Equities Sector Coverage: Wall Street Falls on New EU Downgrade Warnings

Sector Recap |

Wall StreetU.S. stocks fell after the three major credit ratings agencies issued new warnings that European leaders have failed to take the coordinated action necessary to tackle the region's debt crisis. The Dow Jones Industrial Average traded to a low of 11,941, versus the 200- day simple moving average at 11,943. The NASDAQ traded to a low of 2,591, versus the 50- day simple moving average at 2,605.

Asian stocks were mixed on Monday. The Nikkei 225 ended the day at 8.654 – up 1.37% after a deal that moves Europe closer to fiscal union encouraged investors to take on more risk. The Hang Seng ended the day at 18,576 – down 0.06%. European stocks fell sharply on fresh doubts that measures reached at last week’s European Union summit would be enough to keep the sovereign-debt crisis at bay. The FTSE 100 ended the day at 5,442 – down 1.58%, the DAX ended the day at 5,785 – down 3.36%, and the CAC 40 ended the day at 3,090 – down 2.61%.

Higher yields create strongest demand in 3-year note sale since August 2010 (bid-to-cover ratio of 3.30), but good auction fails to reverse Treasurys selling momentum as optimism about euro-zone debt situation is still hurting Treasurys. The yield on the US Treasury 10-Year note traded between 1.989 and 2.066 versus the 50-day simple moving average at 2.065. Gold traded up to a high of $1718.6 the Troy ounce before weakening to a low of $1660.3, versus the 50- day simple moving average at $1709.9. Crude oil traded between $97.54 per barrel and $99.68. The euro versus the dollar traded between 1.3168 and 1.3356.

Energy

El Paso Pipeline Partners (EPB) is a new Overweight at JPMorgan. Breitburn Energy (BBEP) is a new Buy at Bank of America-Merrill Lynch. Hallador Energy (HNRG) is a new Hold at Dahlman Rose. Statoil ASA (STO) gets downgraded to Neutral from Buy at Goldman Sachs. Occidental Petroleum (OXY) is now Neutral from Buy at Citigroup. In afternoon trading: Shares of Rosetta Resources (ROSE) are down about 13%. Shares of Alpha Natural Resources (ANR) are down about 11.25%.

Energy Select Sector SPDR (XLE) was trading at $68.55 at 4:00 PM on Monday, down 2.34% on the day – up 0.44% year-to-date.

Materials

Golden Minerals (AUMN) is initiated at an Outperform by Rodman & Renshaw with a $13.63 price target. In afternoon trading: Shares of Vulcan Materials (VMC) are up about 17.5%. Shares of AM Castle & Company (CAS) are down about 12.5%. Shares of China Shen Zhou Mining (SHZ) are down about 9%. Shares of Zagg Inc. (ZAGG) are down about 8.75%. Shares of ArcelorMittal (MT) are down about 8.5%. Shares of Mechel OAO (MTL) are down about 8.5%.

The Materials Select Sector SPDR (XLB) was trading at $33.29 at 4:00 PM on Monday, down 2.38% on the day – down 13.33% year-to-date.

Industrials

The SEC has told at least 12 U.S.-listed firms, including American Express (AXP) and Caterpillar (CAT), to disclose their activities with Syria, Iran and other "state sponsors" of terror, the Financial Times reports. Boeing (BA) gets an Overweight-from-Equal Weight increase at Morgan Stanley. Pinnacle Airlines (PNCL) is downgraded to Sell from Hold at Dahlman Rose. In afternoon trading: Shares of Broadwind Energy (BWEN) are up about 10.25%. Shares of Pinnacle Airlines (PNCL) are down about 17.5%. Shares of AMR Corp. (AMR) are down about 14.5%.

The Industrial Select Sector SPDR (XLI) was trading at $33.35 at 4:00 PM on Monday, down 1.83% on the day – down 4.36% year-to-date.

Consumer Discretionary

This week marks the busiest for IPOs since March, with eleven companies seeking to raise up to $3.8B via offerings on U.S. exchanges. The standouts are online gaming company Zynga (ZYNG), which wants to raise as much as $1B, and luxury-clothing designer Michael Kors (KORS), which is aiming for $792M. Amazon’s (AMZN) price check app has angered retailers, as it lets consumers scan an item’s bar code at a physical retailer and compare the price to Amazon’s prices, with Amazon adding more incentive to buy that item online in the form of a 5 percent discount -- up to $5 off. Apple Inc.’s (AAPL) iPad and Amazon.com Inc.’s (AMZN) Kindle Fire are the gadgets most people say they want to get as a gift this holiday season, according to a report by electronics review site Retrevo.com. Computer and gadget maker Apple Inc. (AAPL) opened its latest retail store in New York’s Grand Central Station on Friday, just as a report came out saying each Apple Store worker brings in $278 per hour. Analysis by Horace Dediu at Asymco showed store revenue at Apple was about $320,000 in the first three quarters of this year. A company like J.C. Penney Co. (JCP), on the other hand, brings in about $124,000 per employee per year. Bally Technologies (BYI) is taken to Overweight from Neutral at JPMorgan. Tempur-Pedic (TPX) is lifted to Outperform from Perform at Oppenheimer with a new price objective of $70. Toll Brothers (TOL) and Lennar (LEN) are both moved to Hold from Buy at Keybanc. In afternoon trading: Shares of Netflix (NFLX) are up about 7%. Shares of Eastman Kodak (EK) are down about 9.25%. Shares of McClatchy (MNI) are down about 9%. Shares of Groupon (GPRN) are down about 8%.

The Consumer Discretionary Select Sector SPDR (XLY) was trading at $39.23 at 4:00 PM on Monday, down 0.30% on the day – up 4.87% year-to-date.

Consumer Staples

Nomura rolls out Reduce-rated coverage on Beam, Inc (BEAM). SABMiller (SBMRY) is lowered to Neutral from Outperform by BNP Paribas. In afternoon trading: Shares of Diamond Foods (DMND) are down about 22%. Shares of Central European Distribution (CEDC) are down about 13%. Heavily Active Stocks: Shares of Wal-Mart (WMT) are down about 0.3%. Shares of Altria Group (MO) are flat.

The Consumer Staples Select Sector SPDR (XLP) was trading at $31.72 at 4:00 PM on Monday, down 0.91% on the day – up 8.22% year-to-date.

Healthcare

Metabolix (MBLX) is a new Neutral at JPMorgan. Roche Holding (RHHBY) gets boosted by both compatriot Credit Suisse (Outperform from Neutral) and Sanford Bernstein (Outperform from Market Perform). Watson Pharmceuticals (WPI) is upgraded to Buy from Outperform at Credit Agricole. Edwards Lifesciences (EW) is lifted to Buy from Hold at Canaccord Genuity. In afternoon trading: Shares of Sun Healthcare (SUNH) are up about 12%. Shares of Arena Pharmaceuticals (ARNA) are up about 10%. Shares of StemCells Inc. (STEM) are down about 11%.

The Health Care Select Sector SPDR (XLV) was trading at $33.42 at 4:00 PM on Monday, down 1.18% on the day – up 6.10% year-to-date.

Financials

In a long-awaited report, the U.K. Financial Services Authority has criticized RBS (RBS) and regulators over RBS's near-collapse in 2008 following its €72B ($96B) takeover of ABN Amro in partnership with two other banks. The EU could be in for some Lehman-style chaos if there is a sovereign default: banks in the region have sold €178B ($238B) worth of CDSs on GIIPS bonds to each other and tried to hedge this by buying €169B worth. Democrats and Republicans are considering boosting the fees that Fannie (FNMA.OB) and Freddie (FMCC.OB) collect from lenders as a way to finance the payroll tax cut. Lehman's (LEHMQ) bankruptcy estate is preparing to match Equity Residential's (EQR) $1.33B bid to buy 26.5% of Archstone from Bank of America (BAC) and Barclays (BCS), The Wall Street Journal reports. The SEC has told at least 12 U.S.-listed firms, including American Express (AXP) and Caterpillar (CAT), to disclose their activities with Syria, Iran and other "state sponsors" of terror, the Financial Times reports. Deutsche Boerse's (DBOEY) regulator, the state of Hesse, has legal reservations about the exchange operator's takeover of NYSE Euronext (NYX) and has submitted suggested amendments to the deal. Barclays begins Overweights on both Torchmark (TMK) and Reinsurance Group of America (RGA). It assigns Equal Weights on Protective Life (PL) and Symetra Financial (SYA). CIT Group (CIT) is a fresh Buy at BTIG. First Connecticut Bancorp (FBNK) is a new Buy and $14.50 target price at Sterne Agee. AXIS Capital (AXS) is increased to Outperform from Market Perform at Keefe Bruyette. In afternoon trading: Shares of ING Group (ING) are down about 9.5%.

The Financial Select Sector SPDR (XLF) was trading at $12.79 at 4:00 PM on Monday, down 2.37% on the day – down 19.81% year-to-date.

Information Technology

This week marks the busiest for IPOs since March, with eleven companies seeking to raise up to $3.8B via offerings on U.S. exchanges. The standouts are online gaming company Zynga (ZYNG), which wants to raise as much as $1B, and luxury-clothing designer Michael Kors (KORS), which is aiming for $792M. Hewlett-Packard (HPQ) said Friday it plans to offer its webOS software as an open source platform while continuing to develop for it. Internet security software maker Blue Coat Systems Inc. (BCSI) said Friday it has agreed to be acquired by an investor group led by Thoma Bravo LLC for about $1.3 billion. Marc Andreessen on Friday said that neither he nor any of the partners at his Menlo Park firm would take an operating role at Yahoo Inc. (YHOO). Apple Inc.’s (AAPL) iPad and Amazon.com Inc.’s (AMZN) Kindle Fire are the gadgets most people say they want to get as a gift this holiday season, according to a report by electronics review site Retrevo.com. Computer and gadget maker Apple Inc. (AAPL) opened its latest retail store in New York’s Grand Central Station on Friday, just as a report came out saying each Apple Store worker brings in $278 per hour. Analysis by Horace Dediu at Asymco showed store revenue at Apple was about $320,000 in the first three quarters of this year. A company like J.C. Penney Co. (JCP), on the other hand, brings in about $124,000 per employee per year. Altera (ALTR) is boosted to Outperform from Market Perform at BMO Capital. EZchip (EZCH) is raised to Buy from Hold at Auriga. Rubicon Technology (RBCN) is now Neutral from Underperform at Sterne Agee. Salesforce.com (CRM) is lowered to Underperform from Neutral at Cowen & Company. Avago Technologies (AVGO) is moved to Equal Weight from Overweight at Morgan Stanley, which takes Aeroflex Holding (ARX) to Underweight from Equal Weight. In afternoon trading: Shares of Softnet Tech (SOFN) are up about 200%. Shares of Meru Networks (MERU) are up about 11.75%.

The Technology Select Sector SPDR (XLK) was trading at $25.71 at 4:00 PM on Monday, down 1.27% on the day – up 2.06% year-to-date.

Telecommunications Services

MetroPCS (PCS) is lifted to Outperform from Neutral at Credit Suisse. In afternoon trading: Heavily Active Stocks: Shares of Sprint Nextel (S) are down about 3.6%. Shares of AT&T (T) are down slightly. Shares of Verizon (VZ) are down about 0.6%. Shares of Frontier Communications (FTR) are down about 0.8%.

The NASDAQ Telecommunications Index (IXTC) was trading at $199.41 at 4:00 PM on Monday, down 1.26% on the day – down 11.52% year-to-date.

Utilities

E.ON AG (EONGY) is lowered to Neutral from Buy at Bank of America-Merrill Lynch. PNM Resources (PNM) get moved to Market Perform from Outperform with Wells Fargo. In afternoon trading: Heavily Active Stocks: Shares of Duke Energy (DUK) are down about 1.6%. Shares of AES Corp. (AES) are down about 1.5%. Shares of Exelon (EXC) are down about 1.3%. Shares of Southern Company (SO) are down about 1%. Shares of Genon Energy (GEN) are down about 5.4%. Shares of American Electric Power (AEP) are down about 1.7%.

The Utilities Select Sector SPDR (XLU) was trading at $34.70 at 4:00 PM on Monday, down 0.86% on the day – up 10.72% year-to-date.

STOCKS: EPB, BBEP, HNRG, STO, OXY, ROSE, ANR, AUMN, VMC, CAS, SHZ, ZAGG, MT, MTL, AXP, CAT, BA, PNCL, BWEN, AMR, ZYNG, KORS, AMZN, AAPL, JCP, BYI, TPX, TOL. LEN, NFLX, EK, MNI, GPRN, BEAM, SBMRY, DMND, CEDC, WMT, MO, MBLX, RHHBY, WPI, EW, SUNH, ARNA, STEM, RBS, LEHMQ, BAC, BCS, DBOEY, NYX, TMK, RGA, PL, SYA, CIT, FBNK, AXS, ING, HPQ, BCSI, YHOO, EZCH, RBCN, CRM, AVGO, ARX, SOFN, MERU, PCS, S, T, VZ, FTR, EONGY, PNM, DUK, AES, EXC, SO, GEN, AEP

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

Companies

Symbol Name Price Change % Volume
AUMN Golden Minerals Company 0.72 -0.07 -8.67 765,149
TMK Torchmark Corporation 73.67 -0.33 -0.45 426,935
CIT CIT Group Inc (DEL) 43.00 0.09 0.21 1,022,119
GEN Genesis Healthcare Inc. 4.15 0.14 3.49 283,204
FTR Frontier Communications Corporation 3.66 -0.04 -1.08 19,067,719
CRM Salesforce.com Inc 71.12 -0.74 -1.03 4,747,862
SO Southern Company (The) 47.94 0.53 1.12 4,170,499
MNI McClatchy Company (The) 14.02 -0.22 -1.54 9,216
WPI Watson Pharmaceuticals Inc. n/a n/a n/a 0
EVOK Evoke Pharma Inc. 1.54 0.00 0.00 123,881
WMT Wal-Mart Stores Inc. 70.06 -0.29 -0.41 8,784,062
EW Edwards Lifesciences Corporation 90.33 1.03 1.15 3,992,120
MBLX Metabolix Inc. 0.37 -0.14 -27.35 628,868
MO Altria Group Inc. 66.28 0.92 1.41 6,445,862
AAPL Apple Inc. 113.96 1.84 1.64 31,036,512
BCS Barclays PLC 11.75 -0.24 -2.00 4,548,600
S Sprint Corporation 8.47 -0.27 -3.09 18,869,075
AXP American Express Company 74.72 -0.19 -0.25 2,262,073
CAS Castle (A.M.) & Co. n/a n/a n/a n/a
ARNA Arena Pharmaceuticals Inc. 1.45 0.08 5.84 2,073,789
BBEP Breitburn Energy Partners LP n/a n/a n/a 0
AVGO Broadcom Limited 178.97 8.26 4.84 7,201,223
AMZN Amazon.com Inc. 767.75 0.42 0.05 2,146,652
MTL Mechel PAO American Depositary Shares (Each rep. 1 5.15 -0.09 -1.72 464,717
AES The AES Corporation 11.92 0.08 0.68 3,871,448
BWEN Broadwind Energy Inc. 4.19 0.02 0.48 9,687
VZ Verizon Communications Inc. 51.46 0.33 0.64 8,075,586
BAC Bank of America Corporation 23.09 0.14 0.59 122,309,712
RBS Royal Bank of Scotland Group Plc New (The) ADS 5.50 -0.11 -1.88 1,537,053
FBNK First Connecticut Bancorp Inc. 24.25 0.70 2.97 28,868
PNM PNM Resources Inc. (Holding Co.) 33.05 0.45 1.38 530,680
RBCN Rubicon Technology Inc. 0.52 0.02 4.31 70,566
VMC Vulcan Materials Company (Holding Company) 128.58 -0.52 -0.40 984,777
OXY Occidental Petroleum Corporation 70.55 1.23 1.77 4,124,938
HNRG Hallador Energy Company 9.30 -0.05 -0.53 92,289
MT ArcelorMittal 8.05 -0.57 -6.57 24,927,962
SYA Symetra Financial n/a n/a n/a 0
STEM StemCells Inc. n/a n/a n/a n/a
HPQ HP Inc. 15.77 -0.40 -2.44 9,006,620
NFLX Netflix Inc. 122.81 -0.44 -0.35 4,305,886
BA Boeing Company (The) 156.39 1.00 0.64 2,398,824
YHOO Yahoo! Inc. 41.72 0.31 0.75 5,773,261
AXS Axis Capital Holdings Limited 63.80 0.48 0.76 449,308
RGA Reinsurance Group of America Incorporated 128.09 -0.12 -0.09 372,959
ING ING Group N.V. 14.45 -0.14 -0.96 3,686,747
STO Statoil ASA 18.05 0.10 0.56 1,490,830
EZCH EZchip Semiconductor Ltd n/a n/a n/a 0
KORS Michael Kors Holdings Limited 49.22 -1.39 -2.75 1,633,421
EXC Exelon Corporation 34.89 0.69 2.02 9,510,845
T AT&T Inc. 40.36 -0.05 -0.12 14,614,502
CAT Caterpillar Inc. 95.54 -0.73 -0.76 3,529,241
DUK Duke Energy Corporation (Holding Company) 75.82 1.09 1.46 2,849,302
DMND Diamond Foods Inc. n/a n/a n/a 0
TPX Tempur Sealy International Inc. 65.03 -0.53 -0.81 968,846
JCP J.C. Penney Company Inc. Holding Company 10.21 -0.35 -3.32 15,015,744
AEP American Electric Power Company 60.98 0.80 1.33 2,098,903
ZAGG ZAGG Inc 7.20 0.00 0.00 153,294

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