Equities Sector Coverage: Stocks Fall, Energy and Materials Lead Losers Once Again

Sector Recap |

Raw Materials StocksThe CPI rose 0.2% in May with the core rate, excluding food and energy, up 0.3% the largest monthly gain since July 2008. The NY Fed Empire manufacturing survey fell to -7.8 in June when a reading of +12 was expected. Industrial Production rose a weaker than expected 0.1% in May with Capacity Utilization below estimates at 76.7%. The National Association of Home Builders Housing Market Index slumped to 13 from 16 in June, which is extremely weak given that its scale of zero to 100 where a reading of 50 is neutral. Weaker than expected economic data and a higher CPI plus the protests in Greece had US stocks lower at Wednesday’s open. The Dow Jones Industrial Average traded below 11,875 Wednesday afternoon down more than 1000 points since the May 2nd high at 12,876. The NASDAQ traded below its 200-day simple moving average at 2636 Wednesday afternoon. The Dow Industrial Average had an oversold rally on Tuesday rising 123 points to 12,076, up 4.3% year to date and down 6.2% since its May 2nd high at 12,876. The NASDAQ gained 39 points to 2679 on Tuesday, up 1.0% year to date and down 7.2% since its May 2nd high at 2887.75.

Asian stocks were mixed again on Wednesday for the sixth consecutive day with the Nikkei 225 up 0.3% to 9,574 with the Hang Seng down 0.7%. There was a concern that both China and India are set to raise interest rates soon. European stocks declined across the board on Wednesday on concerns about Greece. The FTSE 100 was down 1.0%, the DAX down 1.3% and the CAC 40 down 1.5%. The yield on the 10-Year US Treasury note rose in early trading but its 200-day simple moving average held at 3.114. This yield declined to 2.960 percent in late trading Wednesday afternoon. Comex gold traded down from $1528.8 the Troy ounce to $1514.5 pre-market on Wednesday and then rebounded to $1535.7 after the US open, then consolidated this trading range. Nymex crude oil traded down from $99.69 per barrel to $98.10 pre-market on Wednesday then rebounded to $99.95 on an inventory drawdown before declining again to as low as $94.01 in afternoon trading. The euro traded down from 1.4449 to 1.4160 as Greek workers strike against a new wave of austerity.

Energy

PDC Energy (PETD) gets an Overweight-from-Neutral lift at JP Morgan. PetroChina (PTR) is raised to Buy from Neutral at Bank of America-Merrill Lynch. Enbridge Energy (EEP) is upgraded to Outperform from Market Perform at Morgan Keegan. In afternoon trading: Shares of SunPower (SPWRA) are down about 15.5%. Shares of Treaty Energy (TECO) are down about 10%. Shares of Delta Petroleum (DPTR) are down about 6.5%. Shares of BPZ Resources (BPZ) are down about 6.25%.

Energy Select Sector SPDR (XLE) was trading at $72.02 at 4:00 PM on Wednesday, down 2.29% on the day – up 5.52% year-to-date.

Materials

In afternoon trading: Shares of China Agritech (CAGC) are down about 26.25%. Shares of Owens Illinois (OI) are down about 10.75%. Shares of Norsk Hydro (NHYDY) are down about 6%. Shares of Scotts Miracle-Gro (SMG) are down about 5.9%. Shares of Rock Tenn (RKT) are down about 5.4%. Shares of Taseko Mines (TGB) are down about 5.3%. Shares of China Shengda Packaging Group (CPGI) are up about 5.7%.

The Materials Select Sector SPDR (XLB) traded at $37.21 at 4:00 PM on Wednesday, down 2.31% on the day – down 3.12% year-to-date.

Industrials

Canadian Labor Minister Lisa Raitt has introduced a motion to end a strike by 3,800 Air Canada (AIDIF:US) airport customer service agents if a settlement isn't agreed. General Dynamics (GD) gets launched with a Buy rating and $86 objective at Lazard. Swift Transportation (SWFT) is taken to Overweight from Neutral at JP Morgan. In afternoon trading: Shares of Capstone Turbine (CPST) are down about 18.25%. Shares of Air Canada are up about 12.75%. Shares of A-Power Energy (APWR) are up about 7%. Shares of Korn Ferry (KFY) are up about 6.75%.

The Industrial Select Sector SPDR (XLI) traded at $35.35 at 4:00 PM on Wednesday, down 1.50% on the day – up 1.38% year-to-date.

Consumer Discretionary

Pandora (P) debuted on the NYSE today after raising $235M at $16 a share in an IPO that valued the unprofitable online music service at $2.6B. Seeking Alpha author John Gilliam says that while some of the concerns surrounding Pandora are legitimate, such as its rising content costs, he believes a $2B+ market cap is justified. Coach (COH) is a new Buy at Weeden with a price objective of $75. Adidas AG (ADDYY) is an Overweight-from-Neutral hoist at HSBC Securities. In afternoon trading: Shares of Blockbuster (BLOAQ) are down about 11.75%. Shares of Volvo (VOLVY) are down about 6.0%. Shares of Imax (IMAX) are down about 5.7%. Shares of Bally Technologies (BYI) are UP about 5.1%.

The Consumer Discretionary Select Sector SPDR (XLY) traded at $37.89 at 4:00 PM on Wednesday, down 1.53% on the day – up 1.28% year-to-date.

Consumer Staples

Kellogg (K) is initiated with an Underperform rating and $7 price target at Jefferies, which has Holds on General Mills (GIS) - $40 price target and TreeHouse Foods (THS) - $59 price target. Kraft Foods (KFT) is begun with a Buy and $40 target, as are Diamond Foods (DMND) - $80 price target and McCormick (MKC) - $55 price target. Danone (DANOY) is boosted to Buy from Neutral at Nomura. In afternoon trading: Shares of Synutra International (SYUT) are up about 7.4%. Shares of Imperial Sugar (IPSU) are down about 6.75%.

The Consumer Staples Select Sector SPDR (XLP) traded at $30.91 at 4:00 PM on Wednesday, down 1.50% on the day – up 5.46% year-to-date.

Healthcare

Swiss stock exchange SIX is looking at a spike in the shares of Synthes before news emerged of its $21.3B sale to Johnson & Johnson (JNJ). Any Pfizer (PFE) hopes of getting Spiriva, a mist inhaler for chronic lung disease, accepted in the U.S. may have suffered a blow after a review of five trials found it could increase the risk of early death. Brokerage Brean Murray begins both Edwards Lifesciences (EW) and Hologic (HOLX) with Holds. Johnson & Johnson (JNJ) is rated a new Buy with a $77 target at Brean Murray. Brean Murray begins Buys on Baxter (BAX) - $68 target, Becton Dickinson (BDX) and Medtronic (MDT) - $44 target. It has Holds on Abbott Labs (ABT), Boston Scientific (BSX), Covidien (COV), and St. Jude Medical (STJ). DepoMed (DEPO) is covered with a Buy and target of $11.50 at Capstone. Myriad Genetics (MYGN) is downgraded to Hold from Buy at Auriga with a target of $25. In afternoon trading: Shares of Regeneron (REGN) are up about 7.5%. Shares of NeuroMetrix (NURO) are down about 7.5%.

The Health Care Select Sector SPDR (XLV) traded at $34.90 at 4:00 PM on Wednesday, down 1.36% on the day – up 10.48% year-to-date.

Financials

Shares in Lloyds (LYG), Barclays (BCS), HSBC (HBC) and Royal Bank of Scotland (RBS) fell in London on reports that Finance Minister George Osborne will tonight back a plan to force lenders to ring fence their retail operations. The SEC is scrutinizing Merrill Lynch’s (BAC) sale of a $1.5B collateralized debt obligation it created for Illinois hedge fund Magnetar. The agency is investigating whether Merrill told buyers that Magnetar helped select the assets included in the CDO and bet against those same assets. Fortress Investment (FIG) is boosted to Outperform from Neutral at Credit Suisse. SL Green Realty (SLG) is moved to Outperform from Market Perform at FBR Capital with a new target of $95. Hospitality Properties Trust (HPT) is upgraded to Outperform from Market Perform with Wells Fargo. In afternoon trading: Shares of Banco Santander (STD) are down about 5.5%. Shares of Banco Bilbao Vizcaya Argentaria (BBVA) are down about 5.5%.

The Financial Select Sector SPDR (XLF) traded at $14.73 at 4:00 PM on Wednesday, down 2.16% on the day – down 7.65% year-to-date.

Information Technology

Pandora (P) debuted on the NYSE today after raising $235M at $16 a share in an IPO that valued the unprofitable online music service at $2.6B. Seeking Alpha author John Gilliam says that while some of the concerns surrounding Pandora are legitimate, such as its rising content costs, he believes a $2B+ market cap is justified. Aruba Networks (ARUN) and TTM Tech (TTMI) are both now Buy from Neutral at UBS. NetApp (NTAP) is upgraded to Outperform from Neutral at Credit Suisse. ReneSola (SOL) is reduced to Neutral from Outperform at Macquarie. In afternoon trading: Shares of Spreadtrum Communications (SPRD) are down about 9.25%. Shares of Renren (RENN) are down about 7.9%. Shares of NeoPhonics (NPTN) are down about 7.6%. Shares of Magic Software (MGIC) are down about 7.25%. Shares of Motricity (MOTR) are down about 7.25%.

The Technology Select Sector SPDR (XLK) traded at $24.63 at 4:00 PM on Wednesday, down 1.87% on the day – down 2.22% year-to-date.

Telecommunications Services

In afternoon trading: Shares of Telecom Italia (TI) are down about 5.1%. Shares of Telefonica (TEF) are down about 4.5%. Shares of Deutsche Telekom (DTEGY) are down about 4.2%. Shares of France Telecom (FTE) are down about 4%. Shares of Portugal Telecom (PT) are down about 4%. Shares of MetroPCS (PCS) are down about 3.2%. Shares of BT Group (BT) are down about 3.2%.

The NASDAQ Telecommunications Index (IXTC) traded at $204.42 at 4:00 PM on Wednesday, down 2.09% on the day – down 9.30% year-to-date.

Utilities

E.ON AG (EONGY) is upgraded to Hold from Sell at Citigroup. In afternoon trading: Shares of Tokyo Electric Power (TKECF) are UP about 22%. Shares of Veoilia Environment (VE) are down about 4.7%. Shares of E.ON are down about 4.1%. Shares of GDF Suez (GDFZY) are down about 4%. Shares of Genon Energy (GEN) are down about 3%.

The Utilities Select Sector SPDR (XLU) traded at $32.84 at 4:00 PM on Wednesday, down 1.23% on the day – up 4.79% year-to-date.

STOCKS: PETD, PTR, EEP, SPWRA, TECO, DPTR, BPZ, CAGC, OI, NHYDY, SMG, RKT, TGB, CPGI, AIDIF, GD, SWFT, CPST, APWR, KFY, P, COH, ADDYY, BLOAQ, VOLVY, IMAX, BYI, K, GIS, THS, KFT, DMND, MKC, DANOY, SYUT, IPSU, JNJ, PFE, EW, HOLX, BAX, BDX, MDT, ABT, BSX, COV, STJ, DEPO, MYGN, REGN, NURO, LYG, BCS, HBC, RBS, BAC, FIG, SLG, HPT, STD, BBVA, ARUN, TTMI, NTAP, SOL, SPRD, RENN, NPTN, MGIC, MOTR, TI, TEF, DTEGY, FTE, PT, PCS, BT, EONGY, TKECF, VE, GDFZY, GEN

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

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Symbol Name Price Change % Volume
RAI Reynolds American Inc 54.40 0.44 0.81 2,177,679

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