrower than the $101.0 billion deficit that had been broadly anticipated.
Lastly, the December NAHB Housing Market Index rose to 58 from 54 while the Briefing.com consensus expected the reading to tick up to 55.
Tomorrow, the weekly MBA Mortgage Index will be reported at 7:00 ET while November Building Permits and Housing Starts for September, October, and November will be released at 8:30 ET. The day's data will be topped off with the much-anticipated 14:00 ET release of the FOMC policy directive.
Below we lay out some key reasons why the FOMC might decide, or not decide, to make a tapering announcement on Wednesday.
The case for tapering now:
The House has passed the budget agreement and signs point toward the Senate doing the same this week. That signals the likelihood of less fiscal disruption, and less fiscal restraint, out of Washington in 2014.
Labor market trends are certainly improving. Nonfarm payroll gains have been 200,000+ in three of the last four months and have averaged 191,000 per month over the prior 12 months versus 151,000 (includes revisions) when QE3 was launched in September 2012.
Markets have hung in reasonably well as the case for a taper has gotten stronger, giving the Fed some measure of confidence (and another window of tapering opportunity) that participants are ready for a taper predicated on improving economic activity
Moody's notes high-yield spreads have hit a cycle low
The S&P 500 hit a new record high
After the strong November employment report, the fed funds futures market did not alter its view that the first rate hike will wait until July 2015
The 10-yr yield is down two basis points since the strong November employment report
The next scheduled FOMC press conference isn't until March. If a tapering announcement is made, the presumption is that the Fed chairman will want to explain it at a press conference (and the Fed chair may not want to wait until March given the improving data that could create financial market imbalances in the interim).
In the face of a declining budget deficit and an improving economy, there is growing uneasiness within the Fed about its balance sheet expansion
The case against tapering now:
Inflation rates remain well below the Fed's target rate
Real final sales, up 1.9% in Q3, remain relatively weak; and Q4 GDP is apt to be under 2.0%
The framework for a budget agreement is in place, but nothing has been resolved yet on the debt ceiling
There are reports that year-end liquidity issues will factor into a decision to hold off for now
Once the tapering begins, the Fed runs a heightened risk of seeing its credibility get eroded if it has to increase its purchases again on account of weakening data. While recent data have been encouraging, the Fed will want to be more certain about the sustainability of the improvement.
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Nasdaq +33.3% YTD
Russell 2000 +31.7% YTD
S&P 500 +24.9% YTD
DJIA +21.2% YTD
4:03PM Integrated Device announces appointment of Greg Waters as President, CEO, effective Jan 6, 2014 (IDTI) 10.38 +0.17 : Mr. Waters previously was Executive Vice President and General Manager for Skyworks Solutions. Jeff McCreary, who served as interim CEO since August 2013, will remain a member of the co board of directors.
4:02PM Jabil Circuit to divest aftermarket services for $725 mln (JBL) 19.72 +0.04 : Co announces that it has entered into an agreement with iQor Holdings for the sale of its aftermarket services business for $725 mln. "Today, Jabil's AMS business is concentrated in depot repair for consumer electronics, which is not aligned with our strategy to focus on diversified manufacturing solutions...This divesture should provide us the financial flexibility to potentially add more engineering intensive capabilities, which should allow us to expand and diversify our core manufacturing business." Of the $725 million purchase price, $675 million is cash and $50 million is senior nonconvertible preferred stock of iQor.
1:06PM SolarCity launches 'Give Power Foundation' to provide solar-powered lighting to schools without electricity (SCTY) 53.14 +1.35 : Co launched the Give Power Foundation to build a cleaner, more sustainable future by providing solar energy to those in need. For every megawatt of residential solar power that SolarCity installs in 2014, the company will bring light to a community by donating a solar power system and battery combination to a school without access to electricity.
Large Cap Gainers
AVGO (53.9 +7.59%): Tgt raised to $64 at RBC Capital Mkts; target raised to $60 at DA Davidson; target raised to $65 at Canaccord Genuity; target raised premarket to $60 at UBS.
PBA (33.83 +3.84%): Upgraded to Buy from Hold at TD Securities; target raised to $42 at RBC Capital Mkts.
WMB (36.5 +3.31%): Corvex disclosed 5.28% stake in 13D filing; seeks to add two members to the Board of Directors.
Large Cap Losers
DAL (26.98 -3.37%): Weakness in airline related names (UAL and LUV also trading lower).
TWTR (55.79 -1.45%): Downgraded to Neutral from Overweight at Atlantic Equities; tgt raised to $50 from $34; target raised to $65 at CRT Capital.
NBL (67.72 -2.42%): Announced highlights of 2013 Analyst Conference; production is projected to increase at a CAGR of 18% over the next five years; provided 2014 capital program and guidance.
Mid Cap Gainers
PBYI (104.51 +17.2%): Co will host a conference call on Dec 23, 2013, to provide an update on its clinical trials of PB272 (neratinib) in cancer patients with activating HER2 mutations.
FTR (4.77 +8.41%): Co to acquire AT&T's (T) Wireline Residential and Business Services and associated assets in Connecticut for $2 bln in cash; accretive to free cash flow per share in the first year.
CVLT (72.46 +6.2%): Co defended at BMO.
Mid Cap Losers
OPK (8.32 -8.47%): CEO/10% bought 156,000 shares at $8.54-9.24 worth ~ $1.4 mln,
FDS (111.17 -5.04%): Reported Q1 results; reported revs in-line; guided Q2 GAAP EPS in-line, revs in-line.
AGCO (57.8 -4.59%): Announced $500 mln share repurchase program.
OmniVision Tech (OVTI) and Gionee Communication Equipment have jointly developed a next-generation 16-megapixel camera for Gionee's flagship smartphone.
Micron Technology (MU) announced its collaboration with Broadcom (BRCM) to develop the industry's first solution designed for customers challenged by an intrinsic DDR3 timing parameter called tFAW, or four activate window.
QLogic (QLGC) announced that QLogic FlexSuite 2600 Series 16Gb Gen 5 Fibre Channel adapters and FabricCache 10000 Series server-based caching adapters are certified as DataCore Ready, providing full interoperability with SANsymphony-V storage virtualization solutions from DataCore Software.
8:22AM TTM Tech announces pricing of $220 mln of 1.75% convertible senior notes due 2020 (TTMI) 7.71 : Co announced the pricing of $220 million aggregate principal amount of 1.75% Convertible Senior Notes due 2020 in an underwritten public offering. The size of the transaction was increased from the previously announced aggregate principal amount of $150 million. The offering is being made pursuant to TTM's effective shelf registration statement (including a prospectus) previously filed with the SEC and a preliminary prospectus supplement related to the notes. J.P. Morgan Securities LLC and RBS Securities Inc. are acting as joint book-running managers for the offering.
TTM also intends to use approximately $136.1 million of the net proceeds from the offering to repurchase approximately $131.6 million aggregate principal amount of its outstanding 3.25% convertible senior notes due 2015. TTM intends to use the remaining net proceeds from the offering for general corporate purposes, which may include repayment of indebtedness, potential acquisitions, working capital, and capital expenditures.
TSL +1.4% (Trina Solar to Supply 1MW to Jordan's Largest Solar Power Project)
Analyst comments: HPQ +2.2% (upgraded to Overweight from Neutral at JP Morgan), STX +0.7% (Seagate upgraded to Neutral from Underweight at JPMorgan),
6:47AM BlackBerry deploys of 10,000 BlackBerry 10 Smartphones and Migration to BES10 at PSA Peugeot Citroen (BBRY) 6.20 : Co announces that PSA Peugeot Citroen will deploy 10,000 BlackBerry Z10 smartphones for its operations in France and Spain, and is migrating to BlackBerry's award-winning Enterprise Mobility Management solution - BlackBerry Enterprise Service 10. To date, customers have installed nearly 30,000 BES10 commercial and test
servers around the world.
Pros Holdings (PRO) announced its acquisition of SignalDemand, Inc., a privately held software company headquartered in San Francisco, with approximately 40 professionals. Under the terms of the all-cash transaction, PROS will pay $13.5 million to acquire SignalDemand. SignalDemand provides predictive and prescriptive analytics and optimization for resource-based and commodity-driven businesses.
OpenTable (OPEN) announced that it has acquired Quickcue, a provider of guest management systems for restaurants, for approximately $11.5 million in cash pursuant to an agreement and plan of merger. The nine Quickcue team members joining OpenTable will continue to operate from their offices in Chattanooga, Tennessee. The acquisition will be recorded in the fourth quarter 2013 financial statements of OpenTable and is not expected to have a material impact on fourth quarter and full year 2013 financial guidance provided by the Company on November 5, 2013.
Pegasystems (PEGA) announced that its Board of Directors has authorized an expansion of the Company's current share repurchase program. Under this expansion, the expiration date of the current repurchase program has been extended from December 31, 2013 to December 31, 2014, and $15 million in repurchases of the Company's common stock has been approved, over and above the amounts repurchased through December 11, 2013. This expansion is effective from December 11, 2013 to December 31, 2014. For the current fiscal year through December 11, 2013, the Company had repurchased 378,073 shares under the current repurchase program, for an average price of $31.62 per share.
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