Equities Sector Coverage: Washington Optimism Pushes Up Wall Street

Sector Recap  |

New Home Sales for October slipped 0.3% to an annual rate of 368,000 units, way below expectations. The average selling price was $237,700 up 5.7% year over year. The inventory of new homes rose to 147,000, the highest since January, but still extremely low by longer term standards. The Dow Jones Industrial Average declined to 12,765.32 then rebounded to 12,981.44 still below its 200-day simple moving average at 12,993.05. The Nasdaq traded down to 2935.88 then rebounded to 2990.46, on the cusp of its 200-day SMA at to 2986.02. So far, 103 companies said that they will pay a special dividend before the end of the year, when a steep tax hike to over 40% from 15% would result if Congress does not prevent the Fiscal Cliff. If taxes do rise, companies will likely favor stock buybacks over dividends next year, as the related tax increase may only be to 20% from 15%.

Asian stocks were lower on Wednesday. The Nikkei 225 closed at 9308 – down 1.22%. The Hang Seng closed at 21,709 – down 0.62%. European exchanges closed higher on Wednesday. The FTSE 100 ended the day at 5,803 – up 0.06%. The DAX ended the day at 7,350 – up 0.24%. The CAC 40 ended the day at 3,515 – up 0.37%. The yield on the 10-Year US Treasury declined from 1.642% to 1.598% staying below the 50-day and 200-day simple moving averages at 1.687% and 1.765%.

Comex gold slumped from $1743.1 the Troy ounce to $1705.5 back below the 50-day simple moving average at $1740.7 with the 200-day SMA at $1665.6. Nymex crude oil declined from $87.34 per barrel to $85.36 still below its 50-day and 200-day simple moving averages at $88.75 and $93.95. The euro versus the dollar declined from 1.2944 to 1.2884 between its 50-day and 200-day simple moving averages at 1.2901 and 1.2797.

Energy

BP (BP) rig supervisors Robert Kaluza and Donald Vidrine will be arraigned in court today on manslaughter charges over their role in the Deepwater Horizon rig explosion that killed 11 workers in 2010. Former BP executive David Rainey will appear in court on charges of concealing information from Congress about the size of the oil spill. BP (BP) agreed to sell a number of North Sea oil and gas interests to Abu Dhabi National Energy Company for about $1.1 billion, raising the value of the assets the company has sold following the Gulf of Mexico oil spill to $37 billion, so they are close to their goal is to divest $38 billion in assets by 2013. Suburban Propane Partners (SPH) missed FQ4 EPS estimates by $0.54 with a miss on the revenue line. Yingli Green Energy (YGE) beat Q3 EPS estimates by $0.23 with better than expected revenue. JA Solar (JASO) missed Q3 EPS estimates by a dime with better than expected revenue. Deutsche Banks upgraded these three to Buy from Hold - Hercules Offshore (HERO), Patterson-UTI (PTEN), and Pioneer Energy (PES). Nabors Industries (NBR) - The oil services firm has been upgraded to Buy from Hold at Deutsche Bank with a price target raised to $28. Catalysts include an upbeat secular outlook for natural gas demand. Ensco (ESV) and Rowan (RDC) have been downgraded to Hold from Buy at Deutsche Bank. Dow components – Chevron (CVX) is up about 0.6%. Exxon Mobil (XOM) is down about 0.2%. Energy Select Sector SPDR (XLE) was trading at $70.82 at 3:30 PM on Wednesday, up 0.71% on the day – up 2.44% year-to-date.

Materials

The steel industry is experiencing chronic overcapacity, with production ability of 1.8 billion tons but expecting 2012 orders of just 1.5 billion tons. The industry is not cutting back, by building more mills, often supported by governments. Problems include the fragmentation in the industry and political difficulties in closing plants. AK Steel (AKS) has been upgraded to Hold from Sell at Dahlman Rose. IAMGOLD (IAG) - HSBC Securities upgraded the commodity company to Overweight from Neutral. Dow Components – Alcoa (AA) is up about 0.25%. DuPont (DD) is down about 0.7%. The Materials Select Sector SPDR (XLB) was trading at $36.33 at 3:30 PM on Wednesday, up 0.19% on the day – up 8.45% year-to-date.

Industrials

Numerous CEOs of major companies are off to Washington for talks with President Obama and / or John Boehner about averting the fiscal cliff. Those meeting Obama include the leaders of Merck (MRK), Coca-Cola (KO) and Caterpillar (CAT) Those meeting Boehner include the CEOs of Honeywell (HON) and Aetna (AET). Company bosses have been urging Washington to reach a deal. Dow components – Boeing Co (BA) is down about 0.8%. Caterpillar (CAT) is about flat. General Electric (GE) is up about 0.6%. 3M Company (MMM) is up about 0.4%. United Technologies (UTX) is up about 0.9. The Industrial Select Sector SPDR (XLI) was trading at $36.94 at 3:30 PM on Wednesday, up 0.68% on the day – up 9.45% year-to-date.

Consumer Discretionary

Green Mountain's (GMCR) reported better than expected quarterly results as FQ4 net profit jumped 22% to $91.9 million, EPS of $0.64 was well above estimates, and revenues climbed 33% to $946.7 million. Sales of single serve packs grew 59% to $2.71 billion and brewer revenue jumped 45%. The firm provided FQ1 guidance that was above consensus and reiterated FY13 sales growth at 15%-20%. American Eagle Outfitters (AEO) beat Q3 EPS estimates by two cents with better than expected revenue. Comparable store sales were up 10% and the retailer raised forward guidance slightly. Ann (ANN) beat Q3 EPS estimates by a penny with better than expected revenue. Ann Taylor and Loft brands both saw positive same store sales growth during the quarter at 4.3% and 6.2% respectively. Movado Group (MOV) beat Q3 EPS estimates by six cents with better than expected revenue. The watch maker saw good response to new assortments of watches introduced late in the quarter setting up for the holiday shopping season. Phillips-Van Heusen (PVH) beat Q3 EPS estimate by four cents with in-line revenue. Net earnings climbed 47% as the apparel maker reported sales gains and improved margins in its Tommy Hilfiger and Calvin Klein brands. The company raised its full-year earnings guidance. Dow Components – Disney (DIS) is about flat. Home Depot (HD) is down about 0.1%. McDonalds (MCD) is up about 0.4%. The Consumer Discretionary Select Sector SPDR (XLY) was trading at $47.26 at 3:30 PM on Wednesday, up 1.09% on the day – up 21.12% year-to-date.

Consumer Staples

Several Groupon (GRPN) directors have been considering replacing CEO Andrew Mason with a more experienced CEO. Directors are expected to discuss management issues at a meeting tomorrow. Numerous CEOs of major companies are off to Washington for talks with President Obama and / or John Boehner about averting the fiscal cliff. Those meeting Obama include the leaders of Merck (MRK), Coca-Cola (KO) and Caterpillar (CAT) Those meeting Boehner include the CEOs of Honeywell (HON) and Aetna (AET). Company bosses have been urging Washington to reach a deal. The Fresh Market (TFM) missed Q3 EPS estimates by three cents with better than expected revenue. Comparable store sales rose 5.6% Y/Y on strong transaction growth. The Fresh Market (TFM) has been downgraded to Hold from Buy at Deutsche Bank, which cites the surprise resignation of CFO Lisa Klinger. Its new price target is $54, down from $64. Sherwin-Williams (SHW) - The painting and coating company has been downgraded to Neutral from Buy at Nomura. Dow components – Coca Cola (KO) is down about 0.25%. Procter & Gamble (PG) is up about 0.6%. Wal-Mart (WMT) is up about 1.0%. The Consumer Staples Select Sector SPDR (XLP) was trading at $35.64 at 3:30 PM on Wednesday, up 0.73% on the day – up 9.70% year-to-date.

Health Care

Numerous CEOs of major companies are off to Washington for talks with President Obama and / or John Boehner about averting the fiscal cliff. Those meeting Obama include the leaders of Merck (MRK), Coca-Cola (KO) and Caterpillar (CAT) Those meeting Boehner include the CEOs of Honeywell (HON) and Aetna (AET). Company bosses have been urging Washington to reach a deal. Galena Biopharma (GALE) has been initiated with a Buy rating at Aegis. Idenix Pharmaceuticals (IDIX) has been initiated with a Buy rating at Deutsche. Meridian Bioscience (VIVO) has been downgraded to Underperform from Perform with Wedbush. Dow Components – Johnson & Johnson (JNJ) is up about 0.35%. Merck (MRK) is up about 0.5%. Pfizer (PFE) is up about 0.9%. United Health Group (UNH) is up above 0.85%. The Health Care Select Sector SPDR (XLV) was trading at $39.86 at 3:30 PM on Wednesday, up 0.50% on the day – up 14.90% year-to-date.

Financials

The Fed is considering forcing foreign banks to combine their US operations into American holding companies requiring them to meet minimum capital standards regardless of the resources of the parent firms. The move could increase costs, force foreign banks to inject billions into their US operations, which could limit the flow of capital and even hurt lending. Numerous CEOs of major companies are off to Washington for talks with President Obama and / or John Boehner about averting the fiscal cliff. Those meeting Obama include the leaders of Merck (MRK), Coca-Cola (KO) and Caterpillar (CAT) Those meeting Boehner include the CEOs of Honeywell (HON) and Aetna (AET). Company bosses have been urging Washington to reach a deal. Hartford Financial (HIH) has been initiated with a Buy rating at brokerage boutique Drexel Hamilton. Dow Components – American Express (AXP) is up about 0.95%. Bank of America (BAC) is down about 0.7%. JP Morgan Chase (JPM) is down about 1.1%. The Travelers Companies (TRV) is down about 0.7%. The Financial Select Sector SPDR (XLF) was trading at $15.69 at 3:30 PM on Wednesday, up 0.32% on the day – up 20.69% year-to-date.

Information Technology

American Superconductor (AMSC) announced that it will miss FQ3 earnings expectations, blaming financing and cash flow constraints among wind farm builders and turbine manufacturers. The company announced that it has cut its workforce by 25%. Analog Devices (ADI) beat FQ4 EPS estimates by a penny but missed on the revenue line. Orders fell during FQ4 due to inventory adjustments and thus the chipmaker slashed production. Check Point Software (CHKP) has been initiated with a Market Perform at BMO Capital with a $48 price target. Cowen initiated Outperform ratings on Amazon (AMZN) and Google (GOOG), and new Neutral ratings on eBay Inc. (EBAY), LinkedIn (LNKD), Netflix (NFLX), Pandora (P) IAC/InterActive (IACI), and Yahoo (YHOO). Akamai Technologies (AKAM) has been upgraded to Overweight from Equal Weight at Piper Jaffray. Dow Components – Cisco Systems (CSCO) is down about 1.0%. Hewlett-Packard (HPQ) is up about 1.75%. IBM (IBM) is down about 0.25%. Intel Corp (INTC) is about flat. Microsoft (MSFT) is up about 0.1%. The Technology Select Sector SPDR (XLK) was trading at $28.97 at 3:30 PM on Wednesday, up 0.42% the day – up 13.83% year-to-date.

Telecommunication Services

Nokia (NOK) is seeking to stop the sale of RIM's (RIMM) products in the US, Canada and UK by attempting to enforce the ruling of an arbitrator, which is in favor of the Finnish company in a patent dispute related to its wireless local access network technology. The arbitrator ruled that RIM is "not entitled to manufacture or sell WLAN products without first agreeing royalties with Nokia." Vodafone (VOD) has been initiated with an Outperform rating at Robert W. Baird with a $30 price target saying that the stock is attractively exposed to growing emerging markets and mobile data. Windstream (WIN) has been downgraded to Underweight from Neutral at Piper Jaffray on dividend sustainability. Its price targets was reduced to $6.50 from $8.00. Dow Components – AT&T (T) is down about 0.75%. Verizon (VZ) is about flat. The NASDAQ Telecommunications Index (IXTC) was trading at $192.48 at 3:30 PM on Wednesday, up 0.09% on the day – down 2.26% year-to-date.

Utilities

Veolia Environnement (VE) has been upgraded to Overweight from Neutral at HSBC Securities. The Big Names – Dominion Resources (D) is down about 0.6%. Edison International (EIX) is down about 0.35%. First Energy (FE) is up about 0.25%. PG&E Corp (PCG) is down about 0.45%. Southern Company (SO) is down about 0.25%. The Utilities Select Sector SPDR (XLU) was trading at $34.74 at 3:30 PM on Wednesday, up 0.38% on the day – down 3.45% year-to-date.

STOCKS: CVX, XOM, AA, DD, BA, CAT, GE, MMM, UTX, DIS, HD, MCD, KO, PG, WMT, JNJ, MRK, PFE, UNH, AXP, BAC, JPM, TRV, CSCO, HPQ, IBM, INTC, MSFT, T, VZ, D, EIX, FE, PCG, SO, BP, SPH, YGE, JASO, HERO, PTEN, NBR, ESV, RDC, AKS, IAG, HON, AET, GMCR, AEO, ANN, MOV, PVH, TFM, SHW, GALE, INIX, VIVO, HIH, NOK, RIMM, AMSC, ADI, CHKP, AMZN, GOOG, EBAY, LN, KD, NFLX, P, IACI, YHOO, AKAM, VOD, WIN, VE

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
MMM 3M Company 204.66 -4.95 -2.36 2,716,057 Trade
RDC Rowan Companies plc Class A 11.56 -0.54 -4.46 2,104,882 Trade
UNH UnitedHealth Group Incorporated (DE) 247.09 -4.93 -1.96 3,778,238 Trade
NBR Nabors Industries Ltd. 3.49 -0.21 -5.68 12,485,128 Trade
SHW Sherwin-Williams Company (The) 420.72 -12.91 -2.98 1,071,625 Trade
PG Procter & Gamble Company (The) 101.66 -0.83 -0.81 11,036,296 Trade
GE General Electric Company 9.98 -0.29 -2.82 81,563,530 Trade
CVX Chevron Corporation 123.09 -2.77 -2.20 5,786,776 Trade
SO Southern Company (The) 51.88 0.31 0.60 6,068,084 Trade
PCG Pacific Gas & Electric Co. 19.42 0.37 1.94 9,601,653 Trade
AKS AK Steel Holding Corporation 2.65 -0.17 -6.03 9,623,705 Trade
MOV Movado Group Inc. 31.66 -1.26 -3.83 380,155 Trade
AMSC American Superconductor Corporation 12.14 -0.74 -5.75 548,473 Trade
JNJ Johnson & Johnson 136.91 -1.19 -0.86 6,528,782 Trade
AA Alcoa Corporation 28.12 -1.29 -4.39 3,356,052 Trade
INTC Intel Corporation 53.26 -1.38 -2.53 21,438,435 Trade
D Dominion Energy Inc. 75.52 0.41 0.55 5,324,247 Trade
TRV The Travelers Companies Inc. 134.90 0.53 0.39 2,352,795 Trade
IAG Iamgold Corporation 3.57 0.03 0.85 4,921,991 Trade
EBAY eBay Inc. 36.65 -0.55 -1.48 8,449,254 Trade
ADI Analog Devices Inc. 107.40 -2.78 -2.52 2,300,198 Trade
AKAM Akamai Technologies Inc. 71.23 -2.21 -3.01 1,025,945 Trade
EIX Edison International 64.69 -0.29 -0.45 3,340,005 Trade
RCI Rogers Communication Inc. 54.14 0.12 0.22 226,830 Trade
PVH PVH Corp. 107.21 -1.48 -1.36 1,444,933 Trade
AXP American Express Company 109.46 -2.36 -2.11 3,737,581 Trade
HON Honeywell International Inc. 155.83 -2.62 -1.65 2,430,974 Trade
UTX United Technologies Corporation 125.15 -1.73 -1.36 3,872,155 Trade
VOD Vodafone Group Plc 18.94 -0.17 -0.89 9,118,803 Trade
GALE SLS Galena Biopharma Inc. n/a n/a n/a n/a
CSCO Cisco Systems Inc. 52.74 -1.20 -2.22 23,938,450 Trade
VZ Verizon Communications Inc. 59.76 1.47 2.52 25,125,385 Trade
GMCR Keurig Green Mountain Inc n/a n/a n/a 0 Trade
BAC Bank of America Corporation 27.01 -1.17 -4.15 118,851,628 Trade
NOK Nokia Corporation Sponsored American Depositary Shares 5.88 -0.38 -6.07 95,614,695 Trade
GOOG Alphabet Inc. 1,205.50 -26.04 -2.11 1,714,247 Trade
MCD McDonald's Corporation 186.81 0.44 0.24 3,319,613 Trade
SPH Suburban Propane Partners L.P. 22.61 -0.09 -0.40 68,277 Trade
YGE Yingli Green Energy Holding Company Limited ADR n/a n/a n/a n/a
WIN WINMQ Windstream Holdings n/a n/a n/a 0
ESV Ensco plc Class A 4.23 -0.19 -4.30 9,669,960 Trade
PFE Pfizer Inc. 41.85 -0.50 -1.18 18,614,890 Trade
TFM Fresh Market Inc (The) n/a n/a n/a 0 Trade
HPQ HP Inc. 19.34 -0.88 -4.35 15,765,553 Trade
NFLX Netflix Inc. 361.01 -16.86 -4.46 8,661,346 Trade
YHOO Yahoo! Inc. n/a n/a n/a 0 Trade
MRK Merck & Company Inc. (new) 82.29 -0.66 -0.80 10,152,269 Trade
BP BP p.l.c. 43.95 -0.58 -1.30 6,333,524 Trade
FE FirstEnergy Corp. 41.77 0.53 1.29 3,805,192 Trade
IACI IAC/InterActiveCorp n/a n/a n/a 0 Trade
CHKP Check Point Software Technologies Ltd. 125.43 -0.73 -0.58 758,487 Trade
KO Coca-Cola Company (The) 45.93 0.42 0.92 19,055,939 Trade
T AT&T Inc. 31.07 0.01 0.03 33,171,404 Trade
CAT Caterpillar Inc. 129.77 -4.29 -3.20 5,745,823 Trade
AEO American Eagle Outfitters Inc. 20.00 -0.33 -1.62 3,417,968 Trade
VIVO Meridian Bioscience Inc. 16.83 -0.29 -1.69 267,605 Trade
MSFT Microsoft Corporation 117.05 -3.17 -2.64 33,624,528 Trade
PTEN Patterson-UTI Energy Inc. 13.84 -0.83 -5.66 3,463,797 Trade
WMT Walmart Inc. 98.28 -0.78 -0.79 6,708,131 Trade
IBM International Business Machines Corporation 139.45 -1.99 -1.41 3,877,616 Trade
JPM JP Morgan Chase & Co. 99.76 -3.11 -3.02 31,115,189 Trade
AMZN Amazon.com Inc. 1,764.77 -54.49 -3.00 6,362,983 Trade
DIS The Walt Disney Company 108.23 -0.43 -0.40 24,133,840 Trade
HD Home Depot Inc. (The) 188.75 -1.22 -0.64 5,173,899 Trade
XOM Exxon Mobil Corporation 80.48 -1.31 -1.60 12,497,707 Trade
BA The Boeing Company 362.17 -10.53 -2.83 10,143,922 Trade

Comments

Watchlist

Symbol Last Price Change % Change
AAPL

     
AMZN

     
HD

     
JPM

     
IBM

     
BA

     
WMT

     
DIS

     
XOM

     

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