From Briefing.com: Weekly Recap - Week ending 12-Aug-11
Following a week of extreme volatility, trading calmed down Friday. The U.S. major averages ended the week with two positive sessions, the first back-to-back gains since the recent correction began. That helped minimize the weekly decline following Monday's plunge and Wednesday's extension lower.
The S&P 500 lost 1.7% on the week, with nine of the 10 sectors declining. Financials (-5.0%) saw by far the largest decline after Bank of America (BAC) led U.S. banks lower on worries regarding its Countrywide segment and potential capital issues and European financials sold off aggressively on concerns regarding the banking systems in a number of countries, particularly France. Materials eked out a gain of 0.2%.
The market's focus to begin the week was domestic after Standard & Poor's became the first agency to downgrade the sovereign credit rating of the United States. The downgrade over the weekend from AAA to AA+ on political risks and the country's rising debt burden caused U.S. equity markets to nosedive Monday. The S&P 500 lost 6.7%.
The FOMC responded on Tuesday when it attached a time frame to its federal funds target for the first time, calling for exceptionally low levels at least through mid-2013.
Treasury yields did not spike following the S&P downgrade, and then surged to record lows on Tuesday (10-year 2.03%) after the FOMC made monetary policy more accommodative for a longer-than-expected period.
Treasury auctions were also in focus this week, with mixed results. Following fairly solid support for the 3-year sale on Tuesday, the 10-year auction experienced strong demand on Wednesday, only to have the 30-year sale see exceptionally low demand on Thursday.
Those results did not impact equity trading, though, as the U.S. major averages extended their recent declines Wednesday on the European banking concerns, only to regain that sharp sell-off on Thursday.
The economic calendar was thin this week, but contained some notable results.
Initial jobless claims hung around 400,000 for a third straight week, suggesting nonfarm payrolls could exceed 100,000 again in August, while retail sales was a second positive report for July.
Somewhat offsetting that data was Michigan sentiment. The first economic data point for August plunged to 54.9, the lowest level since April 1980, though it is not surprising when one considers the survey was conducted during the debt ceiling fiasco.
With fears of a slowing U.S. economy rising, next week's economic calendar takes on added importance. It includes housing starts and industrial production on Tuesday, PPI on Wednesday and CPI, jobless claims and existing home sales on Thursday. Developments out of Europe will also be in focus.
Finally, even though second quarter earnings season has drawn to a close, a number of notable retailers report next week, including Lowe's (LOW), Home Depot (HD), Wal-Mart (WMT), Dell (DELL), Target (TGT) and HP (HPQ).
Index Started Week Ended Week Change % Change YTD %
DJIA 11444.61 11269.02 -175.59 -1.5 -2.7
Nasdaq 2532.41 2507.98 -24.43 -1.0 -5.5
S&P 500 1199.38 1178.81 -20.57 -1.7 -6.3
Russell 2000 714.63 697.50 -17.13 -2.4 -11.0
12:15 pm Technology Stocks Trading Higher Today Along With Broader Market )HPQ)
The tech sector is trading higher today, just behind the broader market. Semiconductors are showing relative weakness in the tech space with the Philly Semi Index trading only 0.2% higher. Among chips in the index, MKSI (-2.0%) is a notable laggard, while AVGO (+2.2%) is outperforming. Among other major indices, the S&P 500 is trading 1.3% higher, while the NASDAQ is trading 1.1% higher. The QQQ, meanwhile, is trading 1.3% higher. Among tech bellwethers, AAPL (+1.5%) is showing relative strength, while ORCL (-0.4%) is under pressure.
In earnings last night, NVDA (-0.8%) reported roughly inline Q2 results and guided Q3 higher. In news, TIVO (+6.7%%) authorized a stock repurchase plan of up to $100 mln.
Among notable analyst upgrades this morning, HPQ (+3.8%) was upgraded to Buy at Jefferies, FFIV (+8.0%) was upgraded to Outperform at William Blair, Stifel Nicolaus upgraded CHKP (+2.3%) to Buy, ORCL (-0.5%) and VRSN (+2.5%) were upgraded at Credit Agricole, and FXCM (+17.6%) was added to Focus List at JP Morgan.
In downgrades this morning, LLNW (+3.6%) and AKAM (+0.9%) were downgraded at Raymond James, STM (+1.9%), ARMH (+2.0%), SANM (-2.7%), PLXS (+0.4%), and FLEX (+2.7%), and RBC Capital Mkts downgraded ADBE (+0.8%), CNQR (+0.4%), and ORCL (-0.5%).
Last night, NVIDIA (NVDA $12.98 -0.43) reported second quarter GAAP earnings of $0.25 per share, in-line with the Capital IQ consensus of GAAP $0.25, while revenues rose 25.3% year/year to $1.02 billion versus the $1 billion consensus. The company issued upside guidance for the third quarter with revenues of +4-6% quarter over quarter which equates to approximately $1.057-$1.077 billion versus the $1.05 billion consensus.
TiVo (TIVO $8.06 +0.40) authorized a stock repurchase plan of up to $100 million. This program shall be effective on August 29, 2011.
Check Point Software (CHKP $54.80 +1.51) was upgraded to Buy from Hold at Stifel Nicolaus with a target price of $65. The firm said the company provides a more attractive risk/reward profile from here as they believe Check Point has a more favorable fundamental outlook while trading at similar valuation levels relative to Websense (WBSN $21.69 +0.39). As such, they are taking advantage of the recent pull back in Check Point to increase their exposure to both network security and quality.
Oracle (ORCL $27.50 -0.20) was downgraded to Sector Perform from Outperform at RBC Capital Markets. The firm also lowered their target to $30 from $36 saying Oracle's acquisition of Sun positioned it to become an integrated systems provider combining both software and hardware into a one-stop customer solution. The firm says the rationalization of Sun and business process improvements have been the main drivers behind the improvement which they believe is likely to peak over the next twelve months or at a minimum be factored into buy-side models.
Adobe Systems (ADBE $24.17 +0.18) was downgraded to Underperform from Sector Perform at RBC Capital Markets. The firm also lowered their target to $22 from $32 saying they believe the transition from a perpetual model to reoccurring revenue based on a 12-month release cycle, while positive for the long-term, will likely create near-term volatility compounded by macro issues which could cause the stock to test and even break valuation levels seen in 2008/2009. |
