Factory Orders rose by 0.8% in May below Wall Street estimates. Tomorrow, the Non-manufacturing ISM is to be released and should read 53.5 in June. On Friday we get the Employment Report for June with Nonfarm Payrolls up just 100,000 and with the Unemployment Rate at 9.0%. The Dow Jones Industrial Average traded just above 12,600 Tuesday morning, but quickly faded back into the red with a morning low at 12,545.80. In the afternoon the Dow traded back and forth around the flat line with a new day’s low at 12,540.58. The NASDAQ reached a morning high of 2820.90 then faded into the red to 2810 before rebounding back into the green with a new daily high in the afternoon above 2825.
U.S. stocks had a robust week to the upside last week. After falling by more than 1000 points from its May 2nd high at 12,876 into mid-June the Dow Industrial Average regained 648 points to 12,583 last week. The NASDAQ which was unchanged year to date as last week began gained 163 points to 2816, up 6.1% for the week and hence year to date as well. Its May 2nd high is 2887.75.
Asian stocks rose on Monday with the Nikkei 225 up 1.0% to 9,965 then drifted slightly higher on Tuesday to 9.972. The Hang Seng Index jumped 1.7% on Monday to 22,770 then drifted slightly lower on Tuesday to 22,748. European stocks were mixed on Monday with the FTSE 100 up 0.5% the DAX up 0.3% and the CAC 40 down just 0.1%. On Tuesday the FTSE 100 was up just 0.1%. The DAX was down fractionally. The CAC 40 was down 0.6%. The yield on the 10-Year US Treasury note rose by a huge 31.9 basis points last week to 3.186 percent due to weak auctions and the end of QE2. On Tuesday the 10-Year yield traded between 3.199 percent and 3.114 consolidating within last week’s trading range. On Tuesday gold popped from $1486.2 to above $1515 the Troy ounce in afternoon trading still below the 50-day simple moving average at $1519.4. Crude oil remains above its 200-day simple moving average at $93.26 trading as high as $97.48 per barrel on Tuesday. The euro versus the US dollar traded as high as 1.4552 on Tuesday then drifted below 1.45 to an afternoon low just below 1.44.
Energy
Energy Transfer Equity (ETE) increased its bid for Southern Union (SUG) to $8.9B, up from its original offer of $7.9B and better than Williams’ (WMB) $8.7B bid. Southern’s board has approved the new $40/share proposal. The Pipeline & Hazardous Materials Safety Administration is investigating the weekend leak at Exxon Mobil’s (XOM) Silvertip Pipeline in Montana, saying it had warned the company in 2010 about oil leaking from some of the valves on the pipeline. In afternoon trading: Shares of Kodiak Oil & Gas (KOG) are up about 6.4%. Shares of BPZ Resources (BPZ) are up about 5%. Shares of Frontline (FRO) are down about 5.1%.
Energy Select Sector SPDR (XLE) was trading at $76.53 at 4:00 PM on Tuesday, up 0.62% on the day – up 12.13% year-to-date.
Materials
Specialty chemicals maker OM Group (OMG) agreed to buy Germany’s Vacuumschmelze for €700M ($1B) as it looks to push into Europe and benefit from what it calls ‘mega-trends’ related to alternative energy. Cliffs Natural Resources (CLF) is picked up at a Buy and $118 objective by Bank of America-Merrill Lynch. Goldcorp (GG) and Silver Standard (SSRI) are each downgraded to Hold from Buy at Deutsche Bank, while Thompson Creek Metals (TC) is taken to Hold from Buy. In afternoon trading: Shares of NovaGold (NG) are up about 10.5%. Shares of Silvercorp Metals (SVM) are up about 10%. Shares of Endeavour Silver (EXK) are up about 9.6%. Shares of Zagg (ZAGG) are up about 7.6%.
The Materials Select Sector SPDR (XLB) traded at $39.78 at 4:00 PM on Tuesday, up slightly on the day – up 3.57% year-to-date.
Industrials
Spirit Airlines (SAVE) is initiated as a Buy at Citigroup. Hawaiian Holdings (HA) is a new Buy and $8 target price at UBS. Manitowoc (MTW) is moved to Buy from Neutral By Sterne Agee. Emerson (EMR) is boosted to Outperform from Market Perform at Bernstein. AeroVironment (AVAV) is now Neutral from Buy at Lazard. In afternoon trading: Shares of SatCon Technology (SATC) are down about 24%. Shares of U.S. Airways (LCC) are down about 5.8%. Shares of DryShips (DRYS) are down about 5.1%. Shares of Fushi Copperweld (FSIN) are up about 8.6%. Shares of SmartHeat (HEAT) are up about 6.4%. Shares of Beacon Power (BCON) are up about 5.9%.
The Industrial Select Sector SPDR (XLI) traded at $37.70 at 4:00 PM on Tuesday, down 0.57% on the day – up 8.10% year-to-date.
Consumer Discretionary
Liberty Global (LBTYA) is launched as a Buy at Goldman Sachs. Gamestop (GME) gets upgraded to Neutral from Underweight at Piper Jaffray. Papa John’s (PZZA) is cut to Neutral from Buy at Suntrust. Cinemark Holdings (CNK) is cut to Neutral from Buy at Janney. Regal Entertainment Group (RGC) is reduced to Sell from Neutral by Janney. In afternoon trading: Shares of Imax (IMAX) are down about 9.1%. Shares of AirMedia Group (AMCN) are down about 7.7%. Shares of Hovnanian (HOV) are down about 5.8%. Shares of OfficeMax (OMX) are up about 5.8%. Shares of Netflix (NFLX) are up about 7%.
The Consumer Discretionary Select Sector SPDR (XLY) traded at $41.20 at 4:00 PM on Tuesday, up 0.44% on the day – up 10.13% year-to-date.
Consumer Staples
Nestle (NSRGY:US) is among the companies in talks to buy Chinese candy and pastry provider Hsu Fu Chi. A deal for Hsu Fu Chi, which has a market cap of $2.6B, would help Nestle in its attempts to expand in emerging markets, but it’s unclear whether Chinese authorities would approve the purchase. General Mills (GIS) is now Neutral from Outperform at Credit Suisse. TreeHouse Foods (THS) gets reduced to Neutral from Buy at Janney. In afternoon trading: Shares of China-Biotics (CHBT) are down about 17.2%. Shares of Pilgrim’s Pride (PPC) are down about 8.3%.
The Consumer Staples Select Sector SPDR (XLP) traded at $31.46 at 4:00 PM on Tuesday, down slightly on the day – up 7.34% year-to-date.
Healthcare
Novartis (NVS) plans to file for approval of its Afinitor treatment after a Phase III study showed the drug helped extend the time women with advanced breast cancer could live without their tumors worsening. Afinitor had been used in combination with Pfizer’s (PFE) exemestane, with the trial halted early following positive interim results. Salix Pharma (SLXP) is lifted to Buy from Hold with a $47 target at brokerage Duncan-Williams. Medtronic (MDT) is moved to Market Perform from Outperform with Wells Fargo. In afternoon trading: Shares of Zalicus (ZLCS) are up about 12.5%. Shares of Vivus (VVUS) are up about 4.8%. Shares of Cardiome Pharma (CRME) are down about 5.6%.
The Health Care Select Sector SPDR (XLV) traded at $35.86 at 4:00 PM on Tuesday, down 0.28% on the day – up 13.84% year-to-date.
Financials
Moody’s may go negative on its outlook for China’s banking system after it identified $540B of loan exposure to local governments beyond the $1.6T discovered by a national audit. The International Swaps & Derivatives Association, the final arbiter of what constitutes a credit event, said proposals from French banks to voluntarily roll over their Greek debt are unlikely to trigger the payout of default insurance. New York AG Eric Schneiderman issued subpoenas to at least nine life insurers in an investigation into payouts for deceased customers, as the scrutiny of the industry grows. The insurers include MetLife (MET), Genworth Financial (GNW), Manulife Financial (MFC) and Prudential (PRU). John Paulson’s hedge fund has made over $550M from a recovery in the value of bonds it bought in Lehman Brothers (LEHMQ:US) from the day the bank filed for bankruptcy. M&T Bank (MTB) is resumed with a Neutral rating and $93 target at Rochdale. Tanger Factory (SKT) is taken to Buy from Hold at Jefferies, with the target raised by $5 to $32. In afternoon trading: Shares of St Joe (JOE) are down about 10.8%. Shares of Lloyd’s Banking (LYG) are down about 5.9%. Shares of Banco Bilbao Vizcaya (BBVA) are down about 5%. Shares of The PMI Group (PMI) are up about 5.4%.
The Financial Select Sector SPDR (XLF) traded at $15.49 at 4:00 PM on Tuesday, down 0.90% on the day – down 2.88% year-to-date.
Information Technology
Microsoft (MSFT) signed a deal for Bing to provide Chinese search engine Baidu (BIDU) with English language results. The agreement lets Microsoft boost its minuscule share of the massive Chinese internet market, and may help it succeed where Google (GOOG) has stumbled in the face of censorship. Freescale Semiconductor (FSL) is begun with an Outperform and $24 price objective at Oppenheimer, an Overweight at Piper Jaffray, a Buy at Citigroup, and a Buy at Deutsche Bank. Yandex N.V. (YNDX) is a new Buy at Deutsche Bank. Active Network (ACTV) is begun with Buys at both ThinkEquity and Citigroup. Google (GOOG) is boosted to Overweight from Equal Weight at Evercore with a new target of $670. SanDisk (SNDK) is raised to Buy from Hold at Deutsche Bank. Riverbed Technology (RVBD) is downgraded to Perform from Market Perform at Oppenheimer. SAIC Inc (SAI) is now Negative from Neutral By Susquehanna. LG Display (LPL) is lowered to Neutral from Buy at Goldman. Blackboard (BBBB) is now Neutral from Buy at JPMorgan. Changyou.com (CYOU) is moved to Neutral from Buy at Mizuho. In afternoon trading: Shares of NetScout Systems (NTCT) are down about 17.8%. Shares of Advanced Energy Industries (AEIS) are down about 12.1%. Shares of Sequans Communications (SQNS) are up about 10.4%.
The Technology Select Sector SPDR (XLK) traded at $26.16 at 4:00 PM on Tuesday, up slightly on the day – up 3.85% year-to-date.
Telecommunications Services
Vodafone (VOD) and Telefonica (TEF) are among firms set to be hit by the new caps on data-roaming charges that the European Commission is expected to announce tomorrow. Deutsche Telekom (DTEGY) is lifted to Buy from Neutral at Nomura. Clearwire (CLWR) is lifted to Outperform from Neutral at Credit Suisse. Nomura lowers France Telecom (FTE) to Neutral from Buy and Telefonica SA (TEF) to Reduce from Neutral. In afternoon trading: Shares of TerreStar (TSTRQ) are up about 55%.
The NASDAQ Telecommunications Index (IXTC) traded at $215.30 at 4:00 PM on Tuesday, down 0.20% on the day – down 4.47% year-to-date.
Utilities
El Paso Electric (EE) is increased to Buy from Neutral at Goldman Sachs. In afternoon trading: Shares of Tokyo Electric Power (TKECF) are up about 21.75%. Actives: Shares of Duke Energy (DUK) are down slightly. Shares of AES Corp (AES) are down about 1.1%. Shares of American Electric Power (AEP) are up about 1%. Shares of PPL Corp (PPL) are down about a half of a percent. Shares of Exelon (EXC) are down about 1%. Shares of Southern (SO) are down about 0.3%.
The Utilities Select Sector SPDR (XLU) traded at $33.68 at 4:00 PM on Tuesday, down 0.59% on the day – up 7.47% year-to-date.
STOCKS: ETE, SUG, WMB, XOM, KOG, BPZ, FRO, OMG, CLF, GG, SSRI, TC, NG, SVM, EXK, ZAGG, SAVE, HA, MTW, EMR, AVAV, SATC, LCC, DRYS, FSIN, HEAT, BCON, LBTYA, GME, PZZA, CNK, RGC, IMAX, AMCN, HOV, OMX, NFLX, NSRGY, GIS, THS, CHBT, PPC, NVS, PFE, SLXP, MDT, ZLCS, VVUS, CRME, MET, GNW, MFC, PRU, LEHMQ, MTB, SKT, JOE, LYG, BBVA, PMI, MSFT, BIDU, GOOG, FSL, YNDX, ACTV, SNDK, RVBD, SAI, LPL, BBBB, CYOU, NTCT, AEIS, SQNS, VOD, TEF, DTEGY, CLWR, FTE, TSTRQ, EE, TKECF, DUK, AES, AEP, PPL, EXC, SO
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