From Briefing.com: Weekly Recap - Week ending 24-Sep-10Stocks surged, with the S&P 500 ending the week 2.1% higher at a four month high. The major indices kicked the week off on a high note, and then gave up the gains following three consecutive losses, only to rally more than 2% on Friday. Highlights this week included an FOMC policy announcement, several housing reports and gold hitting a fresh all-time nominal high.
The S&P 500's gain this week was broad-based, with all 10 sectors advancing. Consumer discretionary outperformed, up 2.9%. Financials underperformed on a relative basis with a 0.1% gain. Meanwhile, small cap stocks outperformed, with the Russell 2000 advancing 3.0% on the week.
The FOMC left the fed funds rate unchanged at a range of 0.00% and 0.25%, as expected. Consistent with past statements, the Fed stated that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels for the federal funds rate for an extended period. However, the statement went on to indicate that the Fed is prepared to provide additional accommodation if needed
Economic data were mixed. Weekly initial jobless claims increased to 465,000, which was worse than the Briefing.com consensus estimate of 450,000. The elevated jobless claims numbers indicate that the labor market remains weak.
Housing data were in focus. August existing home sales rose to a seasonally adjusted rate of 4.13 mln, in-line with estimates and up from the record low of 3.84 mln in the previous month. Although the increase is welcomed, sales remain at an anemic rate.
Meanwhile, August new home sales were unchanged from the prior month at 288,000 annualized units, in-line with expectations.
August housing starts climbed 10.5% m/m to an annualized rate of 598,000 (consensus 550,000) and building permits increased 1.8% m/m to an annualized rate of 569,000 (560,000).
Homebuilders received an added boost by some better-than-expected earnings results from KB Home (KBH) and Lennar (LEN).
In other corporate news, Adobe (ADBE) took a beating after the company issued mixed earnings that overshadowed better-than-expected earnings for the latest quarter. Shares plunged 19% on the week.
M&A activity continues to pick up. IBM (IBM) announced that it will purchase Netezza (NZ) for $27 per share, or roughly $1.7 bln. France-based Safran is acquiring L-1 Identity Solutions (ID) for $12 per share, or $1.2 bln. Through September, U.S. companies have been on the buyer end in roughly 5,000 M&As-including 274 publicly traded companies--compared to about 4,100 during the same span in 2009.
Meanwhile, companies are putting cash to use in other ways as well. Microsoft (MSFT) said it is hiking its dividend by 23%.
The dollar index plunged 2.6% for the week, taking a hit following successful debt offerings from Ireland, Greece and Spain. There was some negative news out of Europe, however. Ireland's GDP contracted in the latest quarter and Germany PMI was lower-than-expected.
As the dollar fell, precious metals continued to gain with gold hitting a fresh nominal all-time high of $1299.70 per ounce while silver hit a 30 year high.
Index Started Week Ended Week Change % Change YTD %
DJIA 10607.85 10860.26 252.41 2.4 4.1
Nasdaq 2315.61 2381.22 65.61 2.8 4.9
S&P 500 1125.59 1148.67 23.08 2.1 3.0
Russell 2000 651.44 671.01 19.57 3.0 7.3
8:00AM Motorola announces special meeting of stockholders to approve reverse stock split (MOT) 8.38 : Co announces it will hold a special meeting of stockholders on Nov. 29, 2010, to seek approval for a reverse stock split of co's common stock. The reverse stock split proposal includes a ratio ranging between at least 1-for-every-3 up to 1-for-every-7 shares. The reverse split is expected to be implemented on Motorola Solutions common stock in the 1Q11, immediately following co's previously announced separation into two, independent public companies.
1:13AM PLX Tech to acquire Teranetics (PLXT) 3.73 : Co announces it has signed a definitive merger agreement to acquire all of the outstanding shares of capital stock of Teranetics. Under the terms of the merger agreement, co will acquire Teranetics in exchange for 7.4 mln shares of PLXT valued at ~$27.6 mln based on today's closing price, cash of ~$1.3 mln and two promissory notes aggregating ~$6.9 mln. Co will also assume approximately $18 mln of Teranetics corporate obligations, including indebtedness, transaction expenses incurred by Teranetics and cash bonuses payable to Teranetics employees. The acquisition is anticipated to be completed in early October 2010. Prior to signing the merger agreement, co also made a $1 million bridge loan to Teranetics.
09:43 am AMD Guides Q3 Revs Below Consensus (AMD)
Advanced Micro (AMD 6.80 +0.40) announced that it expects revenue for the quarter ending September 25, 2010 to be in the range of down 1% to 4% quarter-over-quarter versus consensus of 4% growth (third quarter revenue guidance calculates to $1.58 billion to $1.63 billion, below the consensus of $1.72 billion).
The sequential decrease is due to weaker than expected demand, particularly in the consumer notebook market in Western Europe and North America.
09:14 am Durable Orders Growth Minimizes Double-Dip Recession Talk
While the headline durable orders data (-1.3% actual vs. -1.4% Briefing.com consensus) may seem to suggest a weakening in economic activities, the fact is that the August durable orders report struck another blow against the notion that the economy is headed for a double-dip recession.
The entire loss in orders can be attributed to a sharp drop in aircraft orders. In July, aircraft orders increased by almost 70% as Boeing saw significant sales growth. However, those gains were unsustainable and an estimated 90% decline in Boeing orders in August led to a 40.2% reduction in nondefense aircraft orders.
Excluding the transportation sector, every remaining sector showed substantial growth. In total, durable orders excluding transportation were up 2.0% in August and greatly exceeded consensus expectations of 0.6% growth.
As we predicted in our economic data preview, most of the growth outside of the transportation sector occurred in nondefense capital goods excluding aircraft orders. Since October 2009, these orders have followed a pattern where they fall during the first month of the quarter before rebounding during the next two months. So far in every quarter since the trend began, the two months of gains have more than offset the one month of losses.
In July, the first month of the third quarter, orders of business capital goods were revised up but still fell 5.3%. As we stated in our preview, if the rest of the pattern continues through the end of the quarter, then growth of 4% - 5% per month in August and September is realistic. The actual data confirmed this prediction as orders increased 4.1% in August and are poised for another similar gain next month. |
