Stocks Slide as Apple Endures Another Dive
14-Dec-12 16:15 ET
[BRIEFING.COM] Equities spent the day in the red as weakness in shares of Apple (AAPL 509.79, -19.89) weighed on the markets throughout the session. The S&P 500 held near its opening levels until the final hour when selling pressure pushed the benchmark index to a loss of 0.4%.
The technology sector was the biggest laggard due to underperformance from Apple and its suppliers. Earlier, UBS lowered its price target for AAPL to $700 from $780 due to an expected decline in iPhone and iPad shipments. The largest tech company settled lower by 3.8% on the day the iPhone 5 began selling in China.
Looking at notable Apple suppliers, Avago Technologies (AVGO 31.13, -2.56), Cirrus Logic (CRUS 25.58, -1.82), Skyworks Solutions (SWKS 19.80, -1.25), and Jabil Circuit (JBL 17.51, -1.02) all lost between 3.7% and 7.6%.
Elsewhere in technology, Adobe Systems (ADBE 37.56, +2.03) advanced 5.7% after beating on earnings and revenue. During the fourth quarter, the software company earned $0.61, which was $0.05 better than the Capital IQ consensus estimate. Meanwhile, the company's revenue of $1.15 billion also exceeded expectations. The software developer topped off the report with guidance, which was on the lower end of analyst estimates. Following the earnings report, JMP Securities upgraded Adobe to ‘Market Outperform' from ‘Market Underperform' with a $42 price target. On the other hand, Janney Montgomery Scott downgraded ADBE to ‘Neutral' from ‘Buy.'
The materials sector outperformed the broader market, and steel suppliers contributed to the strength. Last night, the Chinese HSBC manufacturing PMI survey revealed the second expansionary reading in a row. The data signals a possible rebound in Chinese growth, which would be beneficial to steelmakers. Among the major producers, Cliffs Natural Resources (CLF 33.96, +1.67), Nucor (NUE 42.28, +1.09), and Reliance Steel (RS 59.25, +1.31) all gained between 2.2% and 5.2%.
Energy stocks slipped 0.5% despite crude oil adding over 1.0%. Schlumberger Limited (SLB 68.91, -3.65) slid 5.0% following this morning's profit warning. The company said that it is experiencing continued contractual delays and higher-than-usual seasonal slowdowns in activity.
In notable analyst rating changes, Exxon Mobil (XOM 88.08, -0.50) shed 0.6% after Goldman Sachs downgraded the company to ‘Neutral' from ‘Buy.' Elsewhere, BP (BP 41.39, -0.08) finished lower by 0.2% after Credit Suisse downgraded the energy producer to ‘Neutral' from ‘Outperform.' On the upside, Marathon Oil (MRO 30.82, +0.63) advanced 2.1% after Goldman Sachs upgraded MRO to ‘Buy' from ‘Neutral.'
European markets entered the weekend on a mixed note. The United Kingdom's FTSE shed 0.1%, France's CAC ended flat, and Germany's DAX added 0.2%.
In the United Kingdom, Prudential lost 2.0%, and was the weakest performer. The insurer was pressured after the top industry regulator said European insurers and pension funds will face headwinds due to low interest rates. On the upside, miners outperformed and Polymetal International gained 2.3%.
In France, utility stocks were among the biggest laggards. Electricity provider GDF Suez lost 0.3% and water supplier Veolia Environnement slid 1.1%. On the upside, provider of communications solutions Alcatel-Lucent (ALU 1.24, +0.14) gained 7.0% after securing EUR1.6 billion in financing from Credit Suisse and Goldman Sachs. It should be noted that digital security provider Gemalto will replace Alcatel-Lucent in the CAC on December 24.
Germany's DAX was supported by carmakers. Daimler gained 2.6% after its European market share increased to 5.7% from 5.2%. The uptick was due to strong sales by its Mercedes unit. Meanwhile, Deutsche Bank was the weakest performer. The financial giant lost 1.6% after a German court found the company partially liable for the collapse of the Leo Kirch media group.
In today's economic data, November consumer prices decreased by 0.3%, which was below the Briefing.com consensus. Today's reading follows the 0.2% increase recorded during the prior month. In addition, core prices rose by 0.1% which was in-line with expectations.
Industrial production increased during November by 1.1%, which was better than the 0.1% increase that had been expected by the Briefing.com consensus. The reading follows the revised 0.7% decrease recorded during the prior month. Capacity utilization hit 78.4%, which was better than the 77.9% expected by the Briefing.com consensus, and up from the revised prior month reading of 77.7%.
On Monday, December Empire Manufacturing Index will be reported at 8:30 ET and October net long-term TIC flows will be released at 9:00 ET.
Week in Review: Markets in Holding Pattern as Budget Deal Remains Elusive
On Monday, equities were little changed. With no economic data to digest, investors expressed caution after Italy's Prime Minister Mario Monti announced plans to submit his resignation upon the successful approval of the country's budget. However, afternoon reports from the Financial Times indicated Italy's centrist parties urged Mr. Monti to run on their ticket in next year's election. Domestically, trade was confined to a narrow range and volume was well below-average. As a result, the S&P 500 finished flat. Hewlett-Packard (HPQ 14.75, +0.25) rose by 2.6% following earlier rumors which suggested activist investor Carl Icahn was building a stake in the company.
Tuesday's session was relatively quiet as the major averages followed an upbeat open with a climb to their respective highs. At noon, House Speaker John Boehner said he remains hopeful a budget deal will be reached, but first, Democrats and the President need to outline specific spending cuts. The comments had little effect on the markets as equities continued holding at their best levels. However, 90 minutes before the close, Senate Majority Leader Harry Reid said Democrats do not plan to propose spending cuts, and that reaching a consensus before Christmas would be difficult. In response to Senator Reid's comments, the S&P 500 slipped from its highs, trimming its gain to 0.6%. TripAdvisor (TRIP 41.67, -1.04) spiked 6.6% after Liberty Interactive (LINTA 19.12, -0.16) purchased 4.8 million TRIP shares for $62.50 per share. As a result of the transaction, Liberty Interactive will control a majority voting stake in TripAdvisor.
Wednesday began on a slightly higher note in anticipation of the latest policy statement from the Federal Reserve. The major averages spiked to session highs upon the release of the central bank's directive. However, stocks surrendered all of their gains, and the S&P 500 finished flat. As expected, the Federal Open Market Committee held its Federal Funds Rate steady at 0-0.25%. In addition, the Fed announced ‘Operation Twist' will be replaced by a Treasury purchasing program with an initial rate of $45 billion per month. Also of note, the key interest rate is expected to remain at exceptionally low levels until a target unemployment rate of 6.5% is reached. Molycorp (MCP 10.05, -0.19) slid 3.0% after announcing the departure of Chief Executive Officer Mark Smith. The company's Board of Directors has appointed Costantine Karayannopoulos as Interim President and Chief Executive Officer.
On Thursday, the major averages began on a mixed note before selling pressure pushed the key indices to their respective lows. Shortly before noon, House Speaker John Boehner addressed the media in Washington. During his remarks, the speaker suggested President Obama is not serious about cutting spending, and the White House is willing to go over the fiscal cliff. Mr. Boehner's remarks had little impact on the markets, which continued pushing to fresh lows. However, a late-afternoon headline indicated Speaker Boehner and President Obama will meet in person at 17:00 ET. The report lifted the S&P 500 off its worst level of the day, but the benchmark index still finished with a loss of 0.6%. Boston Beer (SAM 132.38, +0.44) surged 15.5% after the brewer raised its 2012 earnings expectations as well as the 2013 depletion projections. Following the update, the company sees 2012 earnings between $4.30 and $4.60, while the Capital IQ consensus expects earnings at $4.24 per share.