The Trader's Path: 17 Oct 2012 AMC

17 Oct 2012

Market Summary

As expected, the market went flat to the upside. All eyes are focusing on the market earnings to decide whether to go long or short... the typical type of earnings season that tends to move sideways and volatile for this period...

Prepare for a more volatile ride ahead! =D

Moving the Market

September housing starts: 872,000 actual versus 815,000 Briefing.com consensus, 758,000 prior.

September building permits: 894,000 actual versus 815,000 Briefing.com consensus, 801,000 prior.

Initial Claims (8:30): Briefing 370K, consensus 360K, prior 339K

Continuing Claims (8:30): Briefing 3275K, consensus 3275K, prior 3273K

Philadelphia Fed (10): Briefing 0.0, consensus -0.1, prior -1.9

Leading Indicators (10): Briefing 0.1%, consensus 0.2%, prior -0.1%

Market Internals

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It was more of a bull day than a bear day. The bulls fought back up and managed to close the day with a gain. As you can see from the internals and the candle stick.

Leaders and Laggards

Energy, financials and utilities were the bigger gainers. While IT were dragged down by Intel's earnings.

Technical Updates

On the Dow, it looks like a hanging man in the middle of the trend, finding support on the 20MA. While the other indices have better upside than Dow as it is nearing the 13 600 mark.

Commentaries

Stock Market Update

16:20 ET Dow +5.22 at 13557, Nasdaq +2.95 at 3104.12, S&P +5.99 at 1460.91 :[BRIEFING.COM] Stocks began today's session on a negative note after two technology bellwethers reported disappointing earnings. However, the cautious sentiment was short-circuited when today's housing starts report revealed its highest reading since July 2008. The major averages reacted by staging a steady climb to their respective session highs. A brief afternoon stumble followed, but the move was promptly retraced as the S&P 500 returned to its prior level, and closed higher by 0.4%.

The technology sector was the worst performing group in the S&P 500. Intel (INTC 21.79, -0.56) slipped 2.5% despite beating its earnings and revenue expectations. It should be noted this quarter marked the first time Intel reported a decline in year-to-year revenue since the third quarter of 2009. In addition, Sterne Agee lowered its price target for Intel to $20 from $22.

IBM (IBM 200.63, -10.37) slid 4.9% after reporting a slight earnings beat and a revenue miss. Following the earnings release, the stock was downgraded by Janney Montgomery Scott and Societe Generale. Janney Montgomery Scott lowered IBM's rating to ‘buy' from ‘neutral' while Societe Generale downgraded the company to ‘sell' from ‘hold.'

Networking stocks also saw weakness. Cisco Systems (CSCO 18.70, -0.15), F5 Networks (FFIV 97.33, -3.86), and Juniper Networks (JNPR 17.31, -0.17) all lost between 0.8% and 3.8%. Earlier, Cantor Fitzgerald downgraded Cisco to ‘hold' from ‘buy' with a $19.50 price target.

On the upside, Cree (CREE 28.92, +2.73) settled higher by 10.4% after beating on earnings and reporting in-line revenues. In addition, the company issued in-line earnings and revenue guidance for the second quarter.

In M&A news, ASML Holdings (ASML 50.08, -3.50) will acquire Cymer (CYMI 71.45, +23.62) in a cash-and-stock transaction valued at EUR1.95 billion. The total price reflects a 61.0% premium to Cymer's 30-day volume-weighted average price. Following the report, ASML shed 6.6% while Cymer surged 49.4%.

The financial sector was among the top performers of the day. Bank of America (BAC 9.44, -0.02) shed 0.2% after exceeding its earnings expectations. The financial giant reported breakeven earnings for the third quarter, which was $0.06 better than the Capital IQ consensus. Meanwhile, other major financials moved higher. Citigroup (C 38.43, +1.18), Goldman Sachs (GS 124.92, +1.70), and JPMorgan Chase (JPM 43.32, +0.49) all recorded gains between 1.1% and 3.2%.

European financials outperformed their U.S. peers. Banco Bilbao Vizcaya Argentaria(BBVA 8.67, +0.43) and Banco Santander (SAN 7.97, +0.33) settled higher by 5.2% and 4.3%, respectively.

The Dow Jones Transportation Average outperformed the remaining industrials and added 0.6%. Airlines displayed relative strength within the 20-stock complex. Delta Air Lines (DAL 10.19, +0.20) and United Continental (UAL 20.62, +0.27) saw respective gains of 2.0% and 1.3%.

Railroads stocks were mixed following earnings from CSX (CSX 21.19, -0.44). The rail operator slipped 2.0% after its earnings exceeded Capital IQ estimates by $0.01. Meanwhile, the revenues were reported below Capital IQ consensus. Peer Norfolk Southern (NSC 67.21, -0.50) lost 0.7% while Union Pacific (UNP 123.73, +0.33) added 0.3%.

Meanwhile, Overseas Shipholding Group (OSG 3.40, -0.36) sank 9.6% to extend its recent streak of weakness which stemmed from concerns about the company's cash position.

Homebuilder stocks were broadly higher after this morning's housing starts data was reported at its best level since July 2008. The SPDR S&P Homebuilders ETF (XHB 25.88, +0.49) settled higher by 1.9% in response to the report. Meanwhile, KB Home(KBH 16.76, +1.34), Hovnanian Enterprises (HOV 4.13, +0.35), and PulteGroup (PHM 17.44, +0.88) gained between 5.3% and 9.3%.

In today's economic data, the weekly MBA Mortgage Index showed a 4.2% decrease in new mortgage applications during the past week. This follows last week's 1.2% decline.

Separately, housing starts hit an annualized rate of 872,000 units during September. Economists polled by Briefing.com had expected for housing starts to hit an annual rate closer to 815,000. Prior month figures were revised upward to reflect an annual rate of 758,000 housing starts. As for building permits, they increased from the prior month's rate of 801,000 to 894,000 for September. That is above the pace of 815,000 building permits that had been expected among economists polled by Briefing.com.

Tomorrow, weekly initial and continuing claims will be reported at 8:30 ET. In addition, October Philadelphia Fed Survey and September leading indicators will be released at 10:00 ET. ..NYSE Adv/Dec 2067/915. ..NASDAQ Adv/Dec 1486/946.

After Hours

18:26 ET ETH +6.1%, MLNX -20.9%, ALGN -19.9%, EBAY -0.5% following earnings/guidance :

Stocks began today's session on a negative note after two technology bellwethers reported disappointing earnings. However, the cautious sentiment was short-circuited when today's housing starts report revealed its highest reading since July 2008. The major averages reacted by staging a steady climb to their respective session highs. A brief afternoon stumble followed, but the move was promptly retraced as the S&P 500 returned to its prior level, and closed higher by 0.4%.

Today after the close the following companies are scheduled to report earnings: ALB, AF, AXP, CCK, CLB, CVA, CVBF, CYS, EBAY, EPB, EWBC, GHL, HNI, HOMB, LHO, MLNX, NE, NVEC, PTP, RLI, SCSS, SLM, SYK, UMPQ, WERN, XLNX, ALGN, KMP, UFPI, STLD, ETH, LRCX

Futures are higher after hours: S&P 500 futures are +0.22 from fair value of 1456.08 and Nasdaq100 futures are +2.10 from fair value of 2769.65.

Tomorrow morning before the one economic report is scheduled to be released: 1) Initial Claims (Consensus 360k) and Continuing Claims (Consensus 3273k).

Tomorrow before the open the following companies are scheduled to report earnings: SVU, HLSS, ADS, BAX, BBT, BX, CY, DHR, DO, FCS, FITB, GMT, GPC, HBAN, HUB.B, IIIN, KEY, LH, LTM, LUV, MS, NOK, NTCT, NUE, ORB, POOL, PPG, SASR, SNA, SON, SYNT, TRV, UNP, UTEK, VZ, WCC, PENN, PII, USG, BSX, VAC, BGG