Sector Investing

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From Briefing.com: 4:10 pm : After gaining nearly 30.0% in 2013, the S&P 500 exhibited a bit of a hangover in its first session of 2014. The benchmark index fell 0.9% as all ten sectors registered losses.

Stocks were pressured from the opening bell as cautious action in Europe weighed on the early sentiment. In all likelihood, the slide caught a number of participants off guard given the understanding that the first few days of a new year are known to have a favorable bias with inflows into IRA accounts, bonus money being put to work, and new money coming off the sidelines. That did not happen today as sellers maintained control throughout the trading day.

Three cyclical sectors-energy (-1.3%), industrials (-1.3%), and technology (-1.1%)-slipped behind the broader market at the open and their underperformance weighed for the remainder of the session.

The energy sector followed in the lead of crude oil as the energy component tumbled 3.0% to $95.49/bbl. Meanwhile, industrials were pressured by defense contractors and transports. The PHLX Defense Index lost 1.3% while The Dow Jones Industrial Average fell 1.5%.

Elsewhere, the technology sector struggled to gain traction as its largest component, Apple (AAPL 553.13, -7.89), weighed after Wells Fargo downgraded the stock to 'Market Perform' from 'Outperform.' Chipmakers also lagged, sending the PHLX Semiconductor Index lower by 1.4%.

Even though three large sectors pressured the broader market throughout the day, there was some relative strength in other heavily-weighted groups. On that note, consumer discretionary (-0.5%), financials (-0.6%), and health care (-0.6%) outperformed.

Notably, the financial sector owed some its outperformance to Bank of America (BAC 16.10, +0.53), which gained 3.4% after Citigroup upgraded the stock to 'Buy' from 'Neutral.' JPMorgan Chase (JPM 58.21, +0.11) also bucked the downtrend, climbing 0.2%.

Treasuries rallied throughout the day as the benchmark 10-yr yield slid from 3.04% to 2.99%.

Trading volume was on the light side as just over 610 million shares changed hands on the floor of the New York Stock Exchange.

Today's economic data was limited to three reports, but neither had much of a trading impact:

Weekly initial claims dipped to 339,000 from an upwardly revised 341,000 (from 338,000) while the Briefing.com consensus estimate was pegged at 333,000. Notably, there was no indication from the Department of Labor that seasonal adjustments continued creating difficulties.
Construction spending in November rose 1.0% while the Briefing.com consensus expected an increase of 0.8%. The November gain followed an upwardly revised 0.9% increase (from 0.8%) in October. Total private construction, paced by a 1.9% increase in residential spending, was up 2.2% and led the overall advance. Nonresidential private spending jumped 2.7%, paced by gains in the commercial (+4.7%), office (+4.6%), power (+3.3%), and manufacturing (+1.2%) spaces.
The December ISM Index checked in at 57.0, which was pretty much in-line with the Briefing.com consensus estimate of 56.9. The December reading was the second highest reading for the year, trailing only the 57.3 reading seen in November.

There is no economic data on tomorrow's schedule.

Nasdaq -0.8% YTD
DJIA -0.8% YTD
S&P 500 -0.9% YTD
Russell 2000 -1.1% YTD

DJ30 -135.31 NASDAQ -33.52 SP500 -16.38 NASDAQ Adv/Vol/Dec 929/1.64 bln/1662 NYSE Adv/Vol/Dec 1015/611.4 mln/2057 3:30 pm : Feb crude oil extended losses for a third consecutive session as a stronger dollar index and reports that Libyan protesters have agreed to reopen a key oil field weighed on prices. The energy component trended lower after pulling back from its session high of $97.66 per barrel set at pit trade open. It fell below the $96 per barrel level and settled with a 3.0% loss at $95.49 per barrel.

Feb natural gas chopped around in positive territory today. It dipped to a session low of $4.27 per MMBtu in early afternoon pit action but quickly regained momentum. It settled with a 2.1% gain at $4.32 per MMBtu, just below its session high of $4.33 per MMBtu.

Precious metals traded higher today despite the stronger dollar index. Feb gold brushed a session low of $1216.90 per ounce in early morning floor trade and spent the remainder of the session trading in a consolidative pattern slightly above the $1220 per ounce level. It eventually settled at $1225.40 per ounce, booking a gain of 1.9%. Mar silver chopped around near the $20.10 per ounce level. It settled 3.9% higher at $20.13 per ounce.

4:01PM 3D Systems Expands 3DPRINTING 2.0 at CES 2014 with a dozen new consumer product reveals; unveils B-2-B-2-C powerful merchandising and licensing platforms (DDD) 94.19 +1.26 : Throughout the week the co plans to reveal a dozen new products together with meaningful partnerships and immersive experiences that catapult its entire portfolio of consumer solutions forward. As part of expanding its 3DPRINTING 2.0 initiative, the company will preview next-gen consumer and prosumer products and unveil three entirely new product categories at the Las Vegas Convention Center in the South Hall 3, booth 31424.

12:22PM Floor Talk: 2013 Review (TALKX) : The stock market welcomed 2013 with a bullish charge that began on the first trading day and continued throughout the record-breaking year. The fiscal cliff and worst-case recession scenario talked about at the end of 2012? Didn't happen. A tapering of the Fed's asset purchase program by Labor Day? Didn't happen. Larry Summers nominated to be Fed chairman? Didn't happen. A US-led military strike against Syria? Didn't happen. A debt default by the US? Didn't happen. A hard economic landing in China? Didn't happen. Basically, if there was something ominous on the market's radar screen in 2013, it didn't happen.

The S&P 500 shattered its 2007 high of 1576.09 in mid-April and never looked back. The benchmark index rallied steadily through the remainder of the year and settled at a fresh record high of 1848.36, bringing its 2013 price return to 29.6%. Not to be outdone, the Nasdaq surged 38.0% as the blend of biotechnology and momentum names powered the tech-heavy index to its best close in 13 years.

There was little doubt regarding the market's general trend in 2013 as equities defied a growing chorus of voices calling for a sustained pullback, which never materialized. The largest selloff took place in mid-May after the Federal Reserve hinted at the potential of reducing the size of its monthly asset purchases. That drawdown caused the S&P 500 to surrender 5.8%, but the loss was erased over the following five weeks. Separately, a partial government shutdown in October contributed to a cautious start to the month, but the weakness was promptly erased when it became clear that the shutdown had a limited impact on the economy.

The year-long bullish disposition was aided by solid gains overseas as European markets climbed to record highs of their own while struggling regional economies showed some signs of life.

Will They or Won't They?

Although little stood in the way of equity markets through the first quarter of the year, the rally hit a speed bump in mid-May after Fed Chairman Bernanke, in testimony before the Joint Economic Committee, and the FOMC minutes for the April 30-May 1 meeting pointed to the potential for a reduction in the Fed's monthly asset purchases. This 'taper talk' continued throughout the year, giving market participants time to adjust to the prospect of the Fed curtailing its purchases of Treasuries and agency mortgage-backed securities.

After the June meeting, Fed Chairman Bernanke said further improvements in economic conditions would warrant a modest reduction to the size of asset purchases.
The market expected the tapering announcement to come down after the September 18th meeting; however, that meeting came and went without any such news. During his press conference, Mr. Bernanke said economic data received since June had not been strong enough to justify scaling back asset purchases just yet.
In December, the markets finally received the tapering news as the FOMC announced plans to reduce its monthly asset purchases to $75 billion from $85 billion. Equities settled on their highs (S&P gained 1.7%) after dovish forward guidance offset the immediate impact of the tapering announcement. The FOMC said it will likely be appropriate to maintain the current target range for the fed funds rate "well past the time that the unemployment rate declines below 6.5%."

Although equities took the taper talk in stride, bonds were battered as the 10-yr yield climbed from 1.94% in mid-May to 3.03% by the end of the year.

Investors will keep a close eye on the Fed in 2014 as Janet Yellen, who is expected to be confirmed as the next Fed chair, will navigate the unprecedented unwinding of the Fed's balance sheet.

Cruising Ahead

While taper talk caused brief hiccups, the year-long strength in a handful of sectors helped the market stay true to its uptrend.

The Dow Jones Transportation Average paced the year-long advance with a 39.5% gain. In turn, the bellwether group underpinned the industrials sector, which gained 37.9% in 2013.
Biotechnology also did its part as the iShares Nasdaq Biotechnology ETF (IBB) soared 65.5%. That impressive showing contributed to the outperformance of the Nasdaq and helped the health care sector end in second place with an annual gain of 39.0%.
Momentum names also saw considerable inflows throughout the year:
Netflix (NFLX) took home the title of the top S&P 500 component of 2013. The online streaming service nearly tripled its value, contributing to the strength of the consumer discretionary sector, which ended ahead of the remaining nine groups with a gain of 40.9%.
Facebook (FB) saw its shares surge 105.3% in 2013 after a late-July earnings report revealed an improvement in the closely-watched mobile ad revenue metric.
Twitter (TWTR) came on the scene in early November with shares living up to the hype that led into the IPO. Following a modest November loss, the social media stock spiked more than 53.0% in December.
Tesla Motors (TSLA) posted an eye-popping gain of 344.1%, but its bull run did not start until the company raised its Model S guidance on April 1st. The next three quarterly reports saw TSLA beat earnings estimates each time, which fueled continued momentum in the shares.

Commodities Slump

Even though it proved to be a challenge to find noteworthy weakness in stocks in 2013, the same could not be said for the commodity market. Energy components-crude oil (+8.0%) and natural gas (+26%)-posted gains, but grains and metals endured a forgettable year.

Corn slumped 40.0%, which marked the worst fall since 1960. Soybeans also retreated, but the decline was limited to 8.0%.
Gold futures had their worst year since 1981 as the yellow metal tumbled 28% to the $1200/ozt area. Silver did not fare much better, falling 35% to end the year below $20/ozt.
Miners were victimized by the weakness in metals as the Market Vectors Gold Miners ETF (GDX) sank 54.5%.

Global Bulls on Parade

It should be noted that U.S. markets were not the only place where bulls were on parade during 2013. In Japan, the Nikkei soared 57.0%, which marked the best year for the index since 1972. Markets in China, however, could never gain traction as a persistent liquidity crunch weighed.

Over in Europe, markets in France (+18.0%), Germany (+25.0%), and Great Britain (+14.0%) contributed to the almost-daily, upbeat start for U.S. indices while gains in Italy (+17.0%) and Spain (+21.0%) were regarded as a sign of the ongoing recovery. Fittingly, Spain made a formal exit from its bailout program provided by the European Stability Mechanism on December 31, 2013.

Where Has All the Volatility Gone?

After starting 2013 just a shade over 18.00%, the CBOE Volatility Index (VIX) spent the entire year in a steady downtrend that ended with the index finishing the year below 15.00%. The volatility measure retreated steadily as the year-long rally led investors to lift their hedges to take full advantage of the uptrend.

Although the VIX was fairly subdued throughout the year, the same could not be said for the CBOE Skew Index (SKEW), which notched a multi-year high of 143.20 on December 20. 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. Given the index ended the year close to its upper limit, we can conclude that investors demanded downside protection as 2013 drew to a close.

Click here to see a breakdown of sector ETF and global market performance in 2013

Large Cap Gainers

TWTR (66.05 +3.77%): Tgt raised to $70 from $52 at Evercore.
NEM (24.06 +4.47%): Strength in metals/mining stocks (GG, ABX also higher).
MPEL (40.22 +2.56%): Macau Gaming Inspection and Coordination Bureau reported Dec gross gaming rev +18.5% YoY .

Large Cap Losers

VALE (14.53 -4.72%): Weakness in select Brazil related names; move attributed to weaker real as central bank pulls back on stimulus (SBS, PBR also lower).
NXPI (44.23 -3.7%): Downgraded to Neutral from Buy at Goldman.
TTM (29.58 -3.96%): Disclosed total sales (including exports) of Tata commercial and passenger vehicles in Dec 2013 were 37,852 vehicles.

Mid Cap Gainers

SCTY (59.53 +4.77%): Strength in solar names; Ford Motor (F) plans to show case plug in hybrid car with solar panels, according to reports; NYTimes discussed that a solar panel maker is requesting closure of China duties loophole (SPWR, FSLR, SUNE also higher).
X (30.74 +4.19%): Upgraded to Buy from Hold at KeyBanc Capital Mkts.
AFSI (34.07 +4.22%): Announced its Board of Directors approved the repurchase of up to $150 mln of the co's outstanding common stock.

Mid Cap Losers

ONNN (7.91 -4.07%): Downgraded to Neutral from Buy at Goldman.
HIMX (14.15 -3.81%): Removed from Chardan Capital MKt's top tech picks for the first time in two years.
AOL (44.94 -3.6%): Sold music services to Radionomy, according to reports out yesterday.

Marvell (MRVL) announced Yulong Coolpad's 1,000RMB TD-LTE smartphones for China Mobile (CHL) are based on Marvell's ARMADA Mobile solutions.

6:01AM Ascent Solar signs definitive agreement to build new manufacturing plant in Suqian of Jiangsu province, China; Suqian will provide $32.5 mln for the Joint Venture (ASTI) 0.71 :

Co announced the signing of a definitive agreement to establish a joint venture entity with the Government of the Municipal City of Suqian in Jiangsu Province, China.
Under this definitive agreement, Suqian will provide cash of ~$32.5 mln as well as five year rent-free use of ~331,000 square feet of factory & office space in the Suqian Economic and Industrial Development Science Park.
The JV will build a 100MW factory over six years to manufacture Ascent's proprietary thin-film Copper-Indium-Gallium-Selenium photovoltaic modules on flexible polyimide in addition to related consumer products. In the initial phase of the project, Ascent and Suqian will form a JV in which Suqian will inject ~$4.8 mln in cash and have majority interest of 75%. Ascent shall inject ~$1.6 mln in cash and hold a minority interest of 25%.
Subsequently, during 2014 Suqian will further inject the balance of the committed $32.5 mln while Ascent will contribute its proprietary technology and intellectual property, as well as certain equipment from its Colorado facility, thereby increasing its shareholdings progressively up to 80% ownership. By the first quarter of 2016, the JV is expected to operate an end-to-end manufacturing plant of 25 megawatts capacity and related consumer products

WPCS (WPCS) announced several new developments; looks to find a buyer for the 60% interest in its China-based joint venture. According to Interim CEO Sebastian Giordano, "We believe that the aggressive steps we began implementing in August 2013 and continue to execute to stabilize and turnaround core operations, reduce corporate overhead, and improve stockholders' equity are working. Meanwhile, we will be equally diligent in establishing our newly acquired Bitcoin operation to best position ourselves for growth in this sector." The following are some of the recent developments the Company wants to highlight as calendar 2013 comes to a close: Since last reporting new contracts for July and August 2013, the Company is announcing that for the four months ended December 31, 2013, its two profitable domestic subsidiaries have executed new project contract awards of approximately $6.8 million, a 27% increase over the $5.4 million of contracts awarded for the same period last year. Notable customers included: Johnson Controls, Siemens, Honeywell, SimplexGrinell, San Francisco International Airport, Sutter General Hospital and California Pacific Medical Center; The Company has initiated a search for a President for its Bitcoin trading platform, BTX Trader, LLC ("BTX"); secured office space for BTX in New York City; and is currently pursuing several key BTX-related strategic initiatives that it hopes to be able to report upon early in 2014. In addition, since announcing the public beta of its BTX trading platform, the Company has experienced a 600% increase in beta enrollments; With its corporate office lease expiring on January 31, 2014, the Company will be relocating to a smaller, lower cost space, which will be accompanied by further reductions in related overhead expenses. Recently, the Company entered into a separation agreement with a former executive that it expects will save approximately $200,000 in future compensation expense; and The Company has entered into a non-binding agreement with a business broker to find a buyer for the 60% interest in its China-based joint venture.
Hanwha SolarOne (HSOL) announced that it will supply 11.5 MW of high quality solar modules to Ikaros Solar Belgium NV. The modules are scheduled for delivery in January and February 2014. Ikaros intends to install the modules in a solar park in Norfolk County, United Kingdom. Hanwha SolarOne will supply its 72-cell module HSL-72, characterized by excellent real-life performance and extended durability.