The NY Fed Empire manufacturing survey for July shows a weaker than expected reading of -3.76. The Consumer Price Index declined 0.2% in June but was up 0.3% excluding food and energy. CPI was up 3.6% year over year. Industrial Production rose 0.2% in June with Capacity Utilization at 76.7%. The University of Michigan consumer sentiment survey for July came in at a much weaker than expected reading of 63.8. The Dow Industrial Average opened higher on Friday to just above 12,500 then dipped into the red down to 12,406 and then consolidating this trading range. The NASDAQ traded as high as 2789 down to 2768 and then consolidated this trading range.
Asian stocks were mixed again on Friday with the Nikkei 225 up 0.4% to 9,974. The Hang Seng was down 0.4% to 21,860. European stocks were mixed on Friday. The FTSE 100 was down fractionally to 5,844. The DAX was up fractionally to 7,220. The CAC 40 slumped 0.7% to 3,727. The yield on the 10-Year US Treasury note rose from 2.929 percent to 2.984 then declined to 2.897 as the flight to quality continues despite the debt ceiling issues. Gold traded below its all time high set on Thursday at $1594.9 the Troy ounce. The day’s range was $1589.3 down to $1576.0 then back up to $1592.8. Crude oil traded down from $96.34 per barrel to $95.21 then up to $97.74 versus its 50-day simple moving average at $97.58. The euro versus the US dollar declined from 1.4198 to 1.4096 then consolidated this range.
Energy
BHP Billiton (BHP) has agreed to buy Petrohawk Energy (HK) for $12.1B ($38.75 / share) in a deal that gives it access to large shale gas assets in the U.S. QEP Resources (QEP) is begun with a Buy at Jefferies. Patriot Coal (PCX) is raised to Market Perform from Underperform at BMO Capital Markets, which takes Walter Energy (WLT) to Outperform from Market Perform. SM Energy (SM) is increased to Outperform from Market Perform with Wells Fargo. Transocean (RIG), Atwood Oceanics (ATW), and Noble Corp (NE) are all now Buy from Hold at Jefferies. Petrohawk Energy (HK) is downgraded to Hold from Buy with a $36 price objective at KeyBanc Capital. In afternoon trading: Shares of Petrohawk Energy are up about 61.5% on the takeover news.
Energy Select Sector SPDR (XLE) was trading at $76.86 at 4:00 PM on Friday, up 2.69% on the day – up 12.62% year-to-date.
Materials
BHP Billiton (BHP) has agreed to buy Petrohawk Energy (HK) for $12.1B ($38.75 / share) in a deal that gives it access to large shale gas assets in the U.S. Freeport-McMoRan Copper (FCX) is a fresh Buy at Bank-of-America-Merrill Lynch. Kinross Gold (KGC) is a new Overweight at HSBC Securities. Patriot Coal (PCX) is raised to Market Perform from Underperform at BMO Capital Markets, which takes Walter Energy (WLT) to Outperform from Market Perform. Rock-Tenn (RKT) is moved to Overweight from Neutral by JP Morgan. Teck Resources (TCK) is raised to Outperform from Market Perform at BMO Capital. In afternoon trading: Shares of Allegheny Technologies (ATI) are up about 6.5%.
The Materials Select Sector SPDR (XLB) traded at $39.57 at 4:00 PM on Friday, up 0.89% on the day – up 3.02% year-to-date.
Industrials
Susquehanna starts Expeditors International (EXPD) and C.H. Robinson (CHRW) with Neutrals on each. Rolls-Royce (RYCEY) is reduced to Sell from Neutral at UBS. In afternoon trading: Shares of China Ritar (CRTP) are up about 20%. Shares of YRC Worldwide (YRCW) are up about 9.25%. Shares of A123 Systems (AONE) are up about 8.3%. Shares of AeroVironment (AVAV) are down about 7.3%.
The Industrial Select Sector SPDR (XLI) traded at $36.54 at 4:00 PM on Friday, up slightly on the day – up 4.79% year-to-date.
Consumer Discretionary
Rebeka Brooks, the CEO of News Corp.’s (NWS) U.K. newspaper group, has bowed to massive pressure and resigned in the wake of phone-hacking scandal. British Sky Broadcasting (BSYBY) is begun with a Buy at Deutsche Bank. Sony Ericsson (SNE) (ERIC) swung to a surprise Q2 net loss of €50M ($70.8M) vs. a profit of €12M a year earlier as it suffered supply problems because of Japan’s earthquake. Revenue fell to €1.19B from €1.76B. Mattel (MAT) beat estimates by 7 cents. Penske Auto (PAG) is picked up with a Buy at ThinkEquity. Asia Entertainment & Resources Ltd. (AERL) is begun with a Buy at Sterne Agee. Michelin (MCGFF) is upgraded at Goldman Sachs. DeVry (DV) is boosted to Buy from Neutral at UBS. In afternoon trading: Shares of Blockbuster (BLOAQ) are up about 15.5%. Shares of Asia Entertainment are up about 12.5%.
The Consumer Discretionary Select Sector SPDR (XLY) traded at $40.29 at 4:00 PM on Friday, up slightly on the day – up 7.70% year-to-date.
Consumer Staples
Carl Icahn and his affiliates have offered to buy Clorox (CLX) for $12.6B ($76.50 / share – 9.4% premium), although he hopes the company will find a “strategic buyer,” such as Procter & Gamble (PG) or Unilever (UN), which will offer a higher price. Diamond Foods (DMND) is downgraded to Hold from Buy at Deutsche Bank. In afternoon trading: Shares of Clorox are up about 8.6%. Shares of Medifast (MED) are down about 7.5%. Shares of Inter Pardums (IPAR) are down about 5%.
The Consumer Staples Select Sector SPDR (XLP) traded at $31.36 at 4:00 PM on Friday, up 0.29% on the day – up 6.99% year-to-date.
Healthcare
Cubist Pharmaceuticals (CBST) reported Q2 EPS of -$0.34 (versus consensus of $0.43). Cerner (CERN) is initiated with a Conviction Buy at Goldman. AngioDynamics (ANGO) is raised to Buy from Hold at Canaccord. Skilled Healthcare (SKH) is downgraded to Market Perform from Outperform at JMP Securities. In afternoon trading: Shares of Endocyte (ECYT) are down about 11.25%. Shares of Seattle Genetics (SGEN) are down about 8.5%. Shares of AngioDynamics (ANGO) are up about 11%.
The Health Care Select Sector SPDR (XLV) traded at $35.19 at 4:00 PM on Friday, down 0.51% on the day – up 11.71% year-to-date.
Financials
Ten out of 91 European banks taking part in stress tests are expected to have fallen short of the requirement to hold 5% of core tier one capital. Credit Suisse (CS) has become the latest bank to be caught up in a Department of Justice investigation into financial institutions helping U.S. citizens evade taxes. HSBC (HBC) is also being scrutinized, while in 2009, UBS (UBS) paid $780M to avert indictment over the issue. A New York appeals court has restored Ambac’s (ABKFQ.PK) $1B lawsuit against JPMorgan (JPM) over an investment vehicle that suffered major losses in 2007 and 2008 because of its exposure to subprime debt. Bank of America (BAC) has reportedly made a preliminary offer to MBIA (MBI) to settle a lawsuit on defective mortgages, although the amount is still in dispute. Citigroup (C) reported Q2 Earnings of $1.09 / share (topping estimates). AEGON N.V. (AEG) and BNP Paribas (BNP) are both removed from the Conviction Buy List at Goldman. In afternoon trading: Shares of MBIA are up about 13%. Shares of Greenhill (GHL) are down about 12.2%.
The Financial Select Sector SPDR (XLF) traded at $14.85 at 4:00 PM on Friday, down 0.20% on the day – down 6.90% year-to-date.
Information Technology
The future of Android (GOOG) devices will be in focus today, when the International Trade Commission is due to make a preliminary ruling over accusations by Apple (AAPL) that HTC violated iPhone-related patents. Sony Ericsson (SNE) (ERIC) swung to a surprise Q2 net loss of €50M ($70.8M) vs. a profit of €12M a year earlier as it suffered supply problems because of Japan’s earthquake. Revenue fell to €1.19B from €1.76B. OpenTable (OPEN) is a new Neutral at Janney. Finisar (FNSR) is picked up with a Buy at Jefferies. Brocade (BRCD) is initiated with a Buy at Merriman. Cypress Semi (CY) gets cut to Hold from Buy at Capstone. TeleComm Sys (TSYS) is taken to Neutral from Buy at JP Morgan. Qlik Tech (QLIK) is cut to Hold from Buy at Jefferies. FLIR Systems (FLIR) is cut to Market Perform from Outperform at Morgan Keegan. In afternoon trading: Shares in Google (GOOG) are up about 13% after the company reported Q2 net profit slayed forecasts (beating EPS estimates by 88 cents), soaring 37% to $2.85B. Revenue rose 32% to $9.03B, driven by Google’s core search advertising, as well as YouTube and display ads. Shares of FLIR Systems are down about 10.5%. Shares of Qlik Tech are down about 10%.
The Technology Select Sector SPDR (XLK) traded at $25.92 at 4:00 PM on Friday, up 1.09% on the day – up 2.90% year-to-date.
Telecommunications Services
Telefonica (TEF) plans to cut 6,500 jobs as it aims to head off competition in Spain, where cheaper operators are stealing its customers amid a harsh economy. In afternoon trading: Actives: Shares of Level 3 (LVLT) are down about 0.2%. Shares of AT&T (T) are down about 1.3%. Shares of Sprint Nextel (S) are up about 1.7%. Shares of Verizon (VZ) are down about 0.7%. Shares of Frontier (FTR) are down about 2.1%. Shares of TerreStar (TSTRQ) are up about 21%.
The NASDAQ Telecommunications Index (IXTC) traded at $207.06 at 4:00 PM on Friday, up 0.56% on the day – down 8.12% year-to-date.
Utilities
In afternoon trading: Actives: Shares of Genon Energy (GEN) are up about 3.6%. Shares of Duke Energy (DUK) are down about a half of a percent. Shares of AES Corp (AES) are down about 0.6%. Shares of CenterPoint Energy (CNP) are down slightly. Shares of Exelon (EXC) are relatively unchanged. Shares of PPL Corp (PPL) are relatively unchanged. Shares of American Electric Power (AEP) are down about 0.4%. Shares of NiSource (NI) are up about a half of a percent.
The Utilities Select Sector SPDR (XLU) traded at $33.36 at 4:00 PM on Friday, up slightly on the day – up 6.45% year-to-date.
STOCKS: BHP, HK, QEP, PCX, WLT, SM, RIG, ATW, NE, FCX, KGC, RKT, TCK, ATI, EXPD, CHRW, RYCEY, CRTP, YRCW, AONE, AVAV, NWS, BSYBY, SNE, ERIC, MAT, PAG, AERL, MCGFF, DV, BLOAQ, CLX, PG, UN, DMND, MED, IPAR, CBST, CERN, ANGO, SKH, ECYT, SGEN, CS, HBC, UBS, ABKFQ, JPM, BAC, MBI, C, AEG, BNP, GHL, GOOG, AAPL, OPEN, FNSR, BRCD, CY, TSYS, QLIK, FLIR, TEF, LVLT, T, S, VZ, FTR, TSTRQ, GEN, DUK, AES, CNP, EXC, PPL, AEP, NI
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