There were no economic data points on Monday. This week the number one focus is on the Debt Ceiling standoff on Capital Hill. On Tuesday look for continued weak Consumer Confidence and New Home Sales. On Wednesday there’s Durable Goods Orders and the Fed’s Beige Book. On Thursday there’s Initial Jobless Claims. On Friday Advanced GDP for the second quarter is expected to be weak +1.8%. The Dow Jones Industrial Average traded lower on Monday to 12,536.19 then consolidated that decline. The Dow remains below its May 2nd high at 12,876.00. The NASDAQ traded down to 2828.91 then rebounded to 2859.40 and then stayed within that range, below its May 2nd high at 2887.75.
Asian stocks declined modestly on Monday with the Nikkei 225 down 0.8% to 10,050. The Hang Seng lost 0.7% to 22,293. European stocks drifted ended mixed with the FTSE 100 down just 0.2% to 5,925. The DAX tacked on 0.25% to 7,345. The CAC 40 slipped 0.8% to 3,813. The yield on the 10-Year US Treasury note rose from 2.964 percent to 3.032 on Monday then declined to 2.942 before rising back to 3.000 percent. The July trading range is between the July 1st high at 3.223 and the July 12th low at 2.814. Gold rebounded from $1603.8 the Troy ounce to a new all time high at $1624.3 then consolidated. Crude oil dipped lower from $99.87 per barrel to $98.52 then consolidated. The euro versus the US dollar traded between 1.4329 and 1.4405. The US Treasury market must absorb $35 billion in 2-Year notes on Tuesday, $35 billion 5-Year notes on Wednesday and $29 billion in 7-Year notes on Thursday.
Energy
Marathon Petroleum (MPC) is begun with a Buy rating and $55 target price at Dahlman Rose. Sunpower (SPWRA) is started with a Sell at Auriga. Basic Energy Services (BAS) is boosted to Outperform from Market Perform by BMO Capital. In afternoon trading: Shares of Petroleum products distributor Global Partners (GLP) are down only about 2.2% despite preannouncing a Q2 net loss of “no more than $2 million,” compared with a consensus forecast for a $0.10/share profit. Shares of Oil & gas services firm Gulfmark Offshore (GLF) are up slightly despite reporting Q2 revenue and EPS of $96.9M (+4.5% Y/Y) and $0.51, blowing away the $90.6M and $0.32 consensus. Most Actives: Shares of Petrohawk Energy (HK) are up about a quarter of a percent. Shares of Weatherford International (WFT) are up about 1.5%. Shares of Petroleo Brasileiro (PBR) are up about 3.25%. Shares of Sandridge Energy (SD) are up about 0.75%.
Energy Select Sector SPDR (XLE) was trading at $79.41 at 4:00 PM on Monday, down 0.40% on the day – up 16.35% year-to-date.
Materials
Cemex S.A. (CX) is cut to Hold from Buy at Citigroup. Celanese (CE) is lowered to Neutral from Outperform at Macquarie. Pan Am Silver (PAAS) is downgraded to Hold from Buy at Canaccord Genuity. In afternoon trading: Most Actives: Shares of Alcoa (AA) are down about 1.1%. Shares of Yamaha Gold (AUY) are up about 1%. Shares of Vale (VALE) are up about 0.75%. Shares of Cemex are down about 1.9%. Shares of Freeport-McMoran (FCX) are relatively uchanged.
The Materials Select Sector SPDR (XLB) traded at $39.85 at 4:00 PM on Monday, down 0.25% on the day – up 3.75% year-to-date.
Industrials
CNH Global (CNH) beat estimates by 37 cents on revenue of $4.9B. Eaton (ETN) beat estimates by 2 cents on revenue of $4.09B. BE Aerospace (BEAV) beat estimates by 3 cents on revenue of $608.9M. While some are on edge about a slowdown in China’s growth, Caterpillar (CAT) CEO Doug Oberhelman is comfortable with a small decline that keeps the Chinese economy on even footing. Owens Corning (OC) is upgraded to Top Pick from Outperform at RBC Capital. Swift Transportation (SWFT) is taken to Hold from Sell at Capstone. Rockwell Collins (COL) is raised to Outperform from Sector Perform at RBC Capital. In afternoon trading: Shares of RSC Holdings (RRR) are down about 0.9% despite Q2 beating estimates across-the-board, posting a 46% Y/Y earnings increase on solid top-line sales growth. Rental revenue rose at least 17% for the third-straight quarter, with similar gains expected for the next quarter as well. Shares of CNH Global (CNG) are up about 12%.
The Industrial Select Sector SPDR (XLI) traded at $36.81 at 4:00 PM on Monday, down slightly on the day – up 5.56% year-to-date.
Consumer Discretionary
Bernstein’s Craig Moffett sees cable providers such as Comcast (CMCSA), Time Warner Cable (TWC), and Cablevision (CVC) having a rough Q2, expecting them to collectively lose 322K subscribers. Dunkin’ Brands Group (DNKN) is set to be the largest of 11 IPOs, as Dunkin’ plans to raise up to $400M on Nasdaq, although its food business doesn’t provide the high growth Internet IPOs offer. Netflix (NFLX) is scheduled to report earnings after the close, with analysts likely to focus not just on the headline numbers but also on subscriber growth, costs and margins amid concerns that content distribution deals, including rumored talks with DreamWorks, will grow increasingly costly for the company. Pandora Media (P) is initiated with a Buy – $25 price objective at Citigroup, an Overweight – $22 target at JP Morgan, and an Outperform with Wells Fargo. Starwood Hotels (HOT) is upgraded to Outperform from Market Perform at JMP Securities. Brown Shoe (BWS) is raised to Buy from Hold at BB&T Capital. Newstar Financial (NEWS) is now Market Perform from Outperform at Keefe Bruyette. In afternoon trading: Shares of Bridgepoint Education (BPI) are down about 11.75%. Shares of Imax (IMAX) are down about 11%. Shares of Orbitz Worldwide (OWW) are up about 9.25%. Shares of Brunswick (BC) are up about 8%.
The Consumer Discretionary Select Sector SPDR (XLY) traded at $40.82 at 4:00 PM on Monday, down 0.66% on the day – up 9.12% year-to-date.
Consumer Staples
Dunkin’ Brands Group (DNKN) is set to be the largest of 11 IPOs, as Dunkin’ plans to raise up to $400M on Nasdaq, although its food business doesn’t provide the high growth Internet IPOs offer. Goldman removes Pepsi (PEP) from its Conviction Buy list and cuts the stock to Neutral. Kimberly-Clark (KMB) beat estimates by 2 cents on revenue of $5.3B, and Q2 profits dipped 18%. Lorillard (LO) beat estimates by 3 cents on revenue of $1.69B. PepsiCo (PEP) is now Neutral from Buy at Goldman, which also pulls the pop stock from its list of Conviction Buys. Revlon (REV) is reduced to Market Perform from Outperform at BMO Capital. Safeway (SWY) and Kroger (KR) are each downgraded to Sell from Neutral at Goldman. In afternoon trading: Shares of Danisco (DNSCY) are down about 34%. Shares of Synutra International (SYUT) are down about 10.75%. Shares of China-Biotics (CHBT) are up about 13%. Shares of Yuhe International (YUII) are up about 10.25%.
The Consumer Staples Select Sector SPDR (XLP) traded at $31.45 at 4:00 PM on Monday, down 0.91% on the day – up 7.30% year-to-date.
Healthcare
Silicon Laboratories (SLAB) beat estimates by 2 cents. However, sales missed by $1M and profits fell 36%. Agilent (A) is covered at Outperform at Cowen. Ventrus Biosciences (VTUS) is launched at an Outperform at Leerink Swann. Idenix Pharma (IDIX) is a new Overweight at JP Morgan. Mindray Medical (MR) is moved to Outperform from Neutral at Credit Suisse. Edwards Lifesciences (EW) is lifted to Outperform from Market Perform at Brokerage Morgan Keegan with a $97 objective. Medco Health Solutions (MHS) is moved to Hold from Buy at BB&T Capital. In afternoon trading: Shares of HCA (HCA) are down about 19.5% after missing estimates by 4 cents on revenue of $8.01B.
The Health Care Select Sector SPDR (XLV) traded at $35.22 at 4:00 PM on Monday, down 1.04% on the day – up 11.81% year-to-date.
Financials
TD Ameritrade (AMTD) will reportedly discuss buying rival online-brokerage E-Trade Financial (ETFC) at a board meeting tomorrow. ING (ING) is to sell most of its Latin American insurance and investment management operations to Colombia’s Gruposura de Inversiones Suramericana for €2.68B ($3.86B). Lloyds (LYG) is reportedly considering the flotation of a portfolio of 632 branches after it received only two formal bids ahead of the first deadline for the assets. Regions Financial (RF) is expected to receive offers from several private equity firms for its Morgan Keegan brokerage unit. Blackstone (BX), Stifel Financial (SF) and Apollo (APO) are among those likely to bid for Morgan Keegan, which has a book value of about $1.5B. Commerzbank (CRZBY) is moved to Buy from Neutral at Morgan Stanley. Assoc Banc-Corp (ASBC) gets hoisted to Buy from Hold at Jefferies. Tortoise Energy Capital (TYY) is taken to Buy from Hold at Stifel Nicolaus. PartnerRe (PRE) is moved to Neutral from Overweight at JP Morgan. In afternoon trading: Shares of Radian Group (RDN) are up about 6.7%. Shares of ETrade Financial are up about 5.5%.
The Financial Select Sector SPDR (XLF) traded at $15.21 at 4:00 PM on Monday, down 0.72% on the day – down 4.64% year-to-date.
Information Technology
Texas Instruments (TXN) is due to report its Q2 earnings after the bell, with EPS forecast to have fallen to $0.54 from $0.62 a year earlier and revenue to $3.44B from $3.5B. Texas Instruments has underperformed the NASDAQ by about 10% YTD, as declining Nokia (NOK) orders and chip inventory concerns take their toll. Samsung (SSNLF) is estimated to have sold 18M-21M smartphones in Q2, which could put it beyond Apple’s (AAPL) sales of 20.3M and make it the sector leader. Sohu.com (SOHU) is a new Buy – $97 target at boutique firm T.H Capital. Motorola Solutions (MSI) is moved to Buy from Hold at Jefferies. WNS Holdings (WNS) is now Neutral from Sell at Goldman Sachs. Intuit (INTU) is upgraded to Buy from Neutral at UBS. Computer Sciences (CSC) is cut to Sell from Neutral at Goldman. GT Solar (SOLR) gets lowered to Underperform from Outperform at Credit Agricole. In afternoon trading: Shares of Flextronics (FLEX) are down about 4.1% despite reporting FQ1 earnings jumped 12% on a double-digit increase in sales, as the company posts strong growth across all core units. Shares of Lattice Semiconductor (LSCC) are down about 2.7% despite posting Q2 revenues that were better than estimates, as gross margins increased sequentially and operating expense declined.
The Technology Select Sector SPDR (XLK) traded at $26.65 at 4:00 PM on Monday, down 0.26% on the day – up 5.80% year-to-date.
Telecommunications Services
A review of Verizon (VZ) and AT&T’s (T) Q2 results shows the former outpacing the latter: While Verizon added 2.2M total subscribers and 1.3M retail post-paid subs, AT&T added 1.1M and 331K, respectively. Crown Castle (CCI) is cut to Reduce from Neutral at Citadel. In afternoon trading: Most Actives: Shares of Sprint Nextel (S) are down about 0.2%, while shares of AT&T (T) are down about 1.25% and shares of Verizon (VZ) are down about 1.4%. Shares of Level 3 (LVLT) are down about 2.9%. Shares of Frontier (FTR) are down about 1.8%.
The NASDAQ Telecommunications Index (IXTC) traded at $209.42 at 4:00 PM on Monday, down 1.55% on the day – down 7.08% year-to-date.
Utilities
Bank of America-Merrill Lynch lifts Ameren Corporation (AEE) to Neutral from Underperform, Calpine Corp. (CPN) to Buy from Neutral, Exelon Corp. (EXC) to Buy from Underperform, and FirstEnergy Corp. (FE) to Buy from Neutral. Southern Co (SO) is downgraded to Sell from Neutral at Goldman. Pepco Holdings (POM) is reduced to Hold from Buy at Argus due to valuation concerns. In afternoon trading: Most Actives: Shares of Genon Energy (GEN) are up about 1.5%. Shares of Exelon are up about 1.4%. Shares of AES Corp (AES) are up about 1.25%. Shares of Duke Energy (DUK) are relatively unchanged. Shares of PPL Corp (PPL) are up about 1.1%. Shares of Calpine are up about 3.7%.
The Utilities Select Sector SPDR (XLU) traded at $33.94 at 4:00 PM on Monday, up 0.35% on the day – up 8.30% year-to-date.
STOCKS: MPC, SPWRA, BAS, GLP, GLF, HK, WFT, PBR, SD, CX, CE, PAAS, AA, AUY, VALE, FCX, CNH, ETN, BEAV, CAT, OC, SWFT, COL, RRR, CNG, CMCSA, TWC, CVC, DNKN, NFLX, P, HOT, BWS, NEWS, BPI, IMAX, OWW, BC, PEP, KMB, LO, REV, SWY, KR, DNSCY, SYUT, CHBT, YUII, SLAB, A, VTUS, IDIX, MR, EW, MHS, HCA, AMTD, ETFC, ING, LYG, RF, BX, SF, APO, CRZBY, ASBC, TYY, PRE, RDN, TXN, NOK, SSNLF, AAPL, SOHU, MSI, WNS, INTU, CSC, SOLR, FLEX, LSCC, VZ, T, CCI, S, LVLT, FTR, AEE, CPN, EXC, FE, SO, POM, GEN, AES, DUK, PPL
