Sector Investing

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From Briefing.com: 4:15 pm : The S&P 500 settled higher by 0.5%, registering its third consecutive gain. The benchmark index extended its December advance to 1.2% as eight of ten sectors ended in the green.

Stocks jumped at the open with the technology sector (+1.5%) driving the early surge. The space received considerable support from its largest component, Apple (AAPL 570.09, +21.07), which spiked 3.8% after inking a long-rumored distribution agreement with China Mobile (CHL 52.47, +0.84).

Emboldened by Apple's strength, other top sector components also rallied. Google (GOOG 1115.10, +14.48), Oracle (ORCL 36.94, +0.57), and Intel (INTC 25.32, +0.27) gained between 1.1% and 1.5%. Despite Intel's strength, other chipmakers struggled to keep pace with the sector as Micron (MU 21.49, -0.68) weighed after Bank of America/Merrill Lynch downgraded the stock to 'Underperform' from 'Neutral.' The broader PHLX Semiconductor Index advanced 0.9%.

Social media names also took part in the tech party as Facebook (FB 57.77, +2.65) and Twitter (TWTR 64.54, +4.53) settled higher by 4.8% and 7.6%, respectively.

Outside of technology, gains in other sectors were much more subdued. In fact, the telecom services sector (+1.1%) was the only other outperformer.

Although all six growth-oriented groups posted gains, the energy sector spent the entire session in a steady slide from its opening high. The group ended little changed while crude oil slipped 0.4% to $98.93 per barrel.

The remaining cyclical sectors-consumer discretionary (+0.5%), industrials (+0.4%), and materials (+0.4%)-logged modest gains. However, the discretionary sector failed to capture the relative strength of homebuilders. The iShares Dow Jones US Home Construction ETF (ITB 24.31, +0.71) jumped 3.0%. A Citigroup upgrade of KB Home (KBH 18.19, +1.28) to 'Neutral' from 'Sell' and news that incoming FHFA Director Mel Watt is going to delay the implementation of new mortgage fees on government-backed loans, which many think will crimp new housing demand, factored into the outperformance.

On the countercyclical side, the telecom sector posted a solid gain while consumer staples (-0.2%), health care (+0.4%), and utilities (-0.3%) lagged.

Also of note, following Friday's close, the CBOE Skew Index (SKEW 143.20, +5.34) jumped above the 139 level for the first time in almost two years. Unlike the VIX, which measures the expected near-term volatility to the upside or downside, the Skew index updates after each session and measures the perceived likelihood of a tail event. The index ranges from 100 to 150 with higher values signaling increased demand for low-strike puts. With the index hovering just below its upper limit, we can conclude that investors are demanding downside protection.

Treasuries settled on their lows with the benchmark 10-yr yield up four basis points at 2.93%.

Participation was well below average as many elected to sit today's session out. Only 598 million shares changed hands on the floor of the New York Stock Exchange.

Today's economic data was limited to just two reports, neither of which saw a notable reaction in the market. Personal income increased 0.2% in November after declining 0.1% in October. The Briefing.com consensus expected personal income to increase 0.5%. Compensation levels were a little softer than the employment report implied, increasing 0.3% instead of 0.6%. That difference likely caused the weaker-than-expected income gain. Personal spending rose 0.5%, in-line with consensus expectations, after increasing an upwardly revised 0.4% (from 0.3%) in October.

Separately, the December University of Michigan Consumer Sentiment Index remained at 82.5 in the final reading while the Briefing.com consensus expected the index to be revised up to 83.3.

Tomorrow, the weekly MBA Mortgage Index will be released at 7:00 ET while November Durable Orders will cross the wires at 8:30 ET. The October FHFA Housing Price Index will be reported at 9:00 ET while the New Home Sales report for November will be revealed at 10:00 ET.

Nasdaq +37.4% YTD
Russell 2000 +36.3% YTD
S&P 500 +28.2% YTD
DJIA +24.4% YTD

DJ30 +73.47 NASDAQ +44.16 SP500 +9.67 NASDAQ Adv/Vol/Dec 1904/1.66 bln/730 NYSE Adv/Vol/Dec 2184/598.2 mln/891

3:30 pm :

Feb gold traded lower today despite a weaker dollar index. The yellow metal brushed a session high of $1203.40 per ounce in late morning pit trade but trended lower for the remainder of the session. It eventually settled with a 0.6% loss at $1197.00 per ounce
Mar silver oscillated between positive and negative territory with prices rising to a session high of $19.52 per ounce. Unable to stay in the black, it settled 0.2% lower at its session low of $19.41 per ounce
Feb crude oil also spent today's session in the red. The energy component dipped to a session low of $98.67 per barrel after pulling back from its session high of $99.30 per barrel set at pit trade open. It eventually settled with a 0.4% loss
Jan natural gas, on the other hand, traded higher, with prices touching a session high of $4.51 per MMBtu. It pulled back slightly in afternoon floor action and settled with a 1.1% gain at $4.46 per MMBtu

4:05PM CalAmp beats by $0.02, beats on revs; guides Q4 EPS, revs just below consensus (CAMP) 27.56 -0.71 : Reports Q3 (Nov) earnings of $0.23 per share, excluding non-recurring items, $0.02 better than the Capital IQ Consensus Estimate of $0.21; revenues rose 43.3% year/year to $63.5 mln vs the $61.22 mln consensus.

Wireless Datacom revenue increased to $49.7 million from $36.3 million in the same period last year, and Satellite revenue was $13.8 million compared to $8.0 million in the third quarter last year.

The consolidated gross margin was 33.1% in the fiscal 2014 third quarter, up from 31.6% in the third quarter last year. The increase in consolidated gross margin is due primarily to the contribution of the higher margin Software-as-a-Service (SaaS) revenue from the Wireless Matrix acquisition and margin improvement in the Satellite segment.

Co issues downside guidance for Q4, sees EPS of $0.19-0.23, excluding non-recurring items, vs. $0.24 Capital IQ Consensus; sees Q4 revs of $60-63 mln vs. $63.1 mln Capital IQ Consensus Estimate.

"Based on our current forecast, we anticipate that Wireless Datacom fourth quarter revenue will increase solidly on a sequential basis primarily driven by continued demand in our core market verticals, growing insurance telematics revenue and contribution from RSI. Due to normal quarterly fluctuations in demand from our DBS satellite customer, we currently expect Satellite fourth quarter revenues to be substantially lower on a sequential basis, more than offsetting the Wireless Datacom growth."

Large Cap Gainers

FB (58.19 +5.58%): Continued momentum following additin to S&P 500, priced 70 mln share offering of common stock at $55.05 per share on Friday
CHU (15.44 +4.04%): Co confirmed it and Apple (AAPL) have entered into a multi-year iPhone agreement beginning January 17, 2014
PAGP (26.1 +3.37%): Initiated with a Buy at Wunderlich, target $29

Large Cap Losers

KORS (80.45 -4.09%): Mentioned negatively at Wedbush, warned of slowing sales
MU (21.63 -2.44%): Downgraded to Underperform from Neutral at BofA/Merrill
S (9.66 -2.03%): Seeing reports that CEO of Softbank is exploring a deal for Sprint to acquire T-Mobile US (TMUS) in 2014

Mid Cap Gainers

UTHR (111.24 +26.64%): Announced FDA approval of Orenitram (treprostinil) Extended-Release Tablets for the treatment of pulmonary arterial hypertension; upgraded to Neutral from Underweight at JP Morgan; upgraded to Outperform from Market Perform at BMO Capital Markets
RGP (26.09 +7.85%): Announced plans to purchase Eagle Rock Energy Partners' midstream business for ~$1.3 bln; to acquire midstream assets from Hoover Energy for $290 mln; deal expected to be accretive in 2014
RAD (5.28 +5.81%): Mentioned positively by Jim Cramer and in blog article

Mid Cap Losers

NAV (36.38 -2.1%): Continued weakness following disappointing Q4 results reported last Friday before the open
ALK (72.03 -2.00%): Mentioned as potential takeover target by Delta (DAL)
CNX (37.4 -1.16%): Reinstated with a Neutral at Goldman

Chipmakers have also made a contribution to the sector's outperformance, but the PHLX Semiconductor Index has been limited to a gain of 0.8% as Micron (MU 21.53, -0.65) weighs. The stock trades lower by 2.9% in reaction to a Bank of America/Merrill Lynch downgrade to 'Underperform' from 'Neutral.'

11:01AM IBM receives patent for a breakthrough data encryption technique that is expected to further data privacy and strengthen cloud computing security (IBM) 181.53 +1.51 : The patented breakthrough, called "fully homomorphic encryption," could enable deep and unrestricted analysis of encrypted information -intentionally scrambled data - without surrendering confidentiality. IBM's solution has the potential to advance cloud computing privacy and security by enabling vendors to perform computations on client data, such as analyzing sales patterns, without exposing or revealing the original data.

Silicom (SILC) has secured a strategic Design Win from a new customer for its 10GbaseT network adapters. The co has received initial purchase orders totaling ~ $500,000, most of which were already shipped, while guidance provided by the customer indicates that 2014 sales related to the Design Win will total ~ $1 mln.

8:04AM SMTC appoints Sushil Dhiman as President and CEO (SMTX) 2.25 : Co announced the appointment of Sushil Dhiman as its President and Chief Executive Officer effective January 6, 2014. Mr. Dhiman will also be nominated to join the Board of Directors of the Company. Mr. Dhiman is a respected and accomplished executive with over 25 years of experience in the EMS industry. He joins SMTC from Sanmina (SANM) where he was Senior Vice President of Operations.

McAfee, a subsidiary of Intel (INTC) announced that Accor has chosen its next-generation firewall for the protection and continuity of their IT systems. -Kofax (KFX) announced that a leading construction and engineering company in North America has invested more than $700,000 in Kofax MarkView for AP software to automate its accounts payable operations and seamlessly integrate with its Oracle ERP system.

6:01AM Ascent Solar announced today the debut of the Surfr phone case for the Apple (AAPL) iPhone 5 and 5s at CES 2014 (ASTI) 0.69 :

Apple (AAPL) and China Mobile (CHL) confirmed they have entered into a multi-year iPhone agreement beginning Janunary 17th. As part of the agreement, iPhone 5s and iPhone 5c will be available from China Mobile's expansive network of retail stores as well as Apple retail stores across mainland China beginning on Friday, January 17, 2014. iPhone 5s will be available for pre-registration from China Mobile's official website beginning on Wednesday, December 25, 2013. "Apple has enormous respect for China Mobile and we are excited to begin working together. China is an extremely important market for Apple and our partnership with China Mobile presents us the opportunity to bring iPhone to the customers of the world's largest network."

Engility (EGL) and Dynamics Research (DRCO) announced that they have entered into a definitive agreement under which Engility will acquire DRC. Under the terms of the agreement, Engility will commence a tender offer for all outstanding shares of DRC common stock at a price of $11.50 in cash for each outstanding share.The transaction, which was unanimously approved by the boards of directors of both companies, is expected to be accretive to Engility's 2014 earnings and significantly accretive to 2015 earnings and beyond. The acquisition is anticipated to close during the first quarter of 2014, subject to customary closing conditions and regulatory approval.

TeleComm Sys (TSYS) announced that TCS has prevailed in a patent dispute filed by Cassidian Communications against TCS and its wholly owned subsidiary microDATA GIS. On Dec 20, 2013, an Eastern District of Texas jury returned a verdict in favor of TCS and microDATA. All asserted claims were found to be not infringed and invalid. Cassidian originally filed the lawsuit against microDATA on March 26, 2012 asserting US Patent 6,744,858 prior to TCS' July 2012 purchase of microDATA. TCS was named as a defendant after the acquisition.