ADP reported that private sector jobs rose by 162,000 in September. Non-manufacturing ISM came in stronger than expected at 55.1 in September. The employment component fell to 51.1 from 53.8. The Dow Jones Industrial Average traded up to 13,501.17 at Wednesday’s open and then declined to a morning low at 13,439.12. The Dow traded as high as 13,536.27 in afternoon trading. The NASDAQ traded up to 3134.19 at the open then fell to a morning low at 3115.04 before rallying to a day’s high at 3142.36 in the afternoon.
In Asian, the Nikkei 225 ended the day at 8,747 – down 0.45%. The Hang Seng ended the day at 20,888 – up 23%. European exchanges traded back and forth around the flat line. The FTSE 100 ended the day at 5,826 – up 0.28%. The DAX ended the day at 7,322 – up 0.22%. The CAC 40 ended the day at 3,406 – down 0.24%. The yield on the 10-Year US Treasury rose from 1.597% to 1.640% still below its 50-day and 200-day simple moving averages at 1.664% and 1.814%.
Comex gold rallied from $1773.0 the Troy ounce to $1784.0 staying below Monday’s new 2012 high at $1794.4. Nymex crude oil declined from $91.82 per barrel to $87.70 staying below its 50-day and 200-day simple moving averages at $93.68 and $96.21. The euro versus the dollar traded between 1.2879 and 1.2935 staying above its 200-day simple moving average at 1.2821.
Energy
Petrobras (PBR) is in talks with three prospective buyers to sell them $4B-$6B worth of stakes in oil blocks in the Gulf of Mexico [Shell (RDS.A), Exxon (XOM), Chevron (CVX) and BP (BP) are likely to be the most interested]. The divestments are part of Petrobras’ strategy of selling $14.5B worth of non-core assets. Big Movers – Gastar Exploration (GST) is down about 25%.
Dow components – Chevron (CVX) down 1.31%, Exxon Mobil (XOM) down 0.38%. Energy Select Sector SPDR (XLE) was trading at $73.00 at 3:30 PM on Wednesday, down 1.26% on the day – up 5.60% year-to-date.
Materials
Vale S.A. (VALE) is a Hold at BB&T Capital. Xstrata (XSRAY) is boosted to Buy from Neutral at UBS. Lazard lowers Mosaic (MOS) and Potash (POT) to Neutral from Buy. Dow Components – Alcoa (AA) down 0.90%, DuPont (DD) down 0.40%. The Materials Select Sector SPDR (XLB) was trading at $36.504 at 3:30 PM on Wednesday, down 0.59% on the day – up 8.97% year-to-date.
Industrials
AMR (AAMRQ) and its pilot union intend to restart negotiations over a new labor contract this week after the company abrogated the old agreement as part of its bankruptcy restructuring – and then started to experience a spike in flight disruptions. Meanwhile, American Airlines is inspecting 47 out of its 102 Boeing 757s after seats came loose during two flights. Top brass at Lockheed Martin (LMT) and the Pentagon have become involved in long-running talks over a fifth order of F-35s. Resources Connection (RECN) reported FQ1 EPS of $0.12 (in-line), while missing revenue by $1M. Precision Castparts (PCP) is initiated with a Hold at KeyBanc Capital. CSX Corp (CSX) and Norfolk Southern (NSC) are each moved to Market Perform from Underperform by Sanford Bernstein. Embraer (ERJ) is now Neutral from Outperform at Cowen. Dow components – Boeing Co (BA) up 0.25%, Caterpillar (CAT) down 0.62%, General Electric (GE) up 0.18%, 3M Company (MMM) relatively unchanged, United Technologies (UTX) relatively unchanged. The Industrial Select Sector SPDR (XLI) was trading at $36.785 at 3:30 PM on Wednesday, up 0.40% on the day – up 8.99% year-to-date.
Consumer Discretionary
News Corp’s (NWS) Fox and Time Warner’s (TWX) Turner networks have extended their contracts to televise Major League Baseball until 2021, with Bloomberg reporting that the broadcasters have agreed to pay a combined $6.8B. Family Dollar Stores (FDO) met analyst expectations as FQ4 adjusted EPS climbed 14% to $0.75 and revenues 10% to $2.36B. Family Dollar Stores expects FY13 EPS of $4.10-$4.40 (in-line). Best Buy (BBY) founder Richard Schulze and at least four P-E firms, including Apollo Global (APO), are studying the struggling retailer’s books ahead of a possible buyout offer worth up to $10.9B. Pearson (PSO) CEO Marjorie Scardino will step down at the end of the year after 16 years in the job and be replaced by John Fallon, the head of the U.K. publisher’s International Education division. McGraw-Hill (MHP) is initiated with a Buy at UBS. Michael Kors (KORS) is an Outperform at William Blair. O’Reilly Automotive (ORLY) is started with an Overweight at Stephens. American Axle (AXL) is upgraded to Outperform from Sector Perform at RBC Capital. DineEquity (DIN) is upgraded to Buy from Neutral at Janney Capital. Ann Inc (ANN) is now Neutral from Buy at SunTrust. Express Inc. (EXPR) is downgraded to Neutral from Buy at SunTrust. Big Movers – Hovnanian Enterprises (HOV) is up about 11%. Dow Components – Disney (DIS) up 1.68%, Home Depot (HD) up 2.04%, McDonalds (MCD) down 0.64%. The Consumer Discretionary Select Sector SPDR (XLY) was trading at $47.07 at 3:30 PM on Wednesday, up 0.86% on the day – up 20.63% year-to-date.
Consumer Staples
Billionaire Ronald Burkle and P-E firms KKR (KKR) and TPG are interested in Supervalu (SVU), but are only thinking of buying parts of the hard-luck grocery chain rather than the whole company, which is what Supervalu would prefer. Casey’s General Stores (CASY) is a new Equal Weight at Stephens. Kraft Foods Group (KRFT) is a new Buy at Crédit Agricole. Mondelez International (MDLZ) is initiated with an Outperform at Crédit Agricole. Lorillard (LO) is launched with a Buy at Crédit Agricole. Dow components – Coca Cola (KO) down 0.26%, Procter & Gamble (PG) up 0.61%, Wal-Mart (WMT) up 0.92%. The Consumer Staples Select Sector SPDR (XLP) was trading at $36.24 at 3:30 PM on Wednesday, up 0.42% on the day – up 11.54% year-to-date.
Health Care
Aegerion Pharmaceuticals (AEGR) is initiated with an Overweight at JPMorgan. Brookdale Senior Living (BKD) is begun with a Buy at Deutsche Bank. PerkinElmer (PKI) is picked up at an Overweight with JPMorgan. horatec (THOR) is boosted to Buy from Neutral at UBS. Amarin (AMRN) is now Neutral from Outperform with Wedbush. ArQule (ARQL) is downgraded to Sector Perform from Outperform at RBC Capital. Hill-Rom Holdings (HRC) is cut to Equal-Weight from Overweight at Morgan Stanley. Smith & Nephew (SNN) is moved to Equal-Weight from Overweight at Morgan Stanley. Big Movers – AEterna Zentaris (AEZS) is down about 18%.
Dow Components – Johnson & Johnson (JNJ) relatively unchanged, Merck (MRK) up 0.47%, Pfizer (PFE) up 0.53%, United Health Group (UNH) relatively unchanged 1.62%. The Health Care Select Sector SPDR (XLV) was trading at $40.86 at 3:30 PM on Wednesday, up 0.79% on the day – up 17.79% year-to-date.
Financials
Best Buy (BBY) founder Richard Schulze and at least four P-E firms, including Apollo Global (APO), are studying the struggling retailer’s books ahead of a possible buyout offer worth up to $10.9B. Billionaire Ronald Burkle and P-E firms KKR (KKR) and TPG are interested in Supervalu (SVU), but are only thinking of buying parts of the hard-luck grocery chain rather than the whole company, which is what Supervalu would prefer. In an attempt to kick-start the housing market, Freddie Mac wants to provide loans to investors who are looking to acquire foreclosed homes so that they can rent them out. However, the mortgage giant faces opposition from banks and the FHFA, which is concerned about increasing the government’s role in the real-estate market and crowding out private capital with cheap loans, the WSJ reports. Agree Realty (ADC) is begun with a Buy at Wunderlich. Health Care REIT (HCN) is a new Outperform at RBC Capital. Assurant (AIZ) is now Buy from Neutral at Goldman. Discover Financial Services (DFS) is cut to Hold from Buy at Argus. Nationstar Mortgage (NSM) is now Neutral from Buy at Sterne Agee. Big Movers – Ocwen Financial (OCN) is up about 14.5%. Dow Components – American Express (AXP) up 0.31%, Bank of America (BAC) up 1.34%, JP Morgan Chase (JPM) down 0.22%, Travelers (TRV) up 0.25%. The Financial Select Sector SPDR (XLF) was trading at $15.82 at 3:30 PM on Wednesday, up 0.83% on the day – up 21.69% year-to-date.
Information Technology
The WSJ has firmed up speculation about the mass production of the iPad Mini, reporting that Apple’s (AAPL) Asian suppliers have begun manufacturing the tablet, which will have a 7.85″ screen vs. 9.7″ for the regular iPad and 7″ for Google’s Nexus. LG Display and AU Optronics (AUO) started production for the new screen last month. Xyratex (XRTX) missed estimates by 7 cents and revenue by $43M. FQ4 revenue is expected to be within a range of $235M-$285M and EPS of -$0.15 to -$0.43, well below an outdated consensus of $327.9M and $0.49. Semtech (SMTC) is lifted to Buy from Neutral at Lazard. Heartland Payment Systems (HPY) is slashed to Sell from Hold at Stifel Nicolaus. Texas Instruments (TXN) is taken to Sector Perform from Outperform at Pacific Crest. Big Movers – Hewlett-Packard (HPQ) is down about 11%. Dow Components – Cisco Systems (CSCO) up 0.42%, Hewlett-Packard (HPQ) down 10.97%, IBM (IBM) up 0.41%, Intel Corp (INTC) down 1.27%, Microsoft (MSFT) up 0.30%. The Technology Select Sector SPDR (XLK) was trading at $30.97 at 3:30 PM on Wednesday, up 0.55% on the day – up 21.69% year-to-date.
Telecommunication Services
SBA Communications (SBAC) is resumed with an Overweight at JPMorgan. Big Movers – TerreStar (TSTRQ) is down about 32.5%. Leap Wireless (LEAP) is down about 16%. Dow Components – AT&T (T) up 1.11%, Verizon (VZ) up 1.00%. The NASDAQ Telecommunications Index (IXTC) was trading at $198.56 at 3:30 PM on Wednesday, up 0.45% on the day – up 0.83% year-to-date.
Utilities
The Big Names – Dominion Resources (D) up 0.41%, Edison International (EIX) up 1.08%, First Energy (FE) up 0.52%, PG&E Corp (PCG) up 0.54%, Southern Company (SO) up 0.38%. The Utilities Select Sector SPDR (XLU) was trading at $36.58 at 3:30 PM on Wednesday, up 0.47% on the day – up 1.67% year-to-date.
STOCKS: CVX, XOM, AA, DD, BA, CAT, GE, MMM, UTX, DIS, HD, MCD, KFT, KO, PG, WMT, JNJ, MRK, PFE, AXP, BAC, JPM, TRV, CSCO, HPQ, IBM, INTC, MSFT, T, VZ, D, EIX, FE, PCG, SO, PBR, RDS.A, XOM, CVX, BP, GST, VALE, XSRAY, MOS, POT, AAMRQ, LMT, RECN, PCP, CSX, NSC, ERJ, NWS, TWX, FDO, BBY, APO, PSO, MHP, KORS, ORLY, AXL, DIN, ANN, EXPR, HOV, KKR, SVU, CASY, KRFT, MDLZ, LO, AEGR, BKD, PKI, THOR, AMRN, ARQL, HRC, SNN, AEZS, ADC, HCN, AIZ, DFS, NSM, OCN, AAPL, AUO, XRTX, SMTC, HPY, TXN, HPQ, SBAC, TSTRQ, LEAP
