Personal Income rose 0.5% in December but Spending was flat as the Savings Rate increased to 4% from 3.5%. The Dow Jones Industrial Average traded down to a day’s low at 12,529.41 on Monday, down from last Thursday’s year to date high at 12,841.95 and below its May 2nd 2011 high at 12,876.00. An afternoon rebound had the Dow above 12,650 into the final half hour of trading. The NASDAQ traded down to 2782.44 Monday morning after setting a year to date high at 2834.30 last Thursday, which was below its May 2nd 2011 high at 2887.75. An afternoon rebound had the NASDAQ above 2815 into the final hour of trading.
Asian stocks were lower on Monday with the Nikkei 225 ending their session 8,793 – down 0.54% on the day. The Hang Seng closed at 20,160 – down 1.66% on the day. European stocks were lower on Monday as Germany and Greece wrangle over budget measures. The FTSE 100 ended their session at 5,671 – down 1.09% on the day; the DAX ended their session at 6,444 – down 1.04% on the day; and the CAC 40 ended their session at 3,266 – down 1.60% on the day. The yield on the 10-Year US Treasury note declined from 1.894 percent to 1.811.
Gold traded up to $1739.9 the Troy ounce then down to $1715.7 before consolidating that range. Crude oil traded down from $100.05 per barrel to $98.43. The euro versus the dollar declined from 1.3219 to 1.3080 holding its 50-day simple moving average at the low.
Energy
Exxon (XOM) has agreed to sell its Japanese refining and marketing business to TonenGeneral Sekiyu for $3.9B. Under the deal, Exxon will lose its controlling stake in TonenGeneral but will retain a 22% voting share. A consortium including P-E firms Apollo (APO) and Riverstone reportedly leads the race for El Paso’s (EP) oil-exploration unit and is in advanced negotiations to buy the ops for $7B. HollyFrontier (HFC) is lowered to Neutral from Buy at Citigroup. Inergy (NRGY) is reduced to Underperform from Market Perform at Raymond James. Oasis Petroleum (OAS) gets lowered to Neutral from Buy at Suntrust. In afternoon trading: Shares of Treaty Energy (TECO) are up nearly 100% after the company struck oil on its first well on the Princess Concession in Belize on Friday. Shares of DHT Holdings (DHT) are up about 11%. Shares of YPF Sociedad Anonima are down about 10.5%.
Energy Select Sector SPDR (XLE) was trading at $71.00 at 3:00 PM on Monday, down 0.67% on the day – up 2.71% year-to-date. The 2011 change was +1.29%.
Materials
Albemarle (ALB) is added to Citigroup’s Top Picks Live with a target price of $74. AK Steel (AKS) is cut to Equal Weight from Overweight at Morgan Stanley. CF Industries (CF) is downgraded to Hold from Buy at Dahlman Rose with a price objective of $180. Praxair (PX) is pulled from Citi’s Top Picks Live list. In afternoon trading: Shares of Aluminum of China (ACH) are down about 9% after announcing that based on the preliminary calculations of the finance department of the Company, the net profits (attributable to the equity holders of the Company) for fiscal 2011 are estimated to decrease by more than 50% from that for fiscal 2010.
The Materials Select Sector SPDR (XLB) was trading at $37.18 at 3:00 PM on Monday, unchanged on the day – up 10.99% year-to-date. The 2011 change was -12.78%.
Industrials
Swiss engineering group ABB (ABB) has agreed to buy U.S. electrical components maker Thomas & Betts (TNB) for $3.9B ($72/share – a 24% premium) in a deal that will expand ABB’s North American distribution network and ramp up its presence in the market for low-voltage equipment. Philips (PHG) swung to a Q4 net loss of €162M ($214.1M) from a net profit €463M a year earlier even though sales rose 3.2% to €6.71B. Koninklijke Philips Electronics (PHG) reported Q4 EPS of -€0.17 versus first-call consensus of €0.21), while beating revenue by €0.1B. Thomas & Betts (TNB) beat estimates by 10 cents and revenue by $14M. Spirit Airlines (SAVE) is begun with a Buy at Deutsche Bank. Arkansas Best (ABFS) is lowered to Neutral from Buy at Bank of America-Merrill Lynch. Norfolk Southern (NSC) is moved to Neutral from Overweight at Atlantic Equities. In afternoon trading: Shares of Pinnacle Airlines (PNCL) are up about 23%. Shares of Thomas & Betts (TNB) are up about 23%.
The Industrial Select Sector SPDR (XLI) was trading at $36.309 at 3:00 PM on Monday, down 0.41% on the day – up 7.58% year-to-date. The 2011 change was -3.21%.
Consumer Discretionary
Gannett (GCI) beat estimates by 3 cents with revenue in-line with estimates. Wolverine World Wide (WWW) beat estimates by 3 cents with revenue in-line with estimates. Goldman gives AutoZone (AZO) a Neutral-from-Sell upgrade and boosts KAR Auction Services (KAR) to Buy from Neutral. Advance Auto Parts (AAP) is now Buy from Neutral at UBS. Tenneco (TEN) is taken to Outperform from Market Perform with Wells Fargo. Time Warner (TWX) is moved to Equal Weight from Overweight at Barclays. DR Horton (DHI) is moved to Market Perform from Outperform at Keefe Bruyette. Omnicom (OMC) is cut to Market Perform from Outperform at BMO Capital. Staples (SPLS) is reduced to Sell from Neutral at Goldman Sachs. In afternoon trading: Shares of Pep Boys Manny Moe & Jack (PBY) are up about 23.5%. After the company agreed to go private in a deal that values the company’s stock at about $804 million (24% premium).
The Consumer Discretionary Select Sector SPDR (XLY) was trading at $41.303 at 3:00 PM on Monday, down 0.35% on the day – up 5.85% year-to-date. The 2011 change was +4.30%.
Consumer Staples
Procter & Gamble (PG) is now Neutral from Buy at UBS and Market Perform from Outperform at BMO Capital. Kellogg (K) is cut to Neutral from Overweight at JP Morgan with a new price objective of $62. Whole Foods (WFM) is removed from the Conviction Buy List at Goldman. Monster Beverage (MNST) is now Neutral from Buy at Suntrust. In afternoon trading: Heavily Traded Stocks: Shares of Altria Group (MO) are up about 1%. Shares of Procter & Gamble (PG) are down about 1.5%.
The Consumer Staples Select Sector SPDR (XLP) was trading at $32.02 at 3:00 PM on Monday, down 0.62% on the day – down 1.45% year-to-date. The 2011 change was +10.85%.
Health Care
Haemonetics (HAE) beat estimates by 80 cents and revenue by $5M. Regeneron Pharmaceuticals (REGN) is raised to Buy from Neutral at Bank of America-Merrill Lynch. Zimmer Holdings (ZMH) is moved to Overweight from Neutral at Piper Jaffray. In afternoon trading: Shares of GTx Inc. (GTXI) are up about 55.5% after Citigroup predicted that the company is highly likely to report positive Phase III results for its Ostarine drug in about a year. Shares of Amylin Pharmaceuticals (AMLN) are up about 17.5% after the U.S. Food and Drug Administration approved its new diabetes drug Bydureon. Shares of YM Biosciences (YMI) are up about 12.75%.
The Health Care Select Sector SPDR (XLV) was trading at $35.69 at 3:00 PM on Monday, down 0.36% on the day – up 2.88% year-to-date. The 2011 change was +10.32%.
Financials
Five major banks – JP Morgan (JPM), Goldman Sachs (GS), Citigroup (C), Bank of America (BAC) and Morgan Stanley (MS) – have over $80B of exposure to the EU GIIPS, a New York Times analysis shows, although the number falls to $50B when the banks’ CDS insurance policies are included. Citigroup (C) Chairman Richard Parsons is reportedly considering stepping down after three years on the job. It may be a bullish sign for Citi’s health, as Parsons, who helped lead the company through the financial crisis, has said in the past he would stay until the company is on solid ground. A consortium including P-E firms Apollo (APO) and Riverstone reportedly leads the race for El Paso’s (EP) oil-exploration unit and is in advanced negotiations to buy the ops for $7B. The SEC is reportedly investigating a CDO transaction in which Deutsche Bank (DB) allowed hedge fund Paulson & Co. to select mortgage-backed securities and then bet against those securities without telling other investors. UBS (UBS) is likely to face enforcement proceedings from a joint probe by British and Swiss regulators, The Wall Street Journal reports, due to oversight gaps that enabled employee Kweku Adoboli to make unauthorized trades last year that led to $2.3B in losses and the resignation of then-CEO Oswald Grubel. Officials are still looking for $1.2B of MF Global’s (MFGLQ) missing customer money, but increasingly believe that much of it will never be recovered. Morgan Stanley (MS) gets added to the Conviction Buy list at Goldman Sachs, which also gives Citigroup (C) a Buy-from-Neutral boost. Boston Private Financial Holdings (BPFH) gets an Outperform-from-Market Perform increase by BMO Capital. Goldman downgraded Bank of America (BAC) to Neutral from Buy, and removed JPMorgan Chase (JPM) from their list of Conviction Buys. Columbia Banking System (COLB) gets taken to Hold from Buy with a $22 target at Wunderlich. Provident Financial (PFS) is moved to Neutral from Buy at Janney Montgomery Scott. In afternoon trading: Shares of Washington Mutual (WAMUQ) are down about 14.5%.
The Financial Select Sector SPDR (XLF) was trading at $13.995 at 3:00 PM on Monday, down 0.96% on the day – up 7.65% year-to-date. The 2011 change was -18.50%; the weakest performing sector for the year.
Information Technology
MicroStrategy (MSTR) missed estimates by 13 cents with revenue in-line with estimates. LG Display’s (LPL) $129.3M operating loss was slightly below consensus, but revenue of $589M was slightly better. More importantly, LG, which has struggled to cope with weak TV sales, says it sees display panel prices holding steady in Q1, and expects to turn profitable in Q2. Spansion (CODE) reported Q4 revenue of $220M and EPS of -$0.12 (the latter missed by a penny, but the former beat by $5.3M). Spansion is guiding for Q1 revenue of $210M-$230M and EPS of $0.01 to $0.07 (versus Street estimates of $221.8M and -$0.01). Acme Packet (APKT) is a new Equal Weight at Morgan Stanley. Microsoft (MSFT) is moved to Overweight from Neutral at Atlantic Equities. Motorola Solutions (MSI) is increased to Buy from Hold at Argus with a $55 target. LG Display (LPL) is lifted to Buy from Neutral at Nomura. Progress Software (PRGS) is upgraded to Outperform from Market Perform at JMP Securities. Methode Electronics (MEI) is moved to Neutral from Outperform at Robert W. Baird with a $9 objective. In afternoon trading: Shares of FriendFinder Networks (FFN) are up about 18%. Shares of Renren (RENN) are up about 15.5%.
The Technology Select Sector SPDR (XLK) was trading at $26.98 at 3:00 PM on Monday, up 0.30% on the day – up 6.01% year-to-date. The 2011 change was +1.03%.
Telecommunication Services
In afternoon trading: Heavily Traded Stocks: Shares of Sprint Nextel (S) are down about 1.2%, while shares of AT&T (T) are up about 0.6% and shares of Verizon (VZ) are up about 0.8%. Shares of Frontier Communications (FTR) are down about 1.4%. Shares of Centurylink (CTL) are down about 0.8%.
The NASDAQ Telecommunications Index (IXTC) was trading at $209.86 at 3:00 PM on Monday, down 0.15% on the day – up 6.57% year-to-date. The 2011 change was -12.62%.
Utilities
In afternoon trading: Heavily Traded Stocks: Shares of Genon Energy (GEN) are up about 2.3%. Shares of Duke Energy (DUK) are down about 0.3%. Shares of CenterPoint Energy (CNP) are up about 0.7%. Shares of Exelon (EXC) are up about 0.2%. Shares of American Electric Power (AEP) are down about 1.4%.
The Utilities Select Sector SPDR (XLU) was trading at $34.503 at 3:00 PM on Monday, down 0.65% on the day – down 4.11% year-to-date. The 2011 change was +14.81%; the strongest performing sector for the year.
Stocks: XOM, APO, EP, HFC, NRGY, OAS, TECO, DHT, XLE, ALB, AKS, CF, PX, ACH, XLB, ABB, TNB, PHG, PHG, TNB, SAVE, ABFS, NSC, TNB, XLI, GCI, WWW, AZO, KAR, AAP, TEN, TWX, DHI, OMC, SPLS, PBY, XLY, PG, K, WFM, MNST, MO, XLP, HAE, REGN, ZMH, GTXI, AMLN, YMI, XLV, JPM, GS, C, BAC, MS, APO, EP, DB, UBS, MFGLQ, MS, BPFH, COLB, PFS, WAMUQ, XLF, MSTR, LPL, CODE, APKT, MSFT, MSI, LPL, PRGS, MEI, FFN, RENN, XLK, S, T, VZ, FTR, CTL, IXTC, GEN, DUK, EXC, AEP, XLU
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