Market Monitoring – 25 November 2013

Edited by Vani Rao

The Week That Was: Stocks march on!

The stock markets continued their historic run and ended last week on a winning note, with both the Dow Jones Industrial Average and the S&P 500 registering record highs. Additionally, the Dow and the S&P logged their seventh consecutive winning week.

Source: Bloomberg
Source: Bloomberg

The Dow closed at 16,064.77, up 0.65%; and the S&P finished the week at 1,804.76, up 0.37%. The Nasdaq Composite closed at 3,991.65, gaining 0.14% during the week, and is less than 10 points away from the 4,000 points milestone not reached since September 2000.

There was a degree of profit-booking early morning after Intel Corp. (NASDAQ:INTC) issued a warning that its revenue is expected to remain flat in FY 2014. However, it did not take long for the broader market to regain its footing.

The surge is in part largely due to the monetary stimulus program administered by the Federal Reserve, which supported the economic recovery with monthly bond purchases.

Investors are waiting for more information from the Federal Reserve about when it may pull back on some of its stimulus measures.

Minutes from the Fed’s October meeting released last week showed that policymakers believe that the scaling back or tapering of its bond-buying program is warranted “in the coming months.” However, it remains unclear when exactly the Fed will make the tapering announcement.

Since January 2013, the Dow has climbed by 22%, the S&P 500 by 26%, and the Nasdaq 31%.

The Healthcare sector soared led by Biogen which climbed 13% on news that its multiple sclerosis drugs cleared a regulatory hurdle in Europe. Buying efforts were more restrained elsewhere as the gains in other sectors ranged from 0.5-0.8%.The laggards today were the Utilities (-0.04%), Telecommunication Services (-0.07%), and Information Technology (-0.18%) sectors. However, their losses were fairly negligible.

Movers & Shakers

mm pic 2Charter Communications (NASDAQ:CHTR) soared 6.06% after reports that it is about to reach an agreement with lenders on financing for a bid to buy Time Warner Cable (NYSE:TWC).

Comcast (NASDAQ:CMSCA) rose 4.36% on the speculations that the company may also bid for Time Warner, a move that can start a slew of mergers in the industry.

Source: WSA
Source: WSA

Shares of Biogen Idec (NASAQ: BIIB) soared 13.2% to close at $285.73, an all-time high on reports the company’s multiple sclerosis drug cleared a regulatory hurdle in Europe.

Shares of movie studio Lion’s Gate Entertainment (NYSE:LGF) were up 3.75% on speculations of a huge box-office opening for its movie “Catching Fire”, the second movie in the “The Hunger Games” franchise.

Foot Locker (NYSE:FL) shares rose 4.11% to an all-time high after the retailer reported better-than-expected quarterly results.

Ross Stores (NASDAQ:ROST) tumbled 5.72% to close at $75.67 after the off-price retailer lowered its fourth-quarter forecast for same-store sales.

Futures

Gold hovered around the unchanged line: December Gold reached a session high of $1,247.20 per ounce but dipped later in the afternoon. The yellow metal eventually settled 60 cents higher at $1,244.30 per ounce, booking a 3.36% loss for the week.

Silver stayed lower: December silver pulled back from its session high of $20.00 per ounce in the early hours. It touched a session low of $19.82 per ounce and settled at $19.86 per ounce, booking a loss of 0.36%. Today’s decline brought losses for the week to 4.15%.

Crude oil traded lower: January crude slipped from its session high of $95.57 per barrel in the early morning, declining to a low of $94.05 per barrel. The energy component inched higher in the afternoon trade and trimmed losses to 0.5% as it settled at $94.83 per barrel. Today’s drop reduced the weekly gain to 0.4%.

The benchmark 10-year note added ten ticks, lowering its yield to 2.75%, while the 30-year bond gained nearly a point and saw its yield decline to 3.84%.

Top News

World powers and Iran open three-decade-old gridlock with caveats

Permanent members of the UN Security Council alongside Germany (P5+1) and Iran have struck a six-month interim agreement on Sunday in which Iran will limit its nuclear program in exchange for an easing of international sanctions that will provide Iran with $6-7 billion of relief on some sectors including precious metals.

However, the key oil, banking, and financial sanctions will remain in place.

Iran will halt uranium enrichment beyond 5%, halt the installation of advanced centrifuges, refrain from commissioning its Arak heavy water reactor from which plutonium can be made, and remove its stockpile of the fissile material.

The P5+1 and Iran have expressed satisfaction with the deal while Israeli ministers were quick to denounce it.

Apple acquires Israel-based 3D sensor company

Apple (NASDAQ:AAPL)acquired Israeli motion sensor tech developer PrimeSense for a reported $360million.PrimeSense’s motion-sensing chips, software, and IP powered the original Xbox Kinect, and could potentially be used in Apple’s living room and mobile hardware in the future. Apple is staying tight-lipped about its specific plans for the start-up’s products.

Over the last two years, Apple has stepped up the pace at which it is buying component vendors. In addition to PrimeSense, Apple has acquired flash controller chip vendor Anobit (for $500 million), fingerprint sensor developer AuthenTec, which was used to develop the iPhone 5S’s fingerprint sensor ($356 million), and low-power Bluetooth chipmaker Passif Semi (undisclosed sum).

J.C. Penney to leave S&P 500 after stock decline

Struggling retail giant J.C. Penny Company (NYSE: JCP) will be replaced by Allegion, a soon-to-be-public spinoff of Ingersoll-Rand (NYSE:IR), after the conclusion of the November 29th trading session in the benchmark S&P 500 index. J.C. Penny’s market value has shrunk by 37% to $2.7 billion this year.

Allegion PLC. (NYSE: ALLE-WI), which manufactures commercial and residential door locks, has a current market capitalization of $4.2 billion. J.C. Penny’s stock has plummeted 55% this year, making it a more suitable representative of the mid-cap segment, S&P said in a statement. J.C. Penney will replace Aéropostale Inc.(NYSE:ARO) in the S&P Mid Cap 400, which in turn will replace Corinthian Colleges(NASDAQ:COCO) in the S&P SmallCap 600.

Console battle heats up after Microsoft matches Sony numbers

Microsoft Corp. (NASDAQ:MSFT) said it has sold more than one million Xbox One video-game consoles in less than a day after its launch.

The Xbox One is priced at $499 and surpassed first-day sales of its predecessor, the Xbox 360, and set a record for Microsoft. The Xbox One went on sale in Australia, Austria, Brazil, Canada, France, Germany, Ireland, Italy, Mexico, New Zealand, Spain, the UK, and the U.S.

Sony Corp. (ADR) (NYSE:SNE) announced on November 17 that it sold more than one million PlayStation 4 consoles priced at $399 in North America in the first day of launch, topping initial sales of its predecessor, the PlayStation 3, in 2006. The PS4 goes on sale on November 29 in 30 countries in Europe and Latin America, followed by Japan on February 22, 2014.

The two companies are major rivals in the console market – pegged at around $27 billion –, and are offering gaming consoles with upgraded graphics and more entertainment tie-ins.

Releases/ Events – Next Week

In the U.S., traders will see the release of some key economic data covering housing starts and prices, a major regional manufacturing survey from the Midwest and the latest consumer sentiment indicators.

While those reports are important in determining when the Fed might start to taper asset purchases, traders will be especially anxious for details on how the holiday shopping season pans out.

Corporate Releases:

  • Tiffany’s (NYSE:TIF) and Barnes & Noble (NYSE:BKS) would be reporting their latest quarterly results on Tuesday, November 26, 2013.
  • Hewlett-Packard (NYSE:HPQ) will be in focus as investors look for an update on Meg Whitman’s turnaround plan for the PC and printer maker on it earnings release on Tuesday, November 26, 2013. Investors have been pleased with Whitman so far, and HP has been beating low expectations. Shares of HP are up almost 80% this year so far.

Economic Releases:

  • Monday, November 25, 2013
    • Pending Home Sales
    • Dallas Fed Manufacturing Activity
  • Tuesday, November 26, 2013
    • Housing Starts: The census will publish both September and October numbers due to government shutdown-related disruptions
    • S&P/Case-Shiller Home Price Index
    • Consumer Confidence
    • Richmond Fed Manufacturing Index
  • Wednesday, November 27, 2013
    • Initial Unemployment Claims
    • Durable Goods Orders
    • Chicago PMI
    • University of Michigan Consumer Confidence

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