Weekly Recap - Week ending 15-Jun-12
Dow +115.26 at 12767.17, Nasdaq +36.47 at 2872.80, S&P +13.74 at 1342.84
Coming off of its best week of 2012, the S&P 500 tacked on another 1.3% this week. Precarious conditions of Europe remained in focus, but so were economic data, weekend elections in Greece, and an upcoming Fed meeting.
Trade this past week opened in pessimistic fashion as market participants dropped the stock market for a loss of more than 1% upon considering that Spain’s request for $125 billion to shore up its banks might be too little, too late. In fact, Banco Santander had its rating cut by analysts at Fitch, while analysts at Moody’s downgraded Spain’s rating. The yield on the country’s 10-year Note went on to climb to a record high above 7.0% before easing back by the end of the week.
Market participants made note of a bailout request by Cyprus on Tuesday, but were less concerned about the country’s problems than those with larger economies – the Cyprus economy accounts for only 0.2% of eurozone GDP. Buyers eventually made their way back into the fold. Stocks benefited further from a late squeeze that helped the broad market settle at a session high with a gain greater than 1%.
Amid a dearth of corporate announcements Texas Instruments (TXN 27.86, +0.13) attracted positive attention for narrowing its earnings forecast to range from $0.38 to $0.42 per share after it had previously forecasted earnings of $0.36 to $0.44 per share.
In midweek trade stocks rolled over to suffer sizable losses. Financials had offered leadership as JPMorgan Chase (JPM 35.03, +0.38) CEO Jamie Dimon stated in a testimony to the Senate Banking Committee that he expects the bank to be solidly profitable in the current quarter, and that progress has already been made in reducing risk following the firm’s massive trading loss that received so much attention several weeks ago.
Prior to the stock market’s downturn participants had also attempted to shrug off lackluster retail sales, which declined during May by 0.2% when a 0.1% decline had been broadly expected. Excluding autos, retail sales declined by 0.4%, which contrasts with a Briefing.com consensus that called for no change. Prior month numbers were revised downward so that overall retail sales declined by 0.2% and sales less autos declined by 0.3%.
Producer price data for May featured a 1.0% increase in overall producer prices and a 0.2% increase in core producer prices. The Brieifng.com consensus called for a 0.7% decline in overall prices and a 0.2% increase in core producer prices. Consumer price data came the next day. Overall consumer prices declined during May by 0.3%, while core prices increased by 0.2%. Economists polled by Briefing.com had expected, on average, a decline in overall prices of 0.2%, but an increase in core prices of 0.1%.
Also out on Thursday was the latest weekly initial jobless claims count, which increased to 386,000 from 380,000 when a tally of 375,000 initial claims had been expected, on average, among economists polled by Briefing.com.
Despite the generally underwhelming nature of the data, sentiment strengthened as participants regarded it as possible fodder for the Fed to take accommodative action when it meets next week. Stocks were also helped by headlines purporting that central banks will respond with a coordinated effort, if necessary, after political elections are held in Greece this coming weekend. Those themes helped drive the stock market to a gain on the order of 1%.
In the face of broad market strength sharp losses were suffered by Nokia (NOK 2.48, +0.13) and Credit Suisse (CS 18.88, +0.91). Shares of the former plummeted in response to the company’s pessimistic profitability forecast, while the latter was hurt by concerns that the firm will move to raise new capital at the urging of officials.
The idea that disappointing data will help encourage the Fed to enact another round of quantitative easing remained a theme in the final session of the week. Short covering likely helped push the stock market up 1% to a one-month high, while the dollar declined to a three-week low.
The Empire Manufacturing Survey for June fell to 2.3 from 17.1 in the prior month. Many had expected the Survey to ease down to just 13.5. Also in play was the University of Michigan’s preliminary survey of consumer sentiment for June. The Survey fell to 74.1 from the 79.3, though it had been expected to come in closer to 77.0.
For most of the session Tech stocks provided leadership after a lackluster display in the prior session. As a group, Tech stocks scored a 1.4% gain. That was matched by Financials, which had traded with only a middling gain for most of the morning and early afternoon. The biggest bounce was booked by Energy, though; the sector rallied 1.8%.
Telecom stocks were at the opposite end of the spectrum. The defensive-oriented sector settled with a 0.1% gain.
The dollar had actually traded with moderate strength overnight, but ultimately drifted into the red so that by the stock market’s closing bell it was down about 0.6% against a basket of major foreign currencies. For the week the dollar declined more than 1%.The dollar’s decline on Friday was largely due to a stronger yen, such that the dollar-yen exchange rate fell 0.9% to about 78.7. The sterling pound also garnered buying interest; it advanced 1.0% to $1.57. The euro was up solidly overnight, but pulled back so that it was flat for most of Friday. By the closing bell it was up 0.2% to about $1.27.
The expiration of quarterly options drove share volume on the NYSE to far above average daily volume trends for the past several months.
Although participants displayed an increased tolerance for risk, Treasuries still benefited from healthy demand. In turn, the yield on the benchmark 10-year Note moved back below 1.60%.
Gold also gained. The yellow metal pushed up about 0.5% to a little more than $1628 per ounce. For the week it advanced more than 2%.
Crude oil prices oscillated on Friday before they settled with an incremental gain only pennies above $84 per barrel. The energy component's price slipped by only pennies from the prior week. As an aside, OPEC announced earlier this week that it plans to keep daily oil production at 30 million barrels.
Nasdaq 100 +1.2%. ..S&P Midcap 400 +1.0%. ..Russell 2000 +1.2%.
| Index | Started Week | Ended Week | Change | % Change | YTD % | | DJIA | 12554.20 | 12767.17 | 212.97 | 1.7 | 4.5 | | Nasdaq | 2858.42 | 2872.80 | 14.38 | 0.5 | 10.3 | | S&P 500 | 1325.66 | 1342.84 | 17.18 | 1.3 | 6.8 | | Russell 2000 | 769.19 | 771.32 | 2.13 | 0.3 | 4.1 |
9:23AM Motorola Solutions to acquire Psion Plc. for $1.36 per share in cash ( MSI) 47.37 : Co and Psion Plc. announced that they have agreed on the terms of a recommended offer by Motorola Solutions for all Psion shares for 88 pence ($1.36) in cash per Psion share. It is intended that the acquisition will be effected by way of a recommended cash offer. Psion has been a pioneer in ruggedized mobile computing products and their application in industrial segments around the world. Under the terms of the acquisition, Psion shareholders will receive 88 pence ($1.36) in cash for each Psion share through a recommended cash offer, valuing Psion's issued ordinary share capital at ~ GBP129 million ($200 million). The consideration represents a premium of ~ 45% to the closing price of 60.5 pence per Psion share on June 14, 2012, the last trading day prior to this announcement and a premium of ~ 66% to the six-month average price of 52.9 pence per Psion share prior to June 15, 2012. The acquisition is expected to close in the fourth quarter of 2012. Motorola Solutions expects to realize cost and revenue synergies resulting in margin expansion opportunities and expects the transaction to be accretive to earnings per share on a non-U.S. GAAP basis in the first full year following completion and on a U.S. GAAP basis in the second full year following completion.
Oppenheimer upgraded Nokia (NOK $2.41 +0.06) to Perform from Underperform noting as expected, Nokia announced sizable layoffs and lowered its 2Q12 outlook. Firm says the cost cuts buy Nokia more time to turn around its business without bleeding cash in the process. They still have doubts the changes would transform Nokia into a fast-moving differentiated OEM. And with competitive headwinds getting stronger, macro getting weaker, and Nokia's workforce distracted, they still see near-term risk in the shares. However firm says to short here means they have 100% conviction in W8 failure. To go long is to think the opposite. Right now they just don't know.
11:27 am Information Technology trading higher today along with the market
The tech sector is trading higher today, in line with gains in the broader market. Semiconductors are showing relative strength with the Philly Semi Index trading 0.9% higher. WFR (+4.6%) is a notable leader in that chip index. Among other major indices, the SPY, the QQQ, and the NASDAQ are all trading 0.6% higher on the session. Among tech bellwethers, ORCL (+2.2%) is showing notable strength, while QCOM (-1.4%) is under pressure again today. There were no notable names in tech to report earnings last night or this morning. In news, there are reports that DELL (-0.4%) is the 'strategic' $2.15 bln bidder for QSFT (-0.01%). Among rumors, we are hearing renewed takeover chatter on PMCS (+1.3%) and, separately, private equity interest in ASIA (+11.3%).
Among notable analyst upgrades this morning, Oppenheimer and Citigroup upgraded NOK (+4.7%), SAI (+3.2%) was upgraded to Overweight at JP Morgan, SINA (+0.9%) was upgraded to Buy at Credit Agricole, and ORCL (+2.3%) was upgraded to Buy at ThinkEquity While in downgrades, NOK (+4.7%) was downgraded to Neutral at Credit Suisse. |
