Stocks Gain for the Week on Strong U.S. Jobs Data

Published on Saturday, 04 February 2012 08:50 Written by TradersHuddle Staff

Weston, February 4^th (Tradershuddle.com) – Stocks jumped for the week, with the Dow closing at its highest level since 2008 and the NASDAQ hitting an 11-year high, boosted by solid jobs data in the U.S. and a handful of economic reports around the world. Optimism that Greece would be able to reach a deal with its private creditors eased as the week progressed without signs that the deal to avoid a messy default was close.

For the week the Dow climbed 1.59%, while the NASDAQ rallied 3.16% and the S&P 500 jumped 2.17%.

At the start of the week, stocks erased most of their losses thanks to a late surge in the day. Ongoing worries over the euro zone debt crisis kept participants at bay, as the Greek debt restructuring talks dragged on without a deal and as EU leaders met in Brussels to sign off on the permanent bailout fund.

The Dow was down more than 100 points and the S&P 500 down more than 1%, but participants returned to lift the market from session lows. Financials failed to participate in the stock market's rebound. Instead, the sector suffered a 1.0% loss, in contrast, tech stocks traded up to a 0.3% gain, making it the only key select sector trading in positive territory.

Helping the rebound in the sector were telecom stocks, which had been one of the worst performers last week. Verizon (NYSE: VZ) gained 1.07% to $37.61, posting the second biggest percentage gain in the Dow Jones Industrial Average.

Big cap tech also helped the sector, with Microsoft (NASDAQ: MSFT) leading the blue chip gainers. Shares of Microsoft jumped 1.3% to $29.61 after it was upgraded to Overweight from Neutral at Atlantic Equities.

Apple (NASDAQ: AAPL) gained 1.28% to $453.01, trading close to its all-time high of $454.45, which was posted last week after the record shattering earnings. Apple shares moved higher following a bullish research note from Morgan Stanley that speculated the tech giant could sell 40 million iPhones in China during 2013. The firm said that it sees $10 per share upside to Apple’s profit in calendar 2013, as the company adds China Telecom and China Mobile to the existing iPhone carrier China Unicom.

Financials were under pressure following European banks lower and as participants took profits on the sector, which had seen a sharp rally since the start of the year. Bank of America (NYSE: BAC) tumbled 3% to $7.07, posting the biggest percentage decline in the blue chip index. BofA received additional downward pressure after Goldman Sachs downgraded the stock to a Neutral from Buy, citing execution risk.

Meanwhile, Citigroup (NYSE C) fell 2% to $30.23, following the weakness in the sector, despite Goldman upgrading the stock to a Buy from Neutral. Rival JPMorgan (NYSE: JPM) lost 0.54% to $37.01 after it was removed from Goldman’s coveted Conviction Buy List.

M&A was also at the forefront during the session. ABB (NYSE: ABB), the Swiss engineering giant, announced that it had agreed to acquire Thomas & Betts (NYSE:TNB), the electrical components maker, for $3.9 billion or $72 per share. And Pep Boys (NYSE: PBY), the auto parts retailer, surged 23.59% to $14.93 after a private equity firm said that it would acquire the company for about $791 million in cash.

Elsewhere, Wynn Resorts (NASDAQ: WYNN), the luxury casino operator, tumbled 3% to $115.41 ahead of the release of Macau gaming revenue on cautious comments from analysts regarding the gaming revenue at the Asian gambling capital.

On Tuesday, the market started with modest gains amid overseas strength on optimism that Greece should be able to reach an agreement with the private bondholders on debt restructuring that should avoid a messy default. The gains came amid sharper drop than expected on home prices and amid a flurry of earnings reports.

On the economic front, both consumer confidence and the Chicago PMI failed to meet expectations, casting doubts over the strength of the recovery in the world’s largest economy. The disappointing economic data weighed, pressuring the broad market, but stocks eventually worked their way back to the flat line, however the S&P 500 was unable to muster enough momentum to make an actual advance on the day.

The energy SPDR ETF (NYSE: XLE) fell the most in the S&P 500 select sectors, weighed down by Exxon Mobil quarterly results that failed to impress investors and by coal stocks, which saw the biggest declines, along with a plunge in natural gas prices after the Energy Information Administration said U.S. production of the commodity is at record highs.

Exxon Mobil (NYSE: XOM) fell 2% to $8374, as results were just slightly below consensus. The largest U.S. energy producer was also under pressure due to its big exposure to natural gas, which saw prices drop to $2.50 per MMBtu.

Alpha Natural Resources (NYSE: ANR), the steam and metallurgical coal producer, tumbled the most in the space following the weak economic data. The stock tumbled 4.7% to $20.12, posting one of the biggest declines in the S&P 500.

On the flip side, Financials saw an upside move, buoyed by optimism in the euro zone following the budget deal signaled by EU leaders at the summit and on hopes the debt swap deal in Greece gets completed this week.

American Express (NYSE: AXP), the credit card issuer, jumped more than 2% to $50.14, posting the biggest gain in the Dow Jones Industrial Average. Bank of America (NYSE: BAC) was also on the winning side, with shares rebounding 0.85% to $7.13 after Guggenheim raised its target price on the stock to $9 from $6.50.

Technology also gained; helping the tech heavy NASDAQ to muster a slight advance. Apple (NASDAQ: AAPL) climbed 0.77% to $456.48 after it posted a new all-time high of $458.24. According to reports, the company would be hiring John Browett Chief Executive Officer of UK electronics firm Dixons, to head up retail expansion for the company. Browett will be responsible for Apple’s retail strategy and in expanding Apple’s retail outlets around the world, which currently number about 300. 

Elsewhere, RadioShack (NYSE: RSH) plunged close to 30% to $7.18, posting a new multiyear low of $7.15, after the electronics retailer warned of a decline in fourth-quarter profit below consensus, blaming the poor results on its performance of its Sprint Nextel Business (NYSE: S). Many brokerage houses slashed their price targets on the stock. Rival Best Buy (NYSE: BBY) felt the pressure as well, with shares falling 5.6% to $23.95, posting the biggest decline in the S&P 500. 

Mid week, stocks started February with a bang, as all of the S&P sectors closed with gains. Participants appetite for riskier assets received a boost after improved manufacturing data points around the world, helped eased concerns over the global economy. Optimism in the euro zone that Greece should be able to wrap up a deal on a debt swap plan with its private creditors also boosted sentiment.

American International Group (NYSE: AIG), the insurer, rallied close to 6% to $26.6, posting the biggest percentage gain in the financial sector, as shares surged past its 200day moving average. Morgan Stanley (NYSE: MS) was another outperformer in the sector. Shares rallied 3.97% to $19.39 amid the broad rally in the financial shares on optimism over the global economy and as jitters in Europe eased. Morgan Stanley was also in focus amid the filing of the Facebook IPO, in which the bank is expected to take a leading role.

Other banks also posted sharp gains. Bank of America (NYSE: BAC) rallied 3.2% to $7.36, posting the biggest gain in the Dow Jones Industrial Average. The Charlotte, NC based bank plans to sell and lease back three buildings it owns in New York and Charlotte, North Carolina, as it looks to shed non-core assets under an efficiency program The properties are the Fifth Third Center and the Hearst Tower in Charlotte, and 222 Broadway in lower Manhattan. Meanwhile, Citigroup (NYSE: C) climbed 2.86% to $31.60 after it was upgraded to Outperform from Market Perform at Wells Fargo.

In the energy sector, crude oil slumped after bearish inventory data. The fuel closed below $98 per barrel. Marathon Petroleum (NYSE: MPC) was the top performer, with shares surging 9% to the second spot in the broad market gains. The company said revenues jumped 11.3% year over year, while its board of directors authorized a $2 billion stock repurchase program. Marathon Petroleum also said that it was exploring strategic opportunities to minimize taxes on its mid stream assets.

Technology helped the NASDAQ to outperform once again. Broadcom (NASDAQ: BRCM) was a top performer, with shares rallying 8% to $37.13 after the company beat earnings expectations and increased its quarterly dividend.

Meanwhile, Apple (NASDAQ: AAPL) underperformed despite hitting a new all-time high of $458.99. Shares of Apple slid 0.06% to $456.19, likely as its rival Amazon got clobbered after a weak quarter and gloomy outlook.

Amazon (NASDAQ: AMZN) tumbled 7.7% to $179.4; posting the biggest decline in the consumer discretionary sector and in the broad S&P 500 index. Amazon traded as low as $172, testing support in the $170 area after it disappointed investors with a revenue miss. On the flip side, Whirlpool (NYSE: WHR) surged to the top of the broad market index. Shares of Whirlpool rallied more than 13% after it reported earnings that beat expectations.

On Thursday, the market started near the unchanged line amid a flurry of earnings reports and a mixed overseas session. Slightly better than expected economic data failed to spark a broad move, as participants kept their focus on Greece and were trading cautiously ahead of the Non-Farm Payrolls report. National chain retailers posted their January same-store sales figures, which showed a mixed picture.

On the economic front, weekly jobless claims fell to 367,000 versus the 375,000 figure that was widely expected. Productivity was inline with expectations, while labor unit costs were higher than consensus.

And Federal Reserve Chairman Ben Bernanke was at Capitol Hill providing testimony. The Fed Chief said that rising federal budget deficits are posing a significant threat to the U.S. economy and are likely to cause a crisis if not brought under control. Last week, the central bank set its inflation target of 2% and signaled that it will keep interest rates near zero until late 2014.

The Energy SPDR ETF (NYSE: XLE) gained 0.8% in the session, as a rally in coal stocks and stocks with heavy natural gas exposure outweighed underperformance resulting from a drop in crude oil prices.

Alpha Natural Resources (NYSE: ANR) surged to the top of the sector, leading other coal stocks in the space. The stock jumped 7.55% to $21.64 closing below its calculated resistance at $21.75.

Chesapeake Energy (NYSE: CHK) was also among the outperformers, with shares rallying 5.48% to $22.12 on the higher prices for natural gas. The stock was downgraded to Underperform at JPMorgan last week. And National Oilwell Varco (NYSE: NOV) jumped more than 3% after reporting solid earnings that beat expectations.

Financials once again were in favor, with Bank of America gaining 1.2% to $7.45, posting the second biggest percentage gain in the Dow Jones Industrial Average. The company’s Merrill unit landed an underwriter role in the Facebook IPO, while there were reports that it was planning to sell several buildings in New York and Charlotte, as it continues to shed non-core assets. BofA closed below its calculated resistance at $7.50.

Rival JPMorgan (NYSE: JPM) slid 0.13% to $37.55 despite wowing the Street after landing the number 2 spot in the Facebook IPO, ahead of Goldman Sachs (NYSE: GS). Morgan Stanley (NYSE: MS) climbed 0.67% to $19.39, as the stock continued to benefit from the exposure of being the leader in the Facebook offering.

Material stocks were actually under some pressure, despite metal prices moving higher. Alcoa (NYSE: AA) did benefit from the higher prices in the metals complex, as the stock jumped more than 2% to post the biggest percentage gain in the blue chip index. However Dow Chemical (NYSE: DOW) weighed on the sector, with shares falling 1.2% to $33.54 after the company missed earnings expectations. Dow said that headwinds from Europe and input costs, particularly ethane, weighed on results during the quarter.

Consumer discretionary stocks were weighed down my mixed retail sales data. Gap (NYSE: GPS), the owner and operator of specialty retailers like Banana Republic and Old Navy, surged 10% to $21.52, posting the biggest gain in the S&P 500, after the company reported that January same-store sales fell less than expected. The retailer said January comps fell 4.1% versus a drop of more 5% that was widely expected.

Also posting sharp gains was Macy’s (NYSE: M), the department store operator, rallied more than 3% despite its January comps were less than expected. However the company raised its earnings forecast for the current quarter. Other retailers posting better January comps than expected were Costco (NASDAQ: COST) and Target (NYSE: TGT).

On the flipside, weighing on the sector were Abercrombie & Fitch (NYSE: ANF) and Ann (NYSE: ANN). A&F plunged 13.73% to $40.40 after posting a new 52-week low of $40.31. The specialty retailer issued downside guidance for the current year well below consensus after disappointing performance in the holiday season. Meanwhile, Ann tumbled 6.7% to $22.91 after the company said that it now sees earnings below consensus, as weak sales and heavy discounting impacted results.

In the technology sector, Apple (NASDAQ: AAPL) fell 0.23% to $455.12 amid reports that the tech giant will unveil its new iPhone 5 in June or July timeframe. comScore also reported December mobile market share. According to data, Android and Apple’s share continued to gain at the expense of Research In Motion. Samsung was the top equipment maker with 25.3% share, followed by LG with 20%, and Motorola Mobility with 13.3%. Apple continued to gain share as equipment maker, with 12.4%, while RIM ended with a 6.7% share.

At the end of the week, stocks rallied broadly after strong employment data and a solid ISM Services sector reading boosted confidence in the strength of the recovery in the world’s biggest economy. The Dow jumped to its highest level since 2008, while the NASDAQ hit an 11-year high.

The Financial SPDR ETF (NYSE: XLF) jumped 2.68% to $14.73, posting a weekly gain of around 4%. The sector benefited from an outsize move in the big banks that have a big exposure to economic growth and particularly the consumer through personal loans and mortgages.

Bank of America (NYSE: BAC) rallied 5.23% to $7.84, closing above its calculated resistance of $7.50. The stock posted the biggest gain in the Dow Jones Industrial Average, as it close with an impressive 7.5% weekly gain and a 41% surge so far this year. Wells Fargo (NYSE: WFC) jumped 2.44% to $30.63, closing below its calculated resistance at $31.04. And Citigroup (NYSE: C) jumped 4.85% to $33.54, expanding its breakout above calculated resistance and adding to its impressive year to date gains of 27.5%.

A lawsuit from New York Attorney General to all-major banks over fraudulent and deceptive foreclosure fillings had little impact in the session, amid a broad rally in the financial space.

Obviously other economic sensitive stocks saw outsized gains, including consumer discretionary stocks, technology, energy, and material stocks. In the consumer space, homebuilders also had sharp gains, as the improved employment picture is seen as bullish for the space. PulteGroup (NYSE: PHM) surged more than 7%. PulteGroup posted quarterly results yesterday that beat of the revenue side.

On the same thesis, Caterpillar (NYSE: CAT) was the second best Dow component in the session, with shares jumping 3.27% to $113.94, while Walt Disney (NYSE: DIS) gained 2.8% to $40, posting the fourth biggest gain in the blue chip index.

In the technology space, MasterCard (NYSE: MA) also received a boost from the jobs data that coupled from a better than expected earnings report yesterday, helped the stock to breakout. MasterCard jumped to a new all-time high of $391.30 before the stock closed with a 2.3% gain for the session.

Apple (NASDAQ: AAPL) also hit a new all-time high at $460, however the stock underperformed in the day, as shares added 1% to $459.68 on concern over unfavorable rulings in Germany on Samsung and Motorola Mobility cases and its impacts particularly on the iPhone, iPad, and its new iCloud service. For the week, Apple outperformed the S&P 500 with a gain of 2.77%.

Elsewhere, Gilead Sciences (NASDAQ: GILD) surged close to 11% to $54.7, posting the second biggest gain in the S&P 500. The company posted lower than expected quarterly results but announced that early results from a trial of its experimental hepatitis C drug look promising. Needham bumped its target price to $54.