3 Dec 2012 BMO
Market Summary
Ended last Friday with a very mixed results. The NASDAQ ended down while the DOW and SPX ended slightly up a little. However, we do see some notable increase in options activities in the VIX. It has been a traditional bullish day for the SPX as it was up 5 out of 6 years back... and the tradition did hold.
Updates on Fiscal Cliff
Little progress has been made by the Congress to pass the bill whether to extend the tax cuts or not. Right now the GOP is looking to play some political game with the Democrats by not approving what the Democrats wants. This political standoff shows the vulnerability of a bipartisan system. The stock market is currently being held hostage by the Congress and we will be likely to expect some flat week.
Updates on Black Friday and Cyber Monday Sales
Black Friday sales were up an impressive 6.6% from 2011 figures while the foot traffic was up 5.1%.
The biggest retail sector is cars and car parts, which account for about 18 percent of the total; they're up 10.1 percent so far this year. Food and beverage stores — i.e. groceries—constitute about 13.2 percent of sales, and they're up 5.6 percent through the first ten months. Gasoline stations alone account for 11.7 percent of total sales, and their sales are up 19 percent so far in 2011, thanks to higher gas prices. Food service and drinking places account for 10.7 percent of total sales.
This is good news to hear during such a volatile period.
Hurricane Sandy did it's damage earlier in Nov, and causing major damages to many vehicles hence we saw a very significant increase in the auto part sales. Also, groceries were up 13.2% and which is likely to be families stocking up for the Xmas period.
Defense Contracts
The Boeing Co., St. Louis, Mo., is being awarded a $687,611,825 ceiling-priced modification to a previously awarded fixed-price-incentive-fee contract (N00019-09-C-0019) for the production and delivery of 15 fiscal 2013 (LOT 37) F/A-18E aircraft in accordance with the aircraft variation in quantity clause. Work will be performed in St. Louis, Mo.(45.2 percent); El Segundo, Calif.(44.6 percent); Hazelwood, Mo.(3.4 percent); Cleveland, Ohio (1.7 percent); Torrance, Calif. (1.4 percent); Vandalia, Ohio (1.0 percent); Ajax, Canada (1.0 percent), and various other sites within the continental U. S. (1.7 percent), and is expected to be completed in July 2015. Contract funds in the amount of $645,495,600 are being obligated on this award, none of which will expire at the end of the current fiscal year. The Naval Air Systems Command, Patuxent River, Md., is the contracting activity.
General Electric Co., Lynn, Mass., is being awarded a $197,495,928 modification to a previously awarded firm-fixed-price contract (N00019-11-C-0045) to exercise an option for the procurement of 52 Lot 17 F414-GE-400 install engines and devices for the F/A-18E/F aircraft. Work will be performed in Lynn, Mass. (59 percent); Hooksett, N.H. (18 percent); Rutland, Vt. (12 percent); and Madisonville, Ky. (11 percent), and is expected to be completed in March 2015. Contract funds in the amount of $197,495,928 will be obligated on this award, none of which will expire at the end of the current fiscal year. The Naval Air Systems Command, Patuxent River, Md., is the contracting activity.
Raytheon Missile Systems, Tucson, Ariz., is being awarded a $108,784,917 modification to previously awarded contract (N00024-11-C-5300) for fiscal 2011 Standard Missile-2 (SM-2) production, section level components and spares, shipping containers and associated data. Work will be performed in Tucson, Ariz. (43.5 percent); Camden, Ark. (22 percent); Andover, Mass. (16.7 percent); Netherlands (5.3 percent); Anniston, Ala. (2.6 percent); San Diego, Calif. (2.4 percent); Lebanon, N.H. (2.1 percent); San Jose, Calif. (1.9 percent); Joplin, Mo. (1.8 percent); El Segundo, Calif. (1.6 percent); and is expected to be completed by March 2014. This contract will support foreign military sales to Australia (39.8 percent), Korea (19.8 percent), Japan (17.5 percent), Canada (3.2 percent), Germany (0.4 percent), Taiwan (0.2 percent) and the Netherlands (0.1 percent). Contract funds in the amount of $8,525,429 will expire at the end of the current fiscal year. The Naval Sea Systems Command, Washington, D.C., is the contracting activity.
Northrop Grumman Systems Corp., Redondo Beach, Calif., (FA8808-13-C-0001) is being awarded a $148,313,460.00 contract for the Enhanced Polar System Control and planning segment, which will provide extremely high frequency protected satellite communications capability to forces operating in the North Polar Region. The location of the performance is Redondo Beach, Calif. Work is expected to be completed by June 2018. The contracting activity is SMC/PKJ, Los Angeles Air Force Base, Calif
Market Internals
The volumes on NYSE were amazing... that was way above the average volume seen on the NYSE for a long time... and guess what... the bulls outpaced the bears by just a little. I reckon that must have due to many players closing out their positions and prepared to go for a good holiday. Especially during this volatile period where the Congress might just screw everyone up..
The VIX were up more than 5% on Friday while the internals are showing mixed results. Truly a FLAT day..
Leaders and Laggards
Looking at the sector ETFs. The sector that has been leading the market is actually the Consumer Staples followed by Healthcare, then the Industrials. This is not a very good sign when you see the Financials being constipated and the Tech going down like crazy thanks to IBM and AAPL.
Technical Updates
On the technical note, all 3 indicies are at the resistance level while SPX and NASDAQ now face some resistance at Moving Averages. We're might be looking at some down day on Monday.
Commentaries
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Commodities
Treasuries
Weekly Analysis
Week 48
I'm totally right about this week... Right after Thanksgiving and the speculation on the Sales results..
This week marks the start of the December. Dec is a very good month for the bulls while it's up 44 times out of a 62 year period. The first trading day of Dec is usually bullish.
However this week will be a very volatile week as many economic reports will be coming out during this week like the NFP, the ISM report, and many stuff coming out from the ECB.
Technical Updates
On the technical note, it's time for the 3rd candle reversal!!! we might see a flat and volatile week while continuing going up for the Santa Claus period.
Commentaries
Weekly Wrap Dow +3.76 at 13025.58, Nasdaq -1.79 at 3010.24, S&P +0.23 at 1416.18
Equities were on uncertain footing during the first hour of the session. The S&P 500 followed the early indecision by sliding to its lows just above the 1410 level. A familiar theme played out intraday as President Obama and House Speaker Boehner held another round of press conferences. The President reiterated the importance of reaching compromise and expressed hope that enough Republicans can be convinced to break rank and vote in favor of his budget proposal. Meanwhile, House Speaker Boehner maintained his prior stance and said that Republicans are willing to compromise if Democratic lawmakers agree to spending cuts. Until then, the two sides remain at a stalemate. The benchmark average spent the majority of the day in the red, but a buying surge shortly before day's end lifted the index to flat close.
Financials saw relative weakness as the budget debate remains in focus. Citigroup (C 34.57, -0.64) lost 1.8% and was the weakest performer among the majors.
Though U.S. financials underperformed, their European counterparts advanced. Barclays (BCS 15.83, +0.17) and UBS (UBS 15.70, +0.11) added 1.1% and 0.7%, respectively. Earlier, Reuters reported Barclays may cut as many as 3500 investment bank positions and reduce the scope of its Asian operations.
Tech stocks lagged the broader market and large cap names saw weakness. Apple (AAPL 585.28, -4.08), International Business Machines (IBM 190.07, -1.46), and Microsoft (MSFT 26.61, -0.33) all lost between 0.7% and 1.2%.
Elsewhere, VeriSign (VRSN 34.15, -5.19) slid 13.2% after its updated agreement with the Department of Commerce limited the company's ability to increase domain registration prices.
Also of note, Groupon (GRPN 4.14, -0.40) fell 8.8% after company spokesman said Chief Executive Officer Andrew Mason will not be replaced in the near term.
Consumer discretionary stocks saw weakness and carmakers weighed on the sector. Earlier, Ford Motor (F 11.45, -0.08) said it plans to increase its electric car market share to 11.0%, from the current 5.2%. Despite the news, shares of Ford finished lower by 0.7%. Looking at other automakers, Honda Motor (HMC 33.29, -0.30), Toyota Motor (TM 86.08, -0.43), and Thor (THO 37.74, -0.21) all lost between 0.5% and 1.0%.
Restaurant operator Yum! Brands (YUM 67.08, -7.39) also weighed on the discretionary space. The restaurant operator slid 9.9% after issuing full-year 2013 guidance and reaffirming its full-year 2012 earnings growth forecast of at least 13%. The guidance proved to be a point of concern as sales in China are expected to continue tracking lower. Following the update, Raymond James, Susquehanna, and UBS all downgraded the stock.
On the upside, teen retailer Five Below (FIVE 37.15, +5.76) soared 18.4% after beating on earnings and revenue. In addition, the company issued downside fourth quarter earnings guidance while revenue is expected to come in above consensus estimates.
The utilities sector was the top performer and the SPDR Utilities Select Sector ETF (XLU 35.32, +0.37) settled higher by 1.1%. Within the space, electric utilities paced the advance. Duke Energy (DUK 63.82, +1.43) gained 2.3% after reaching settlement with the North Carolina Utilities Commission. The settlement aims to resolve issues following the merger of Duke Energy and Progress Energy. In addition, the company President, Chairman, and Chief Executive Officer Jim Rogers announced his intention to retire by the end of next year. Looking at other utility stocks, Northeast Utilities (NU 38.74, +0.58) and IDACORP (IDA 42.71, +0.47) both advanced near 1.3%.
In economic news, the November Chicago PMI reading of 50.4 surprised to the downside as economists surveyed by Briefing.com had generally expected a reading of 50.7 to follow the prior month's 49.9.
Personal income was unchanged in October, which was below the 0.2% increase expected by the Briefing.com consensus. Personal spending decreased by 0.2%, which was below the expected 0.1% uptick. Core personal consumption expenditures were higher by 0.1%, which fell short of the broadly expected reading of 0.2%.
Monday's economic data will include the November ISM Index as well as October construction spending. The two reports will be released at 10:00 ET. In addition, automakers will report their sales throughout the day.
Week in Review: Equities Eke Out Gains amid Fiscal Cliff Debate
On Monday, equities began the week on a cautious note as uncertainty crept back into the markets. Overseas, the Eurogroup continued to discuss the next tranche of Greek aid. Reports from the talks indicated lawmakers remained split over whether or not haircuts should be applied to the outstanding Greek debt. Additionally, elections in the Spanish region of Catalonia resulted in two-thirds of the vote going to parties which support a referendum on independence. The European news combined with some profit-taking following Friday's rally translated into a downbeat session which saw the S&P 500 slip 0.2%. Retailers succumbed to the broad market pressure, and the SPDR S&P 500 Retail ETF (XRT 63.27, -0.09) slid 1.0%.
Tuesday's session began on a negative note, and the indices finished on their lows. Overnight reports from Europe indicated the International Monetary Fund and the Eurozone finance ministers agreed on the terms of the next installment of Greek aid. As part of the agreement, the country's debt-to-GDP ratio is expected to decline from 190% in 2014 to 124% in 2020. The news did little to inspire investor confidence as the markets doubted the sovereign's ability to reach the lofty goals. Instead, market participants remained focused on Washington where Senator Harry Reid said little progress has been made in budget negotiations. After the Senate majority leader's comments, the S&P 500 fell to session lows from its flat line. The index declined further when a final round of selling pressured it to a loss of 0.5%. Exelon (EXC 30.22, +0.26) gained 0.9% after ISI Group upgraded the stock to ‘buy' from ‘neutral.'
On Wednesday, equities opened lower, but staged a reversal when top lawmakers reiterated their desire to reach a budget agreement. After marking a session low near its 200-day moving average, the S&P 500 reversed 25 handles to session highs. The reversal was aided by comments from House Speaker Boehner who said he is optimistic a deal can be reached in order to avoid going over the fiscal cliff. In addition, the President held a press conference where he reiterated his belief in higher tax rates for top earners. He also stressed that if Congress fails to approve selective tax increases, going over the cliff will result in an across-the-board tax hike. The S&P 500 ended the session with a gain of 0.8%. Green Mountain Coffee Roasters (GMCR 36.67, +0.30) surged 27.3% after reporting strong earnings.
Thursday started on a positive note after Wednesday's comments from House Speaker Boehner were viewed as supportive. However, the Speaker held another press conference on Thursday at which he said no "substantive progress" has been made. The S&P 500 responded to Mr. Boehner's remarks by falling back to its flat line. The weakness did not last long, and the benchmark average was able to regain its losses to close higher by 0.4%. Kohl's (KSS 44.65, -0.37) sank 12.0% after its same store sales declined by 5.6% on expectations of a 2.1% increase.
Next Week In View
Gonna have a wide ride this week... With all these data coming out during this period and with the Congress stuck in a political Grid Lock. The Wall Street is simply held hostage...
Just before market open for 3 Dec, Hang Seng was down 1.19% while Nikkei went flat for Monday. The Eurpoean Market went up slightly, mostly around the region of 0.5%. That could point to a bullish start to 3 Dec
Market Call(3 Dec): UP
Market Call(Weekly): FLAT AND VOLATILE
Just before market open for 3 Dec, Hang Seng was down 1.19% while Nikkei went flat for Monday. The Eurpoean Market went up slightly, mostly around the region of 0.5%. That could point to a bullish start to 3 Dec
Market Call(3 Dec): UP
Market Call(Weekly): FLAT AND VOLATILE
Date: 3 Dec 2012
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