Stocks Gain for the Week Despite EU Jitters (AA, AAPL, BAC, CVX, FSLR, JPM, NFLX, TIF, URBN, WSM)

Published on Saturday, 14 January 2012 09:11 Written by TradersHuddle Staff

Weston, January 14^th (Tradershuddle.com) – Stocks gained for the week, extending their January week and posting the second consecutive weekly gain for the year. Economic optimism amid a decent outlook from Alcoa and hopes that the weaker than expected trade data in China will spur the Chinese government to ease its monetary policy helped the markets to the upside earlier in the week. Downgrades jitters in the euro zone and weaker than expected retail sales in the U.S. tempered optimism later in the week, while JPMorgan kicked off the banks reporting season with disappointing results on the revenue side.

For the week the Dow closed with a 0.5% gain, while the NASDAQ jumped 1.63% and the S&P 500 climbed 0.88%.

At the start of the week, stocks closed with modest gains, extending the rally from the first week of the year, ahead of a brand new earnings season. Participants focused on earnings and domestic issues, while keeping an eye on the euro zone developments.

Front and center over the weekend was M&A, with Bristol Myers Squibb (NYSE: BMY) agreeing to pay a whopping 163% premium for Inhibitex (NASDAQ: INHX), the hepatitis C drug developer. Bristol Myers agreed to pay $26 per share on an all-cash transaction valuing the company in $2.5 billion.

Financials were boosted by performance from banks and insurers. Regions Financial Corporation (NYSE: RF) gained 2.72% to $4.53 after the company said it is close to a deal to sell its Morgan Keegan & Co. unit to Raymond James Financial or Stifel Financial Corp. for roughly $1 billion. The regional bank was the best performer in the sector.

Bank of America (NYSE: BAC) posted the second biggest gain in the Dow Jones Industrial Average. BofA added to last week’s solid gains and close near its calculated resistance at $6.35. CNBC reported that the Obama Administration was near to close on a plan that will sell foreclosed properties on the books of Fannie, Freddie and FHA on a package to investors to be use as rental properties. The stock also moved to the upside ahead of rival JPMorgan (NYSE: JPM) earnings report.

Also in the sector Wells Fargo (NYSE: WFC) gained 1.24% to $29.30 on the news of the foreclosed properties plan and after Jim Cramer recommended the stock as the best of breed of the big banks ahead of the open. Meanwhile, Travelers (NYSE: TRV), the property and casualty insurer gained 0.57% to $59.69 after the Goldman Sachs added the stock to its coveted Conviction Buy List.

In tech land, trading was choppy for most of the session, with the group unable to hold gains. Apple (NASDAQ: AAPL) closed near the unchanged line after the stock reversed following hitting an all-time high of $427.75. Apple received a boost from Goldman Sachs and Needham, which upped estimates. Goldman boosted its target price to $550 from $520, citing upside in the December quarter and better than expected results in 2012. And Needham maintained its Buy rating and target price of $540, while citing blow out iPhone sales. The firm raised its EPS estimate to $10.85 for the quarter from $9.55. For the full year Needham said that Apple should earn $38.70 on revenues of $151.95 billion.

Google (NASDAQ: GOOG), the largest search engine, also weighed on the performance of the sector. Shares tumbled more than 4% after Motorola Mobility warned of worse than expected quarterly results, which sparked worries over the pending Google $12.5 billion acquisition of the mobile and smartphone maker. Also weighing on Google shares was cautious commentary from Stifel Nicolaus, which said that it rather be patient with the stock as it believes end demand in Europe may be slowing, and currency now presents a headwind.

The consumer discretionary space ended lower as a group, however Netflix (NASDAQ: NFLX) saw once again outsized gains. The video rental company surged to the top of the S&P 500; with shares rallying 13.78% to $98.18 and extending its year to date rally to 41.7%. The company announced the launch its streaming service in the United Kingdom and Ireland for the monthly price of 5.99 Pounds Sterling in the UK and euro 6.99 in Ireland. CEO Reed Hastings said in an interview that U.S. subscriber growth is back in positive territory, while commenting on 2012 profitability. Hedge Fund Manager Whitney Tilson also boosted the stock after an appearance on Fast Money Half-Time Report, in which he noted that he is still long on the stock, with a multiyear horizon. He noted that the stock overreacted to the downside, plenty of rumors of a takeover or a merger, international growth, and U.S. subscriber growth.

And Amazon.com (NASDAQ: AMZN), the largest online retailer, fell more than 2% despite Barclays bumping its target price on the stock. The firm raised its target price to $225 from $220, citing solid holiday season for online retailers and more specifically AMZN and its family of Kindle products.

On Tuesday, the market started with a strong bid following better than expected revenue and outlook from Alcoa (NYSE: AA) and on hopes China will ease monetary policy to avoid further slowdown in the economy. The Shanghai Composite extended its rally to a third session, jumping after weak trade figures bolstered the prospects of the Chinese Central Bank acting before the Chinese New Year.

In Europe, equity markets closed with solid gains following the Wall Street rally, with cyclical and mining plays leading the advance. Financials also received strong bids after Fitch ratings said that it does not expect to downgrade France’s AAA credit rating this year.

A pullback in afternoon trading, send stocks to close considerably off their session highs, but still with solid gains to keep the rally alive. The combination of improved economic sentiment, along with positive news coming from the euro zone helped financials move higher, with the embattled shares of Bank of America (NYSE: BAC) once again posting the biggest gain in the Dow Jones Industrial Average. The lender rallied 5.7% to $6.63, closing above its calculated resistance at $6.35.

Materials received the strongest bid helped by the increased appetite for commodities. Alcoa (NYSE: AA) gained 0.16% to $9.44 after trading as high as $9.85. The stock closed below calculated resistance at $9.50, as it posted mixed quarterly results, with revenues beating expectations, while providing a robust outlook for the global aluminum market.

Metal prices saw upside moves, with copper rallying also on reports of Chinese re-stocking. Freeport McMoRan (NYSE: FCX), the world’s largest publicly traded copper producer, jumped 4% posting one of the biggest gains in the sector as copper prices moved higher on signs of increased demand in China, the world’s largest user of the industrial base metal.

Also in the sector, CF Industries (NYSE: CF) was among the top performers in the sector, with shares jumping 4.01% to $166.21. The North American fertilizer producer was upgraded to Outperform from Market Perform at BMO Capital.

The economic sensitive sector of industrials also benefited from the improved global sentiment, with Caterpillar (NYSE: CAT) posting the second biggest gain in the blue chip index. The world’s largest maker of earthmoving equipment jumped close to 3% amid improved sentiment over future demand.

Consumer discretionary stocks were also active amid analyst actions and retailers issuing earnings guidance. Netflix (NASDAQ: NFLX) fell 2.39% to $95.83 after Bank of America downgraded the stock to Underperform.

Also on the losing side were shares of Goodyear Tire (NYSE: GT). The tire manufacturer tumbled more than 8% after it said that the unusually warm winter was impacting sales of winter tires.

However the biggest drop in the sector and the S&P 500 was Tiffany & Co (NYSE: TIF). The fine jewelry maker and luxury retailer plunged 10.46% to $59.94 after the company lowered its fiscal 2012 earnings guidance below consensus.

On the flip side, TripAdvisor (NASDAQ: TRIP), the online travel research Company, rallied 5.7% after Susquehanna initiated coverage with a Positive, while Nomura initiated its rating on TripAdvisor with a Neutral.

In tech land, Apple (NASDAQ: AAPL) gained slightly and underperformed after late in the session, Eastman Kodak (NYSE: EK) said that it was suing Apple on patent infringement of certain Kodak patents relating to digital imaging technology.

And First Solar (NASDAQ: FSLR) rallied more than 5%, posting the biggest percentage gain in the technology sector. The stock continued in an upswing amid M&A rumors.

Mid week, stocks closed narrowly mixed after paring earlier losses, following an upside move in banks. Worries over the euro zone weighed on the session, with the euro trading below the $1.27 level against the Dollar after Fitch ratings warned the ECB over a possible collapse of the currency if its not revamps is sovereign bond buying program.

The Financial SPDR ETF (NYSE: XLF) continued with its upswing, adding more than 1% in the session, extending its year to date gain to 6.6%. Despite the jitters in the euro zone, participants have been embracing the sector and banking shares, looking past the crisis in Europe and focusing on the prospects of better economic growth in the U.S. and stabilization and perhaps a slight improvement in the housing market, as labor figures begin to improve.

Bank of America (NYSE: BAC) rallied 3.6% to $6.87, posting the biggest gain in the blue chip index. Rival Citigroup (NYSE: C) also saw a strong bid, jumping 4% to $31.27, posting one of the biggest gains in the sector. Citi is expected to report is quarterly results next Tuesday, with analysts on average expecting a profit of $0.76 per share on revenues of $18.78 billion.

Meanwhile, energy shares fell as a group pressured by the weakness of the energy complex. Crude oil prices closed with a 1.2% loss at $100.96 per barrel, while natural gas prices suffered a 5.8% drop to close at $2.77 per MMBtu. A combination a weak euro, a bearish inventory report, and the unusually warm weather has been impacting energy demand.

Southwestern Energy (NYSE: SWN), the Houston based independent energy company, was the worst performer in the sector, with shares tumbling 8%. The stock received additional pressure after it was downgraded to a Neutral from Outperform at Robert W. Baird.

On the flip side in the sector, refiners and coal producers were outperformers. Marathon Petroleum (NYSE: MPC) jumped 3.33% to $32.89 despite warnings that it expects to report a small loss in the quarter compared with consensus for EPS of $1 and last quarter EPS of $0.64. The company blamed the rapid increase of WTI oil during the quarter.

In the consumer staples space, Coca-Cola (NYSE: KO) and PepsiCo (NYSE: PEP) weighed on the performance of the sector, with both stocks getting downgraded to a Neutral from Buy at UBS. Coca-Cola fell 1.85% to $68.06, posting the second biggest decline in the blue chip index, after UBS also cut its target price to $70 from $73. PepsiCo ended the session nearly 1% lower at $65.01.

Weighing the most in the S&P 500, were shares of Urban Outfitters (NASDAQ: URBN). The owner and operator of Urban Outfitters and Anthropologie retail chains plunged to the bottom of the S&P 500, with shares tumbling 18.6% to $23.93, after the company announced the resignation of its CEO and both Citi and Robert W. Baird downgraded the stock. Citi cut its rating to a Sell, while Robert W. Baird cut its rating to Neutral.

In the technology sector and posting the second biggest percentage gain in the S&P 500 was First Solar (NASDAQ: FSLR). The largest maker of thin film solar modules in the world surged 7.8% to $41.80, as solar stocks rallied in the day, despite lower crude oil prices, as Deutsche Bank said that a surprisingly quarter in Germany and robust demand in Italy and the United States could benefit the sector. The firm said that its checks indicate inventories across the supply chain are at record levels, which could spur a restocking rush. First Solar shares plummeted last year on concern over oversupply and falling prices. The stock has been rallying this year from oversold levels also amid M&A or takeover rumors.

On Thursday, stocks closed higher, with the NASDAQ posting its 6^th straight gain, as the market erased earlier losses that came after weak economic data in the U.S. weighed on the positive sentiment stemmed from successful bond auctions in the euro zone.

The market started with modest gains after disappointing economic data in the U.S., weighed on futures and spurred a pullback from the highs that were hit after a positive response to successful bond auctions in both Spain and Italy. Both December Retail Sales and weekly jobless claims were worse than expected, with investors taking pause to digest the data amid the strong January rally.

Materials saw strong action, with Alcoa (NYSE: AA), the aluminum producer, posting the biggest gain in the Dow Jones Industrial Average and one of the biggest gains in the sector. Alcoa jumped 3.12% to $9.93.

The sector was helped by a move from the euro, which climbed back above the $1.28 level. Dow Chemical (NYSE: DOW) rallied 3.6%, as diversified chemical companies traded higher amid the ongoing drop in natural gas prices, with participants betting that chemical companies will benefit from higher margins in its products from lower production and raw material costs.

The weakness in both natural gas and crude oil weighed on the energy sector. Natural gas fell and traded around $2.70 per MMBtu, with many analysts thinking it could fall further, meanwhile crude oil closed below $100 per barrel for the first time this year on reports that the Iran embargo by the EU might be delayed.

Chevron (NYSE: CVX) tumbled 2.6% to $104.97, posting the biggest decline in the blue chip index, as the stock received additional pressure after the company warned that it expects that fourth quarter EPS to be significantly lower than third quarter.

Also on the weak side, ConocoPhillips (NYSE: COP) fell 1.7% after the stock was downgraded to a Hold from Buy at Jefferies. On the flip side, Valero (NYSE: VLO), the independent crude oil refiner, jumped 2.4%, as the spread between Brent and WTI crude oil prices gained.

Technology also gained and helped the NASDAQ to outperform the other benchmark indices. Research In Motion (NASDAQ: RIMM), the maker of the Blackberry smartphone, was one of the outperformers in the index, as shares rallied 5.32% to $16.44 after speculation the company hired Goldman Sachs to explore strategic options.

Apple (NASDAQ: AAPL) underperformed, falling 0.27% to $421.39 after trading as low as $418.75, lower than the prior session low. The stock was on a holding pattern despite Ticonderoga saying that its checks indicate that Apple had its best December growth ever, with a 9.4% month over month growth, the first December where sales increased month-over-month. This strength follows the best month over month growth for a November that it had on record. The firm noted that Apple ended 2011 on a strong note and believes this momentum will continue in 2012.

In the consumer space, retailers were in focus amid earnings guidance. Williams-Sonoma (NYSE: WSM) tumbled 12% to 34.32 after the high-end home furnishings and cooking equipment retailer, cut its earnings guidance for the quarter blaming heavy discounting at its Williams Sonoma stores, and saying that Pottery Barn and West Elm brands saw decent sales performance.

Dick’s Sporting Goods (NYSE: DKS) surged 12.5% to $40.94 after the retailer announced a stock re-purchase plan of up to $200 million. The retailer also lowered its earnings guidance, citing the warmer the usual weather pattern in most of the U.S.

And Starbucks (NASDAQ: SBUX), the largest coffee shop chain in the world, gained 1.02% to $47.60 after posting a new all-time high of $47.63. The stock saw upside after UBS maintained its Buy rating but raised its target price to $52 from $47.

At the end of the week, stocks closed lower, with the NASDAQ snapping its six session winning streak, after weaker than expected revenues at JPMorgan and jitters from the euro zone, with reports of imminent downgrades to several of the euro zone countries weighed on sentiment. The market however was able to bounce of their worst levels of the session and still posted a gain for the week.

In Europe, equity markets closed lower, with equity markets extending declines, as the euro broke below the $1.27 level against the Dollar on reports that S&P was set to downgrade several euro zone countries. Banks were one of the worst performers amid the downgrade jitters and on reports that negotiations on the Greek debt swap deal were facing challenges. Earlier in the day, Italy held a long-term bond auction that had decent demand.

Sellers gained additional control as the session progressed, amid the euro weakness, but the market found support and was able to bounce, as more details emerged from the imminent downgrade, which will have France’s AAA credit rating cut by one notch, while Italy, Spain, and Portugal will also be downgraded.

Financials received most of the focus, particularly banks, as JPMorgan (NYSE: JPM) kicked off the banks reporting season. The lender posted a profit of $0.90 per share, inline with consensus, on revenues that fell 9.6% year over year to $21.47 billion,. JPMorgan logged the second biggest decline in the Dow Jones Industrial Average, as shares fell 2.52% to $35.92.

Rivals Citigroup (NYSE: C) and Bank of America (NYSE: BAC) fell, as participants booked some profits from the big run the stocks had had during this year, amid the downgrade jitters in the euro zone and concern over JPMorgan’s earnings report. Citigroup fell 2.72% to $30.74, trimming its year to date gain to 16.8%. Meanwhile, Bank of America lost 2.65% to $6.61; posting the biggest decline in the blue chip index and cutting its year to date jump to 18.9%. According to reports, the Charlotte, NC based lender told regulators that it was willing to cut back its presence from some parts of the country if its financial problems deteriorate. The reports also speculated that BofA could be mulling the sale of stock tracking the performance of its highly profitable Merrill Lynch unit.

Industrials were also under pressure, as the euro weakened and as the trade deficit widened to $47.8 billion, its highest level in 5-months. In the sector, railways were some of the worst performers following production cuts at Patriot Coal. CSX Corp. (NYSE: CSX) tumbled 3%, cutting its weekly advance to 1.1%.

The cut in production at Patriot Coal (NYSE: PCX) weighed on coal producers, with Alpha Natural Resources (NYSE: ANR) plunging to the bottom of the S&P 500, as shares tumbled 10.47% to $20.19.

In the technology space, Apple (NASDAQ: AAPL) saw weakness, falling 0.37% to $419.81 after trading in a tight range. The company suspended the sale of its iPhone 4S in retail locations and will only offer it online after a scuffle erupted outside its flagship store in Beijing, with eggs thrown to the store, as the huge crowds prevented Apple from opening the store.

Elsewhere, Chipotle Mexican Grill (NYSE: CMG) gained 2% to $354.62 after it posted a new all-time high of $355. William Blair upgraded the stock to Outperform from Market Perform.