Market Monitoring – 24 Mar 2014

Edited by Vani Rao

US Stock Markets Edge Lower on Ukraine Political Standoff

Tech stocks slip, but Nasdaq ekes out weekly gain

US stocks dipped on Friday, March 21, 2014, as investors booked profits in momentum names heading into the weekend, wiping out early gains that had pushed the S&P 500 to an intraday record high. The markets were also affected after the West slapped fresh sanctions on Russia, brewing fears that a diplomatic solution to the standoff may be farther off on the horizon.

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The S&P 500 ended the day 0.29%, or 5.61 points lower, at 1,866.40. The benchmark index gained 1.4% during the week.

The Dow Jones Industrial Average edged 0.17%, or 28.28 points higher. The blue-chip index gained 1.5% over the past five trading days.

The Nasdaq Composite Index finished the day 0.98%, or 42.50 points lower, at 4,276.79. The tech-heavy index rose 0.7% during the week.

mmm 2The European Union and the US intensified sanctions against Russian President Vladimir Putin and his allies to pressure his government to defuse the global standoff over Ukraine.
Russia followed suit with similar sanctions that were viewed by markets as a tit-for-tat measure. However, stock prices fell on concerns that diplomatic efforts to diffuse the crisis may be unfruitful.

mmm 3Although no other sector posted a loss larger than 0.6%, other top-weighted groups like Technology (-0.45%) and Consumer Discretionary (-0.64%) underperformed, while Financials (+0.01%) finished a bit ahead of the broader market after being up as much as 1.1% at the start of the session.

Losses in the Technology sector were paced by chipmakers such as Intel (NASDAQ:INTC) falling 1.0%.

Movers & Shakers

First Solar Inc. (NASDAQ:FSLR) extended its winning streak to a sixth session on Friday on a more upbeat outlook. The company’s shares rose 4.1%, rallying 36% during the week. The company has been attracting positive attention from Wall Street after it forecast strong sales growth for 2014.

Unwired Planet Inc. (NASDAQ:UPIP), an intellectual property company that focuses on the mobile industry, skyrocketed 49.23% on news that Chinese computer-maker Lenovo was buying 21 of its patent portfolios for $100 million.

Exelon Corp.’s (NYSE:EXC) shares climbed 3.76%. The stock was raised to outperform from neutral and its price target hiked to $35 from $23 by Credit Suisse.

Symantec Corp.’s (NASDAQ:SYMC)  shares tumbled 12.94% after the company unexpectedly sacked its CEO Steve Bennet on Thursday March 20, 2014, replacing him with board member Michael Brown. The news, offered with little explanation, came as the security software developer makes a push to hit its turnaround targets.

Shares of  Nike Inc. (NYSE:NKE) fell 5.12% after the athletic apparel and shoe maker said in an earnings call late Thursday that it expects lower earnings growth due to foreign exchange challenges.

Gilead Sciences Inc.’s (NASDAQ:GILD) shares dropped 4.57%. Idenix Pharmaceuticals Inc. (NASDAQ:IDIX)  last week filed patent infringement lawsuits against Gilead in France, Germany, and the UK related to drugs containing sofosbuvir, used to treat hepatitis C.

Alexion Pharmaceuticals Inc.’s (NASDAQ:ALXN) shares skidded 7.99%. The stock had posted strong gains recently after the company increased its 2014 earnings outlook and is up 23% year to date.

Futures

Currency

The Euro traded higher against the US dollar on Friday, March 21, 2014, as investors factored in the ongoing geo-political tensions between the West and Ukraine. Another major factor for the decline of the US dollar was the possibility of an earlier-than-expected rate hike by the Federal Reserve. For more details, access the full report.

Oil & Gas

On Monday, March 24, 2014, the US crude oil prices improved 56 cents, or 0.57%, to end the week at $99.46 a barrel on the New York Mercantile Exchange (NYMEX). WTI crude gained 0.57%, or 57 cents a barrel, during the week. Weekly gains were cut short on the improving US crude supplies and the strengthening dollar. For more details, access the full report.

Treasuries rose and the gap between short- and long-dated bonds hit its lowest level in eight months as investors continued to evaluate the possibility that the Federal Reserve will increase benchmark rates sooner than expected. The spread between two-year notes and 30-year bond yields narrowed to 317 basis points, the tightest since July. The Treasury will sell $32 billion in two-year notes on Tuesday, March 25, 2014, and $35 billion in five-year notes on Wednesday, March 26, 2014. Moreover, it will also sell $29 billion in seven-year notes on Thursday, March 27, 2014, and $13 billion in reopened two-year floating rate notes on Wednesday. The 30-year bond rose 31/32, yielding 3.61%. The 10-year note was up 9/32 to yield 2.74%.

Gold rose on bargain hunting, although the market posted its biggest weekly drop since November, following the Federal Reserve’s latest indication that an interest rate hike could come in early 2015. Spot gold gained 0.37% to $1,332.74 an ounce. Gold futures for April delivery gained 0.23% to $1,333.60 an ounce.

Top News

Bitcoin lookalikes outnumbering real world currencies; Mt.Gox finds stolen coins

Notwithstanding the growing regulatory unease about the bitcoin and its other digital peers, the world now has a larger number of virtual currencies apart from the 180 recognized currencies present across the globe. A total of 193 virtual currencies are currently being traded across the internet, although none of them carry an official stamp from the government or banking regulator from any of the countries.

While the bitcoin and other digital currencies came into existence about four years ago, a frenzied proliferation in the last two months has more than doubled their count, according to data available with various online marketplaces for such currencies. Apart from bitcoins, ripple, litecoin, auroracoin, peercoin, and dogcoin have seen a steady pickup in volume as well as market value. The latest additions include teacoin, aliencoin, magic internet money, and heisenberg.

Braving regulatory warnings and new risks like rampant hacking attacks on virtual currency exchanges as well as trading platforms, these 193 virtual currencies have been floated by enthusiasts who claim that virtual units offer benefits like low transaction costs and ease of transfer across borders.

Bitcoin, which accounted for over two-thirds of the total virtual currency volume traded in recent times, has fallen an average price of $600 from lofty highs of $1,200 apiece in late 2013 after trading below $100 for the most part of 2013. Bitcoin was trading at $550 on Sunday, March 23, 2014, after falling from $620 last week.

mmm edited with font 6 bitcoin chart

At the end of December 2013, there were a total of 67 virtual currencies in the market, a sharp increase from a few about four years ago as virtual currencies could not strike a chord among users amidst a global financial crisis. The rapid growth of virtual currencies has also thrown light on the illegal acts being committed with such systems. From being used in ponzi schemes, as ransom for holding files hostage in computers, and facilitating criminal transactions, virtual currencies are the medium of choice for anonymous faces looking for a way to transfer monetary values across the world without being detected.

Having filed for bankruptcy, Mt. Gox has admitted to have lost 850,000 bitcoins of its customers and one lakh of its own, which together are estimated to be worth about $0.5 billion. However, in a filing on March 21, 2014, Mt. Gox said that it has found 200,000 lost bitcoins, worth around $116 million, which were stored in an old digital wallet from 2011. This brings down the total number of bitcoins that the exchange lost to 650,000 from the earlier 850,000.

Mt.Gox, formerly the world’s largest bitcoin exchange, filed for bankruptcy in February, after it said it lost thousands of bitcoins to hackers. “Mt.Gox had certain old-format wallets which were used in the past and which, Mt.Gox thought, no longer held any bitcoins,” said Mt. Gox Chief Executive, Mark Karpeles, in the filing.

Mt.Gox recently won brief bankruptcy protection in the US as the firm’s case works its way through Japanese courts.

Candy Crush to be Downloaded on Wall Street

Most of the headlines in the coming week will be made by the expected IPO pricing and market debut of King Digital Entertainment, maker of the smartphone game Candy Crush Saga. King is expected to price its IPO on Tuesday, March 25, 2014, at between $21 and $24 a share, which would give the company a market value of up to $7.6 billion, roughly the same as Hasbro, maker of traditional games like Monopoly and Scrabble.

King’s stock is then expected to start trading on the New York Stock Exchange on Wednesday, March 26, 2014, under the ticker symbol ‘KING’. Investors are looking for a healthy first-day jump in its stock price.

Coming up in the Next Week

Economic Releases

On Wednesday, March 26, 2014, the Fed is expected to go ahead with its second stage of contentious stress tests on the biggest US banks, which could have a big say on the levels of dividends or share buybacks being planned by these banks.

Economic indicators this coming week will include the Conference Board’s Consumer Confidence Index on Tuesday, March 25, 2014, the same time as data on US new home sales for February will be released.
On Wednesday, March 26, 2014, data for US durable goods orders for February would be released.

Following this, on Friday, March 28, 2014, comes the influential University of Michigan US consumer confidence report as well as updates on US personal spending data.

Earnings Releases

Accenture (NYSE:ACN) is expected to announce second-quarter results before the opening bell on Thursday, March 27, 2014. The company’s profit is likely to come in below analysts’ average expectations. Growth in its consulting business, which has been slow in the last few quarters as customers cut down on discretionary spending, is expected to remain stunted in the second quarter. The consulting business accounts for about half of the company’s revenue.

Carnival Corp (NYSE:CCL), the world’s largest cruise operator, is likely to report its latest quarterly results on Tuesday, March 25, 2014, amidst high expectations as smaller rival Royal Caribbean Cruises (NYSE:RCL) has forecast a stronger-than expected profit for 2014. This signals resurgence in demand in an industry plagued by mishaps over the past two years. Investors will want to know about a possible rebound in demand for its European and Caribbean cruises as well as forecasts for bookings for the full year.

Other Major Events

The US Senate Judiciary Committee plans to hold a hearing on Wednesday, March 26, 2014, to examine how the proposed merger of Comcast (NASDAQ:CMCSA) and Time Warner Cable (NYSE:TWC) would affect consumers, the committee’s chairman says. Although US lawmakers have no formal role in reviewing mergers and acquisitions, Sen. Patrick Leahy, a Vermont Democrat, had said in a statement that the deal “touches on important policy questions” about how Americans access pay TV and the internet. “It also presents a critical moment to discuss net neutrality principles that have allowed the internet to remain an open marketplace for ideas,” Leahy said.

Satya Nadella, the long-time Microsoft (NASDAQ:MSFT) executive who took over from Steve Ballmer as CEO last month, makes his public debut as leader of the world’s largest software company on Thursday, March 27, 2014. He is expected to announce the launch of iPad-friendly versions of Office applications such as Word, Excel, and PowerPoint, which would likely boost revenue for its Office unit. However, the launch risks putting a nail in the coffin of its own Surface tablet, which has been witnessing tepid sales. Investors will be listening for other bold moves that might help Microsoft catch up with Apple (NASDAQ:AAPL) and Google (NASDAQ:GOOG) in the post-PC, mobile computing world.

At least five US Federal Reserve officials are slated to speak on the economy and monetary policy in the coming week, giving investors plenty to digest as they seek to fine-tune bets on when interest rates will rise and how quickly. The centrist head of the Atlanta Fed, Dennis Lockhart, will speak on Tuesday, as will his hawkish colleague from Philadelphia, Charles Plosser. St. Louis Fed chief James Bullard speaks on Wednesday and Thursday in Hong Kong. Cleveland Fed’s Pianalto, who will depart the central bank at the end of May, also speaks on Thursday, as does Fed uber dove Charles Evans of Chicago, who will be attending the same Hong Kong conference as Bullard.

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