Equities Finish Little Changed as S&P 500 Holds at Five-Year High
11-Jan-13 16:15 ET
[BRIEFING.COM] The major averages saw little change during today's session, and the S&P 500 remained at its five-year high. However, equities slipped out of the gate as data out of China indicated the country's consumer price index rose by 2.5% year-over-year. The news put a damper on expectations for future stimulus and China's Shanghai Composite lost 1.8%. Domestically, traders looked to Wells Fargo (WFC 35.10, -0.30), which was the first financial to report its fourth quarter results.
The financial sector was the weakest performer and Wells Fargo lost 0.9%. The bank's quarterly report topped the Capital IQ earnings and revenue forecast, but turned out to be less upbeat below the surface. During the fourth quarter, Wells Fargo saw its margins compress to a multi-year low. In addition, mortgage originations dropped from $139 billion in the third quarter to $125 billion during the most-recent reporting period.
Elsewhere, American Express (AXP 61.24, +0.45) added 0.7% after the company pre-announced better-than-expected fourth quarter earnings. Additionally, American Express has announced plans to cut over 5,000 jobs.
The materials sector lagged due to underperformance from miners and steelmakers following hotter-than-expected Chinese inflation data. Earlier, BHP Billiton (BHP 76.66, -2.03) and Rio Tinto (RIO 55.65, -1.64) were both downgraded to ‘Neutral' from ‘Outperform' at Macquarie. The two miners settled lower by 2.6% and 2.9% respectively.
The consumer staples space was the top performing sector and the SPDR Consumer Staples Select Sector ETF (XLP 35.92, +0.16) ended higher by 0.5%. Though most components were mixed, tobacco stocks led the sector higher. Philip Morris (PM 89.23, +1.94) was the top industry performer after Goldman Sachs added the stock to its Conviction Buy List. Philip Morris gained 2.2% and other cigarette producers saw strength as well. Reynolds American (RAI 42.62, +0.36) and Lorillard (LO 117.02, +0.93) both gained near 0.9%.
With the holiday shopping season in the rearview mirror, the market has been receiving early reports concerned with holiday spending. Yesterday, Aeropostale (ARO 12.38, -0.86) lowered its earnings guidance which weighed on rival teen retailers. Though the stock proved to be resilient during yesterday's session, it ended lower by 6.5% today. Earlier, Piper Jaffray downgraded the stock to ‘Neutral' from ‘Overweight.' Additionally, Imperial Capital has cut its price target for Aeropostale to $15 from $18. Looking at peers, American Eagle Outfitters (AEO 19.14, -0.80) and Buckle (BKE 43.85, -0.33) lost 4.0% and 0.8% respectively.
Elsewhere, Best Buy (BBY 14.21, +2.00) surged 16.4%. This morning, the electronics retailer reported flat domestic comparable store sales while international sales declined by 6.4% year-over-year. With lowered expectations going into the holiday period, the market is receiving today's update as better-than-feared.
Overnight, aircraft manufacturer Boeing (BA 75.16, -1.93) returned to the headlines. Overnight reports from Reuters indicated that two more Dreamliner 787 jets have experienced structural issues. In response to the rash of recent issues, the United States Federal Aviation Administration has ordered a review of the aircraft's electrical systems.
A handful of economic data points were reported today. The trade deficit widened to $48.7 billion during November after a downwardly revised prior month deficit of $42.1 billion. Economists polled by Briefing.com had expected that the deficit would come in at $41.8 billion.
Export prices, excluding agriculture, decreased by 0.2% in December after they had decreased by 0.7% during the prior month. Excluding oil, import prices decreased by 0.1%, which follows the 0.2% decrease experienced in the prior month.
The December Treasury Budget showed a deficit of $260 million, which was narrower than the deficit of $1.0 billion expected by the Briefing.com consensus. The report has mattered little to market participants as equity indices did not respond to the news.
Week in Review: S&P 500 Inches to its Five-Year High
On Monday, stocks registered modest losses. With no economic data or notable earnings to dictate the tone, the major averages were trapped in a relatively narrow range. The S&P 500 opened in the red, and traded near its opening levels for the duration of the session. As a result, the benchmark index finished lower by 0.3%. Bank of America (BAC 11.63, -0.15) announced it has reached a settlement with Fannie Mae to resolve agency mortgage repurchase claims on loans originated and sold directly to Fannie Mae through December 31, 2008. The settlement is expected to reduce Bank of America's fourth quarter pretax income by about $2.7 billion.
Tuesday's session saw the S&P 500 end lower by 0.3% after spending the duration of the day in the red. With little economic data of note and below-average volume, the key indices traded in range bound fashion. Consumer discretionary stocks were in focus after Yum! Brands (YUM 66.87, -0.62) reaffirmed its full-year 2012 earnings guidance, but lowered the same-store sales estimates for its China division. As a result of the disappointing outlook, Yum! Brands slid 4.2% and other quick service restaurants traded lower as well.
On Wednesday, equities began the day on a positive note after Alcoa (AA 8.94, -0.03) kicked off the fourth quarter earnings season with a top line result which exceeded estimates. With no notable economic data, the remainder of the session was largely uneventful as the key indices retreated off their respective highs, ending with just a portion of their early gains. The S&P 500 added 0.3%. For-profit education names saw general weakness after Apollo Group (APOL 19.21, -0.02) reported its quarterly results. Although Apollo beat on earnings and revenue, its full-year revenue guidance was a disappointment. Shares of APOL lost 7.8% as a result.
Thursday started on a positive note after China's trade surplus expanded to $31.6 billion due to strong export growth. The upbeat open was followed by a late-morning stumble, but the S&P 500 showed resilience and climbed to fresh highs. The benchmark index ended with a gain of 0.8%. The financial sector paced the advance, and the SPDR Financial Select Sector ETF (XLF 17.11, -0.04) settled higher by 1.3%. The financial sector proxy ETF ended at a fresh 52-week high with most majors scheduled to announce their fourth quarter earnings next week.