25 Jan 2013 AMC
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Weekly Analysis
Week 38
Technical Updates
Briefing's Commentaries
Weekly Wrap
Dow +70.65 at 13895.98, Nasdaq +19.33 at 3149.71, S&P +8.14 at 1502.96
Stocks began the final session of the week on a strong note as upbeat European trade supported U.S. equity futures. The positive sentiment across the old continent resulted from a strong German Ifo Business Climate Index, which beat expectations on both components—business expectations and the current assessment. Meanwhile, a disappointing preliminary GDP report out of the United Kingdom did little to cool investor optimism. The key averages climbed throughout the session and ended near their respective highs. The S&P 500 added 0.5%, and settled above the 1500 level for the first time since December 10, 2007.
The Nasdaq was the top performing index despite the relative weakness in the shares of Apple (AAPL 439.88, -10.62). The largest tech stock slipped 2.4% to extend yesterday's 12.4% decline, which followed a disappointing earnings report. Note that today's slide caused Apple to slip below Exxon Mobil's (XOM 91.73, +0.38) market cap. This occurred exactly one year after Apple surpassed Exxon Mobil to claim the title of most valuable company.
Sans Apple, the tech sector fared well thanks in part to strength among microprocessor manufacturers. KLA-Tencor (KLAC 56.34, +4.37) surged 8.4% after the company beat on earnings and revenue. Elsewhere, Cirrus Logic (CRUS 29.42, +2.71) soared 10.2% after investors welcomed its quarterly report. The two names contributed to the gains registered by the PHLX Semiconductor Index, which settled higher by 1.3%.
Several large cap technology stocks garnered interest as the recent slide in the shares of Apple caused some investors to look elsewhere. Amazon.com (AMZN 283.99, +10.37),eBay (EBAY 56.53, +1.34), and Priceline.com (PCLN 718.82, +39.27) all gained between 2.4% and 5.8%.
While Amazon.com and Priceline.com are both part of the Nasdaq, the two stocks are also a component of the S&P 500 consumer discretionary space. The sector was the day's top performer after gaining 1.0%.
Discretionary stocks saw general strength, and Starbucks (SBUX 56.81, +2.24) jumped 4.1% after its quarterly earnings indicated same store sales remain healthy. Elsewhere,Netflix (NFLX 169.56, +22.70) spiked 15.5% to follow yesterday's earnings-driven 42.2% jump. Since Tuesday, shares of Netflix have been on fire, gaining nearly 70%.
However, there was a pocket of weakness within the discretionary sector. Hasbro (HAS 37.31, -1.14) slipped 3.0% after warning that its fourth quarter revenue will come in below the Capital IQ consensus estimate. Peer Mattel (MAT 37.15, -0.89) lost 2.3% in sympathy.
The discretionary sector was closely followed by energy stocks, which climbed higher despite little change in crude oil. Halliburton (HAL 39.72, +1.91) was a notable gainer after the stock advanced 5.1% on the back of a strong quarterly report.
Looking at the relative performance of S&P 500 sectors, discretionary (+1.0%) stocks led while energy (+0.9%), and health care (+0.8%) followed closely. On the downside, technology (+0.1%), telecoms (+0.4%), and materials (+0.4%) lagged.
It should be noted that while the key indices ended near their highs, the CBOE Volatility Index (VIX 12.89, +0.20) settled in positive territory as well. The move indicates that despite today's advance, near-term downside protection received notable interest during the session.
Volume was slightly above its 20-day average with just under 700 million shares changing hands on the floor of the New York Stock Exchange.
Looking at today's economic data, the headline number for the December new home sales report was a disappointment. The Department of Housing and Urban Development indicated sales were at a seasonally adjusted annual rate of 369,000 units, while the Briefing.com consensus estimate was pegged at 385,000. In actuality, though, the report was better than expected when taking into account the upward revision to November.
Specifically, sales in November were revised up to 398,000 from 377,000. Combined with the sales in December, the average for the two-month period was 384,000 versus an average of 381,000 that was expected prior to the revision.
Three out of four regions saw new home sales slip in December. The Northeast led the decline with a 29.4% drop. The Midwest was the standout, enjoying a 21.3% jump in new home sales.
Median prices edged up 1.3% to $248,900. For 2012, the median sales price of a new home increased 7.2% from 2011 to $243,600.
At the current pace of sales, there is a 4.9 month supply of inventory, which is up from 4.5 months in November and the highest level since April 2012.
On Monday, December durable goods and durable goods ex-transportation will be reported at 8:30 ET. In addition, December pending home sales will be announced at 10:00 ET. Among notable earnings, Caterpillar (CAT 95.58, -1.02) is scheduled to announce its quarterly results ahead of the opening bell.
The U.S. Treasury will auction off $35 billion in 2-yr notes.
Week in Review: Stocks Climb Despite Mixed Earnings Picture
On Monday, equity and bond markets were closed in observance of Martin Luther King Day.
Tuesday's session ended with slim gains despite a mid-morning stumble. The S&P 500 and Dow were able to overcome the early weakness thanks in part to upbeat earnings from major sector components. The 30-stock Dow Jones led the way as earnings fromDuPont (DD 48.33, +0.26), Travelers (TRV 78.35, +0.26), and Verizon Communications (VZ 42.67, +0.08) contributed to the outperformance. Though Verizon missed on the bottom line, its stock added 0.9%. Elsewhere, Caterpillar saw little change following the discovery of accounting misconduct at its Chinese subsidiary. As a result of the discovery, Caterpillar will take a fourth quarter non-cash charge of approximately $580 million.
Wednesday saw the major averages finish on a positive note despite early weakness in the S&P 500. The day's sentiment was driven by earnings as technology heavyweightsGoogle (GOOG 753.67, -0.16) and International Business Machines (IBM 204.97, +0.55) reported bottom line beats. Revenues were mixed as Google's top line grew 50% year-over-year, but the reported $12.16 billion fell short of analyst expectations. Meanwhile, IBM's revenue slipped 0.6% to $29.30 billion, in-line with expectations. Google and IBM saw respective gains of 5.5% and 4.4%.
On Thursday, the major averages ended the session near their opening levels. The Dow was an exception as the blue chip index finished higher by 0.3%. The Nasdaq slid 0.7% as Apple's 12.4% fall weighed on the tech-heavy index. Shares of Apple plunged after the company fell short of revenue expectations, and issued downside second quarter gross margin and revenue guidance. On the flip side, Netflix was a notable standout as the stock soared 42.2% after its fourth quarter results handily beat the Capital IQ earnings and revenue estimate. In addition, the video streaming service guided first quarter top and bottom line above consensus.
Next Week In View
Jason's Commentaries
What a bullish week... market closed higher 6 days straight. Not to mention before it began its 6 day streak, the previous day lost only a mere 23 points. And before that day, there was another 5 days of bull day. 3 more days to end the month and it's very likely to have a bullish January and the investors will definitely look to have a bullish 2013 based on the January Barometer which has a 75.8% accuracy. During this earning seasons, we have many notable names missing their dear earnings... but somehow... we're still up. Currently, we have 163 companies of the 500 S&P 500 companies that announced their earnings. Of that 163 companies, 59.5% beat their estimates, 15.3% met their estimates while 25.5% missed their earnings.
Of those who missed their earnings are... Citi, General Dynamics, Verizon, AT&T, Lockheed Martin, Amgen, Coach, Capital Financial.
It seems that 2 of the major defense giants missed their estimates, while our dear Boeing is battling its symbol dreamliner's defect right now. It doesn't look good on the defense industry right now. On top of that, we have Apple dragging down the Tech sector. Though we have some bad industries right now, we have the Agriculture industry and homebuilders looking really good. Both Monsanto and Agrium reported very good earnings and it seems that the Agriculture industry is continuing their tradition season bull run.
Currently, we have the financials, Energy, Consumer Discretionary, Consumer Staples, Healthcare and Industrials leading this run. The only few laggards are the Utilities and Tech. This is definitely bullish in the near term and i'm expecting this bullishness to last till April assuming if there's no major event happening within this period.
While on Friday's close, after a disappointing GDP report from the United Kingdom, the market managed to shrug off the loss and continued it's bullrun. It's also the day where Apple surrendered its biggest market capitalization title to Exxon Mobil. Looking at the internals, we have the UVOL outpacing the DVOL at a 2:1 ratio, the new highs made were much higher than the new lows. Except the ADVN did not outpace the DECN as much. The VIX gained slightly at a 1.58% on Friday, finding a support at 12.50. While the Treasuries sold off again on Friday, with the 10 Year Treasuries suffering the heaviest damage. Volumes has quite consistently averaging at 700mil shares traded on the NYSE. Seems that the some volumes are coming back into the market already.
Looking at the technicals, we're likely to continue the bull run and probably face a resistance at 14,000 which is very very near the pre-subprime level. Traditionally, when the market crashes, it tend to break higher highs. I believe 14000 level will not be able to hold for long. However the 14000 mark will definitely cause a very significant gyration in the market and will likely cause a retracement before breaking higher highs.
On the coming week, we have the Durable goods order on Monday, Consumer Confidence on Tuesday etc.. The most important to watch out for will be the Fed Statement happening on Wednesday, Following by the Non-farm payrolls on Friday which will very likely gyrate the market like mad. Perhaps the market will complete it's 8th candle reversal on Wednesday in anticipation of the FOMC statement.
Market Call:FLAT to upside
Market Call(weekly):FLAT to downside
Market Call(weekly):FLAT to downside
Date: 28 Jan 2013
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