Market Monitoring – 02 December 2013

Edited by Vani Rao

Markets continue winning run in the holiday-shortened week

Equity indices closed mostly flat on Friday, 29 November, pulling back from Wednesday’s record levels, but still achieved gains for the week and the month.

The main indexes spent most of the shortened, post-Thanksgiving session in positive territory after upbeat reports on holiday shopping, but erased their intraday gains in the final minutes of trading.

Source: Bloomberg
Source: Bloomberg

The S&P 500 dipped 1.42 points, or 0.08%, to close at 1,805.81, pulling back from its record close on Wednesday. It rose less than 0.06% for the week and 2.80% for the month of November.

The Dow lost 10.92 points, or 0.8%, to finish at 16,086.41, easing from its record closure on Wednesday and snapping a five-session winning streak. The blue-chip index rose 0.13% for the week and 3.48% for November. The S&P and Dow have both advanced for eight straight weeks.

The Nasdaq Composite Index bucked the negative trend and finished ahead of its peers, rising 15.14 points, or 0.37%, to end at 4,059.89.Technology stocks lifted the Index to a 13- year high; the tech-heavy index climbed 1.71% for the week and 3.58% for the month.

The trading session ended at 1 p.m. Eastern time, three hours earlier than normal.

The S&P 500 suffered from late weakness, surrendering its entire gain.Besides Information Technology thatwas in the green (+0.45%),during the final 30 minutes,Financials (-0.40%) and Industrials (-0.39%) tumbled into the red with most other sectors following suit. In addition, Energy (-0.16%), which displayed intraday strength, also gave up its gain during closing time.

Movers & Shakers

mm pic 2Apple (NASDAQ:AAPL) climbed 1.9% amid news that the company secured almost 76% of October smartphone sales from Japan.

Online retailers Amazon.com Inc. (NASDAQ:AMZN) and eBay Inc. (NASDAQ:EBAY) outperformed shares of brick-and-mortar stores like Target (NYSE:TGT) and Wal-Mart (NYSE:WMT) even after the traditional retailers made upbeat comments regarding early Black Friday returns. eBay rose 2.47% and Amazon.com gained 1.79%.

Source: WSA
Source: WSA

A survey by Nielsen Co. showed that 85% of those polled planned to skip retail-store shopping entirely on Black Friday, while 46% plan to shop online on Cyber Monday, up from 30% a year ago.

Wal-Mart edged up 0.10% and Best Buy (NYSE:BBY) gained 2.37%.On the other hand, Macy’s (NYSE:M) fell 0.52% and (NYSE:TGT) slipped 0.75%. In addition, Sears Holdings Corp. (NASDAQ:SHLD) dropped 0.24% while Kohl’s Corp. (NYSE:KSS) shed 1.14%.

On a heartening note, J.C. Penney Co. (NYSE:JCP) rose 1.09% in its last day of trading as an S&P 500 component.

Shares of Archer Daniels Midland Co.(NYSE:ADM) fell 2.99% after Australia blockedits bid to buy grain handler GrainCorp Ltd. on concerns among Australian farmers and conservative politicians that the deal would go against national interest. The lobbyists felt that the takeover would have resulted in foreign companies gaining control overAustralia’s entire export infrastructure.

Boston Properties Inc. (NYSE:BXP) shares fell 2.10% to close to at $99.49. The shares finished below the $100-level for the first time since August. In late October, the real estate investment trust reported third-quarter funds from operations of $1.29 pershare. In addition,itprojected per share fourth-quarter FFO of $1.23 to $1.25, compared with Wall Street’s average forecast of $1.26.

Shares of Renren Inc. (NYSE:RENN) dropped 11.04% after the Chinese socialnetworking company reported a wider-than-expected loss for the third quarter on Wednesday.

Salesforce.com Inc.(NYSE:CRM) shares fell 1.18% after the company awarded Chief Executive Marc Benioff a significant hike and stock options worth almost $29 million in fiscal year 2015.

Commodities


Treasuries dipped slightly in subdued trading, with investors looking ahead to key data next week in the absence of any significant economic releases on the day’s schedule. The 10-year Treasury note slipped 3/32 in price to yield 2.75%. The 30-year bond fell 3/32 in price to yield 3.82%.

The euro traded near a five-year peak against the yen and a one-month high against the dollar after euro zone economic data dented speculation about further monetary easing by the European Central Bank. The euro was little changed at $1.3589. However, the euro gained 0.06% to 139.23 yen;the dollar was last up 0.17% at 102.46 yen.

Oil prices climbed as prolonged unrest in Libya kept supply disruptions in focus. Libya’s oil exports are down to a fraction of its total capacity due to seizures of oilfields and ports by militias, tribesmen, and civil servants who are demanding more political rights or higher pay. U.S. oil rose 0.88% to $93.11 a barrel.

Gold rose as the dollar declined, but was still headed for its biggest monthly drop in five months on signs that a recovery in the US economy could lead to the curbing of easy central bank money. Gold has shed more than 5% in November and has lost around a quarter of its value so far this year, which putsit on track to post its first annual loss in 13 years. Spot gold rose 0.59% to $1,250.91 an ounce. US gold futures rose 1.07% to $1,251.00 an ounce.

Economic Front

US labor market continues improvement

Signals suggested that consumers might be poised to provide a boost to economic growth and corporate profits. US weekly jobless claims surprised many observers by declining by 10,000 to 316,000 on a seasonally adjusted basis. The number of weekly layoffs has declined in six of the last seven weeks.

Good signs from Black Friday are encouraging

Early hints about the holiday shopping season from major retailers indicated that an improvement in the job market might be encouraging consumers to spend. The Wall Street Journalreported that both Wal-Mart and Target reported strong sales both in physical and online stores. Consumer discretionary stocks fared well early in shortened trading on Friday.

Housing expanding, but homeownership lags

Homebuilding stocks rose on Tuesday after investors were encouraged by an increase in housing permits, which reached their best level in over five years. The entire rise was accounted for by the multifamily sector, where renting predominates. This suggests some lasting reluctance to homeownership, which may have been accentuated by the rise in mortgage interest rates this summer.

Top News


Europe receives mixed rating report card

Standard & Poor’s (S&P) cut the Netherlands’ credit rating on Friday, reducing the euro zone club of full triple-A nations to just three.

S&P lowered its ratings on the Netherlands, which is suffering from worsening growth prospects, slumping house prices, and fragile consumer demand, to “AA+” from “AAA”. This left Germany, Luxembourg, and Finland as the only members of the 17-nation euro zone with the top rating from all three leading credit agencies.

Dutch finance Minister Jeroen Dijsselbloem, who heads the Eurogroup, said that he was disappointed by S&P’s decision. However, he told reporters there would be few consequences for the cost of financing the country’s debt as interest rates on Dutch state bonds remain very low.

Yields on the 10-year Dutch government bond were 2.02% after the announcement.

S&P said that the Dutch decision was due to a worsening growth prospects. “The real GDP per capita trend growth rate is persistently lower than that of peers at similarly high levels of economic development,” S&P said in a statement, while affirming the Netherlands’ short-term debt rating at A-1+.

Rival agencies Moody’s and Fitch still rate the Netherlands as triple-A. Dijsselbloem said he was optimistic they would not follow S&P in lowering the Netherlands’ credit rating.

On another note, S&P raised its outlook for Spanish debt to “Stable” from “Negative” and upgraded bailed-out Cyprus, highlighting diverging fortunes within the common currency bloc.

S&P raised the outlook for Spain to “Stable” from “Negative”. Spain’s ratings have plummeted over the last two years as it struggled to rescue banks and cash-strapped regional governments. Spain recently revised upwards its 2014 growth forecast to 0.7% from 0.5%.

Spanish Prime Minister Mariano Rajoy welcomed the improved ratings outlook.

S&P is the second of the three main credit ratings agencies to lift its Spanish outlook in less than a month after Fitch also switched to “Stable” from “Negative” in early November.

S&P raised its rating for Cyprus to B- from CCC+ on Friday, saying immediate risks to the island’s debt repayments appeared to have receded.

This marked the first upgrade for Cyprusin three years. Cyprus was shut out of the international financial markets in 2011 and came to the brink of financial collapse earlier this year.

Meanwhile, Greece’s credit rating was boosted by Moody’s citing that the country’s progress was due tofiscal consolidation and an improving economic outlook.

Holiday shopping up, but Black Friday down: report

Shoppers increased their holiday spending as the 2013 season began, but earlier visits to retail outlets cut into Black Friday numbers, according to ShopperTrak, a company that tracks retail sales, reported on Saturday. Overall, spending on Thanksgiving and Friday increased 2.3% over 2012 to $12.3 billion for those two days. However, Black Friday sales decreased 13.2% compared with 2012, ShopperTrak said.


Releases/Events – Coming Week

It’s Cyber Monday, the busiest day of the year for online shopping.

All eyes will be on November’s employment report to see whether October’s solid job gain was a fluke and for clues on how soonthe Federal Reserve can start scaling back bond purchases. TheUS Department of Labor is expected to report its findings on Friday.

On Wednesday, the Institute for Supply Management’s(ISM) will release its November survey of servicesindustries. Moreover, on Wednesday, markets will get an early read of the labormarket with the release of the ADP National Employment Report for November.

The US Department of Commerce on Wednesday will release the trade report for October. The deficit is expected to have narrowed a bitto $40.1 billion from $41.8 billion in September. The department will also publish new home sales data for September and October.

On Wednesday in Washington, an appellate court hearing will be held fora lawsuit between Oracle (NYSE:ORCL) and Google (NASDAQ:GOOG). The two tech giant is in a dispute whether Oracle can claim copyright protection over Java programming language that Google has incorporated into Android.

On Thursday, the US Department of Commerce will publish revisions to third-quarter GDP numbers. The department will also publish factory orders data for October.

On Thursday, Kroger Co. (NYSE:KRO) will report results for the third quarter of FY2013. Analysts will be watchingthe data to see if the biggest US supermarket operator washit from cuts to the food stamp program during the third quarter.

Federal Reserve Chairman Ben Bernankewill give brief welcomeremarks before the National College Fed Challenge Trialsin Washington and New York Fed Executive Vice President, Markets Group Simon Potter speaks at a Money Marketeers of New York University dinner in New York, N.Y.

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