Market Monitoring – 20 November 2013

Edited by Vani Rao

Markets subdued: economic data, Best Buy drag stock slower

Stock markets closed modestly lower amid concerns over disappointing forecasts by Best Buy and Campbell Soup as well as anxiety ahead of key economic data releases.

Source: Bloomberg
Source: Bloomberg

In the morning session, major indexes stepped moderately higher on comments from the European Central Bank stoking the possibility of quantitative easing. Reflecting the positive trend, the Dow crossed the 16,000 mark for a second consecutive day, but fell after disappointing forecasts from Best Buy Co. and Campbell Soup Co.

The Dow Jones Industrial Average edged down 8.99 points, or 0.1%, to close at 15,967.03, snapping a four-day winning streak. Echoing the decline, the S&P 500slipped 3.66 points, or 0.2%, to 1,787.87, and the Nasdaq Composite shed 17.51 points, or 0.4%, ending at 3,931.55.

The weakness seen on Wall Street was partly due to anxiety ahead of the release of some key economic data on Wednesday November 20, 2013. These economic data could have a significant impact on expectations regarding when the Federal Reserve will start scaling back the monetary stimulus program.

Movers & Shakers

mm pic 2Six out of the 10 main S&P 500 industries declined as industrial and utility shares fell more than 0.6% for the worst performance

Home Depot Inc. (NYSE:HD) rose 0.9% to $80.38 after the No 1 U.S home retailer posted a 43% surge in quarterly profit. The rising home prices are driving consumers to splurge on renovations. The number of transactions increased by 4% and climbed 3.2% compared to the previous quarter.

Source: WSA
Source: WSA

Best Buy Co. (NYSE:BBY) tumbled 11%, the most since December 2012, after the electronics retailer said that it would match or beat competition at the expense of profitability during the fourth quarter.

Campbell Soup Co. (NYSE:CPB) fell 6.2% to $39.20 after missing earnings estimates this quarter and providing a disappointing guidance for the coming quarter. Inc. (NYSE:CRM), the CRM software specialist, slipped 5% to $52.74 after low forecast for its fourth-quarter earnings.

Tyson Foods (NYSE:TSN) surged 4.6% to $30.78 for a sixth day of gain after the largest US meat processor posted better-than-expected results on Monday.

United Continental Holdings (NYSE:UAL) climbed 3.9% to $37.80 after the world’s biggest airline announced plans to cut costs by $2 million per year.

Tesla Motors Inc. (NYSE:TSN), the electric car maker, stabilized after its recent slide, gaining 3.7%.


Crude oil prices slipped to a session low of $92.43, but climbed up with the December crude oil closing at $93.36 per barrel, translating into a gain of 0.4%

Gold trade was choppy with December contracts dropping to $1,268.00 a troy ounce on Tuesday, the lowest since November 13, closing at $1,273.50, and a gain of 0.09%.

Silver for December delivery inched up 0.1% to close at $20.25 a troy ounce.

Macroeconomic front

  • The Organization for Economic Cooperation and Development (OECD) cut global growth forecasts for 2013 and 2104, as emerging markets economies such as India and Brazil slow down. The OECD cut it forecast for global economy to 2.7% for 2013 and 3.6% for 2014, much lower than its predictions of 3.1% and 4%, respectively, in May 2013.The US economy would expand 1.7% in 2013 and 2.9% in 2014, broadly similar to the earlier forecasts.
  • Federal Reserve Chairman Bernanke stated on 19 November that the employment data of the US economy was “somewhat disappointing”. Bernanke mentioned that the labor market has shown “meaningful improvement” since the start of the central bank’s bond-buying program and that the benchmark interest rate will probably stay low long after the purchases end.
  • Federal Reserve Chairman Bernanke stated on 19 November that the employment data of the US economy was “somewhat disappointing”. Bernanke mentioned that the labor market has shown “meaningful improvement” since the start of the central bank’s bond-buying program and that the benchmark interest rate will probably stay low long after the purchases end.
  • The latest data shows that the US added an average of 200,000 jobs in each of the last three months, marking a sudden improvement in the labor market after months of forlorn reports. Immediately after the October report released, speculation started whether this would be the trigger for the Fed to start winding down the stimulus program.

Top News

US safety regulators to conduct probe on Tesla fire

The US National Highway Traffic Safety Administration (NHTSA) announced that it will conduct a security investigation on Tesla Motors Inc.’s (NASDAQ: TSLA) Model S, following instances of three fires that broke out in five weeks after road mishaps. The NHTSA said it would look into the fire risks from the car’s undercarriage striking objects. The probe involves 13,108 Model S vehicles. Tesla, which prides itself as the safest car manufacturer in America, has 19,000 models of the Sedan S series on the roads, with the price ranging from $70,000 to more than $100,000. Tesla’s CEO Elon Musk announced that the company will update the software suspension to enable greater ground clearance on highways to boost safety. Reacting to news, Tesla’s stock surged 3.7% on the NYSE to close at $126.09, after touching an intra-day high of $129.00 during Tuesday’s trading session.

Yahoo supplements $5 billion to its share buyback program

Yahoo Inc. (NASDAQ:YHOO) has increased its share buyback fund by $5 billion, partly of it by issuing $1 billion convertible notes maturing in 2018. In recent quarters, the company has spent $3.1 billion in its share buyback program, which was totally funded by its stake sale in Chinese e-commerce giant Alibaba Group. Yahoo’s shares have gained nearly 74% so far this year and 1.6% to $35.17 on Tuesday’s after hours trading, despite stagnant revenue growth in earlier quarters.

Johnson & Johnson to settle faulty artificial hips accord for $2.5billion

Johnson &Johnson (NYSE:JNJ) has confirmed a settlement of at least $2.5billion for 8,000 different lawsuits filed across the US by patients who had used artificial hip implants made by its subsidiary, DePuy Orthopedics. The company said that it would pay out $250,000 to each patient participating in the settlement program. Further, it said that the payments would not affect its future earnings outlook as the funds have already been accounted for in the previous quarters. The settlement is another major setback for the company after it was fined a $2.2-billion penalty for over pitching some of its products, including theantipsychotic drug RispedralConsta.

News to look forward to in next 24 hours

Wednesday November 20would be a busy day as a slew of reports would be released.

FOMC Minutes

The Fed would release the minutes of its October policy meeting tomorrow. The document will reveal more details about the decision to continue with the $86-billion monthly asset purchases. The markets would be looking for the below mentioned economic reports, which might enable them to understand how the Fed will proceed with its monetary stimulus program.

  • MBA Mortgage Index
  • Consumer Price Index
  • Retail Sales
  • Existing Home Sales

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