The Dow Jones Industrial Average rose to 12,650.47 then declined to 12,447.49 going into the final half hour of trading. The NASDAQ rose to 2882.96 then declined to 2815.63 going into the final half hour of trading.
Asian stocks were higher on Monday in reaction to the 100 billion euro bailout of Spain’s banks. The Nikkei 225 ended the day at 8,625 – up 1.96%. The Hang Seng ended the day at 18,954 – up 2.44%. European exchanges opened higher on Monday but drifted to a mixed close. The FTSE 100 ended the day at 5,432 – down 0.05% on Friday. The DAX ended the day at 6,141 – up 0.17%. The CAC 40 ended the day at 3,043 – down 0.29%. The yield on the 10-Year US Treasury rose to 1.728% on the Spain debt deal, but in US trading the yield traded down to 1.583% as the bloom came off the Spain debt rose.
Gold rallied to $1609.3 the Troy ounce overnight then declined to $1582.7 in US trading still below the 50-day and 200-day simple moving averages at $1617.6 and $1682.1. Crude oil rallied to $86.64 per barrel overnight then declined to $82.16 in US trading as concerns return to a weaker US economy. The euro versus the dollar rallied to 1.2667 overnight then declined to 1.2486 during US hours.
Energy
BP (BP) and US authorities are debating over how much the oil giant will pay to resolve all criminal and civil penalties and damages resulting from the Deepwater Horizon oil spill. BP says the amount should be less than $15 billion and the DOJ is asking for $25 billion. A settlement appears likely by September well before a possible a trial in January. Comstock (CRK) has been upgraded to Buy from Hold at Stifel Nicolaus with a $19 price target. Gulfport Energy (GPOR) has been upgraded to Buy from Hold with a $25 target at Stifel Nicolaus, citing a clean balance sheet among other attractions. Dow components – Chevron (CVX) up 0.18%, Exxon Mobil (XOM) up 0.61%.
Energy Select Sector SPDR (XLE) was trading at $63.97 at 3:30 PM on Monday, down 0.82% on the day – down 7.46% year-to-date.
Materials
Commercial Metals (CMC) has been upgraded to Neutral from Sell at Goldman Sachs. Weyerhaeuser (WY) has been added to the Conviction Buy list at Goldman Sachs. AK Steel (AKS) has been downgraded to Sell from Neutral at Goldman and to Hold from Buy at Dahlman Rose. Both saw additional balance sheet risks and cash flow concerns as a result of recent quarterly performance. Dow components – Alcoa (AA) down 0.41%, DuPont (DD) down 0.40%.
The Materials Select Sector SPDR (XLB) was trading at $34.12 at 3:30 PM on Monday, down 1.33% on the day – up 1.85% year-to-date.
Industrials
GE (GE) is considering selling its GE Capital’s consumer-finance portfolio according to the Wall Street Journal, which would cut the unit’s loan portfolio by 16%. This move acknowledges investor concerns that GE owns one of the country’s largest banks. Dow components – Boeing Co (BA) up 0.71%, Caterpillar (CAT) down 0.53%, General Electric (GE) up 0.49%, 3M Company (MMM) down 0.02%, United Technologies (UTX) down 0.08%.
The Industrial Select Sector SPDR (XLI) was trading at $34.52 at 3:30 PM on Monday, down 0.80% on the day – up 2.28% year-to-date.
Consumer Discretionary
McDonald’s (MCD) has been upgraded to Buy from Outperform at CLSA citing attractive valuation despite near-term competitive weakness. The new price target is $105. Skechers USA (SKX) has been upgraded to Buy from Neutral at Sterne Agee. Time Warner (TWX) has been upgraded to Market Perform from Underperform by Sanford Bernstein. Walt Disney (DIS) has been downgraded to Above Average from Buy with a $52 target at Caris & Company. Dow Components – Disney (DIS) up 0.04%, Home Depot down 0.92%, McDonalds (MCD) down 0.73%.
The Consumer Discretionary Select Sector SPDR (XLY) was trading at $42.91 at 3:30 PM on Monday, down 1.15% on the day – up 9.97% year-to-date.
Consumer Staples
Cott Corp (COT) has been upgraded to Sector Outperform from Sector Perform at CIBC World Markets. Nestlé (NSRGY) has been downgraded to Hold from Buy at Société Générale. Dow components – Kraft (KFT) up 0.39%, Coca Cola (KO) down 0.24%, Procter & Gamble (PG) up 0.22%, Wal-Mart (WMT) up 0.04%.
The Consumer Staples Select Sector SPDR (XLP) was trading at $34.03 at 3:30 PM on Monday, down 0.18% on the day – up 4.74% year-to-date.
Health Care
Johnson & Johnson (JNJ) – according to Bloomberg JNJ may soon announce that it agreed to pay up to $2.2 billion to settle investigations with regard to the marketing its Risperdal antipsychotic treatment and other drugs, and claims that the company paid kickbacks to Omnicare (OCR). UnitedHealth (UNH) has been offering many of the benefits mandated by Obamacare even if the Supreme Court voids some or all of the Act. One reason for this policy is that it’s not that expensive, and customers can keep their children on their health plan until age 26. There is still no coverage for children with pre-existing conditions. Forest Labs (FRX) cut its FY 2013 EPS well below consensus citing sharply lower-than-expected sales of its Lexapro treatment following patent expiration in March. Citigroup upgraded to Buy from Hold on HCA Holdings (HCA), Health Management Associates (HMA), Community Health Systems (CYH), Lifepoint Hospitals (LPNT), Universal Health Services (UHS), and Vanguard Health Systems (VHS). Citigroup upgrades Tenet Healthcare (THC) to Buy all the way from Sell. Watson Pharmaceuticals (WPI) has been downgraded to Neutral from Overweight at Piper Jaffray. Dow Components – Johnson & Johnson (JNJ) down 0.60%, Merck (MRK) up 0.70%, Pfizer (PFE) up 0.45%.
The Health Care Select Sector SPDR (XLV) was trading at $36.40 at 3:30 PM on Monday, down 0.52% on the day – up 4.93% year-to-date.
Financial
Moody’s is expected to downgrade the large banks this week including the short-term debt of Bank of America (BAC) and Citigroup (C) from Prime-1 to Prime-2. Money-market funds have already been limiting some lending to big banks. Some municipal bond issuers have been switching bankers. Progressive (PGR) has been downgraded to Underweight from Equal Weight at Evercore. Dow Components – American Express (AXP) down 0.32%, Bank of America (BAC) down 2.76%, JP Morgan Chase (JPM) down 1.60%, Travelers (TRV) down 0.60%.
The Financial Select Sector SPDR (XLF) was trading at $13.95 at 3:30 PM on Monday, down 1.09% on the day – up 7.31% year-to-date.
Information Technology
Apple’s (AAPL) Worldwide Developer Conference begins today and the company will likely unveil the next generation of the iOS operating system for the iPhone, the iPad and MacBook. Apple’s own mobile mapping software that compete with Google (GOOG) Maps is also anticipated. NVIDIA (NVDA) has been upgraded to Buy from Neutral at UBS. Brocade (BRCD), EMC Corp (EMC), and NetApp (NTAP) have been upgraded to Buy-from-Hold at Cantor Fitzgerald. Marvell Technology (MRVL) has been downgraded to Neutral from Positive at Susquehanna. Dow Components – Cisco Systems (CSCO) down 0.75%, Hewlett-Packard (HPQ) down 2.23%, IBM (IBM) down 0.45%, Intel Corp (INTC) down 0.76%, Microsoft (MSFT) down 1.33%.
The Technology Select Sector SPDR (XLK) was trading at $28.02 at 3:30 PM on Monday, down 1.09% on the day – up 10.10% year-to-date.
Telecommunication Services
Spain’s heavily indebted Telefonica (TEF) has agreed to raise about 1.1 billion euros in cash by selling half of its shares in China Unicom (CHU) back to the company. Telefonica in retain a 5% stake in CHU remains committed to the two firms’ strategic alliance. Dow components – AT&T (T) up 1.01%, Verizon (VZ) up 0.99%.
The NASDAQ Telecommunications Index (IXTC) was trading at $178.43 at 3:30 PM on Monday, down 1.76% on the day – down 9.39% year-to-date.
Utilities
Duke Energy (DUK) has been upgraded to Outperform from Neutral at Credit Suisse. Southern Company (SO) has been downgraded to Neutral from Outperform at Credit Suisse. Dominion Resources (D) down 0.17%, Edison International (EIX) up 0.65%, First Energy (FE) up 0.50%, PG&E Corp (PCG) up 0.55%, Southern Company (SO) up 0.30%.
The Utilities Select Sector SPDR (XLU) was trading at $36.92 at 3:30 PM on Monday, up 0.27% on the day – up 2.61% year-to-date.
STOCKS: CVX, XOM, BP, CRK, GPOR, AA, DD, CMC, WY, AKS, BA, CAT, GE, MMM, UTX, DIS, HD, MCD, SKX, TWX, KFT, KO, PG, WMT, COT, NSRGY, JNJ, MRK, PFE, OCR, UNH, HCA, CYH, HMA, VHS, LPNT, UHS, THC, WPI, AXP, BAC, JPM, TRV, C, PGR, CSCO, HPQ, IBM, INTC, MSFT, AAPL, GOOG, NVDA, BRCD, EMC, NTAP, MRVL, T, VZ, TEF, CHU, D, EIX, FE, PCG, SO, WTR
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