Stocks Gain on EU Bailout Fund Hopes (AAPL, AZO, BAC, CF, CVX, DRI, GE, HAL, MOS, PFE, STI, TEL, TOL, TSO)

Published on Tuesday, 06 December 2011 18:22 Written by Christopher Lynn

New York, December 6^th (TradersHuddle.com) – Stocks received a boost later in the session, but still the major benchmark indices closed mixed, following a report that EU policymakers were discussing the possibility of launching a second bailout fund as a way to tackle the debt crisis in the region. Equities had been fluctuating and struggling to find direction in a narrowly traded session, as participants continued to digest the outsize gains from the prior sessions and the recent S&P downgrade warnings for nations in the euro zone.

The Dow Jones Industrial Average gained 52.30 points, or 0.43%. The S&P 500 index added 1.39 points, or 0.11%, while the NASDAQ lost 6.20 points, or 0.23%

The market started near the unchanged line, as futures recovered from their overnight lows following weakness in Asia and Europe, as the S&P warned 15 euro zone nations, including AAA countries like Germany and France, that it has placed them in Credit Watch Negative. The credit rating agency said that systemic stress in the euro zone has risen in recent weeks to the extent that they now put downward pressure on the credit standing of the euro zone as a whole.

In Europe, stocks mostly fell after a choppy session following S&P warning to almost every country in the 17-nation bloc. Investor jitters also grew after the credit rating also put the European Financial Stability Fund in Credit Watch negative as a direct result of late yesterday’s action. The rally on the past session came to a halt, as the optimism for potential new measures at a EU summit later this week was offset by investors jitters ahead of the ECB meeting on Thursday and the credit rating actions.

In the S&P 500 it was a mixed bag, with materials, healthcare, and utilities posting the biggest gains. Meanwhile, consumer discretionary and technology logged the biggest declines. The Materials sector was the clear leader, with a 0.9% gain for the session. CF Industries (NYSE:CF), the North American manufacturer and distributor of agricultural fertilizers, jumped the most in the sector, with shares gaining 4.28% to $146.82, as the stock is facing resistance at $149.04. Last week, Ticonderoga said that CF was a buying opportunity amid seasonal weakness and economic uncertainty. Other AG names were also outperformers; Mosaic (NYSE:MOS), the concentrated phosphates, and potash producer, gained 3.44% to $53.19, closing below its calculated resistance at $54.28.

Healthcare also saw an increased bid, with Pfizer (NYSE:PFE), the world’s second largest pharmaceutical company, posting the second biggest percentage advance in the Dow Jones Industrial Average, as shares gained 1.97% to $20.23 with above average trading volume. Also helping lead the gains in the blue chip index and the industrial sector was General Electric (NYSE:GE). The diversified manufacturer of power turbines and medical devices jumped 2.39% to $16.72 after the stock was upgraded to Outperform from Market Perform at Bernstein. The firm also bumped its target price to $21 from $19

Chevron (NYSE:CVX), the second largest U.S. energy producer, also helped the blue chip index to outperform and was able to aid the energy sector to offset losses from refiners and oil services plays. Chevron gained 1.50% to $104.36, making it the third best Dow component, as crude oil ended near the highs of the session above $101 per barrel. Crude moved slightly higher, following a report of a possible second bailout fund in the euro zone, which in turn boosted the euro against the Dollar.

Also in the energy sector, Halliburton (NYSE:HAL) tumbled 3.9% to $35.57 after BP accused the company before a Federal Judge of destroying evidence related with the inadequate cement work Halliburton perform according to BP on the Gulf of Mexico Macondo oil well that suffered an explosion in 2010, causing the biggest oil spill in U.S. history.

Tesoro (NYSE:TSO), the crude oil refiner based in San Antonio, TX, also weighed on the sector, as shares tumbled 6.12% to $23.31 after the stock was named a short Research Tactical Idea at Morgan Stanley. Tesoro was also downgraded to a Neutral from Outperform at Credit Suisse.

On the financial sector, regional banks weighed on performance. SunTrust (NYSE:STI) posted the biggest decline after it said that its fourth-quarter mortgage repurchase costs would be "well above" those of previous periods. Shares of SunTrust dropped 6.43% to $18.03. Other regional banks were also weaker on the news, with shares of First Horizon National (NYSE:FHN) tumbling 4.38% to $7.43.

Bank of America (NYSE:BAC), the largest U.S. lender, was able to shake-off weakness, as shares ended with a modest loss of 0.17% to $5.78. The concern over sovereign debt in the euro zone and mortgage exposure following the SunTrust news were offset by optimism over additional measures to be announce in the region to tackle the crisis, including a second bailout fund. And Lincoln National (NYSE:LNC) gained 1.81% to $20.79 after Bank of America Merrill named the stock into its favorite stocks for 2012. The firm has a target price of $38.

Technology ended with a narrow loss for the session. Apple (NASDAQ:AAPL), the maker of iPads and iPhones, was not able to hold its breakout above its 50day moving average at the $391 level, as the stock slid 0.52% to $390.95. Apples was included in Bank of America Merrill 2012 favorite stocks list, with the firm giving the stock a target price of $515 per share. The firm said that the valuation is compelling, particularly with the upside potential in revenues and earnings growth in the Mac and iPhone segments, which will likely outweigh a slowdown in the iPod units and consumer exposure. Additionally, Oppenheimer said that its wireless checks point to strong demand for the iPhone 4S and this demand will likely drive muted March seasonality and possible upside for the stock, which is its top pick in the space.

Also weighing in the sector, First Solar (NASDAQ:FSLR), the largest maker of thin film solar modules in the world, was the worst performer. Shares of First Solar fell 3.43% to $46.11. On the flip side, TE Connectivity (NYSE:TEL), the maker of relays, circuit breakers, fiber optic components, touch screens, and wireless products, jumped 2% to $32.71 after the company reaffirmed its fiscal first quarter and fiscal 2012 EPS and revenue guidance. TE Connectivity was upgraded to a Buy from Neutral at Goldman Sachs.

Consumer discretionary stocks were under pressure, as Darden Restaurants (NYSE:DRI), the owner and operator of the Red Lobster and Olive Garden restaurant chains, plunged to the bottom of the S&P 500 after the company cut its fiscal 2012 earnings and sales guidance below consensus. Darden tumbled 12.38% to $41.82.

On the earnings front, Toll Brothers (NYSE:TOL), the luxury homebuilder, jumped 2% to $21.30 after posting better than expected quarterly results, as the cancellation rate dropped to pre-crisis levels. The company said it earned $0.09 per share, $0.03 better than consensus. And AutoZone (NYSE:AZO), the auto parts supplier, fell 0.34% to $337.81 after logging a new yearly high of $343.9. The company also reported earnings results that topped expectations.