Market Update

Weekly Recap - Week ending 10-Aug-12

Dow +42.76 at 13213.06, Nasdaq +2.22 at 3020.86, S&P +3.07 at 1405.87

Equity markets started today's session lower by nearly 0.5%. The losses held early on before the S&P 500 got a lift from a strengthening euro. Challenged by low volume, stocks then staged a slow climb off their lows resulting in a marginally positive close. The S&P 500 ended higher by 0.2%.

Two companies saw heavy selling after reporting their quarterly results. Ubiquiti Networks (UBNT 8.71, -6.30) fell 42.0% despite an earnings and revenue beat. However, the company issued lower guidance which was responsible for today's heavy selling which has dropped the stock to its lowest level since the shares started trading in October 2011.

Elsewhere, Grocery store operator Roundy's (RNDY 7.71, -2.52) plunged 24.6% after missing on earnings. Revenues were slightly below expectations and the company lowered their full-year outlook. The disappointing report combined with multiple analyst downgrades puts the stock at its all-time low, near $7.70.

The telecommunications sector has managed to stay positive today. As most sector components traded in-line with the broader market, Level 3 Communications (LVLT 21.94, +1.76) spiked 8.7% after securing additional financing. In addition, analyst coverage of the stock was initiated at Goldman Sachs with a buy rating.

Financials underperformed the broader market before rallying into the close. The SPDR Financial Select Sector ETF (XLF 14.94, +0.01) gained 0.1%. Within the sector, American Express (AXP 55.85, -0.62) and Morgan Stanley (MS 14.61, -0.10) slipped 1.1% and 0.7% respectively. Barclays (BCS 11.52, +0.31) outperformed other banks as shares gained 2.8%. Today's advance came on the heels of an announcement that Sir David Walker will be the next Chairman.

Manchester United (MANU 14.00, 0.00) was flat on its first day as a publically traded company as underwriters supported the stock at $14.00. This week's other IPO, Bloomin' Brands (BLMN 12.86, -0.63) dipped 4.7%. Shares of the company saw their first down day since it began trading on Wednesday.
J.C. Penney (JCP 23.40, +1.30) gained 5.9%. The company delivered disappointing earnings and reported a 21.7% decrease in same store sales. However, an upbeat earnings call and likely short-covering led to a reversal in the stock. The stock lifted off its pre-market lows as company's Chief Executive Officer Ron Johnson indicated that last quarter's earnings do not reflect the success of recent pricing and marketing changes which have only been in effect for less than a month.

The economic calendar was light today as well. Export prices, excluding agriculture, declined by 0.3% in July after they had decreased by 1.4% in the prior month. Excluding oil, import prices were down in July by 0.4%, which follows the 0.3% decrease experienced in the prior month.

The Treasury Budget for July showed a $69.6 billion deficit, which is better than the deficit of $71.0 billion that had been broadly expected. The report has mattered little to market participants as equity indices did not respond to the news.

Stimulus chatter continues as markets make slim advances
Looking back on the week, Monday started with headlines indicating that The People's Bank of China suggested it would take monetary policy up a notch in the back half of the year and vowed to bolster the economy with improved credit. It also sees a broader use of currency in cross-border trade and investing. Knight Capital Group (KCG 2.90, -0.17) confirmed weekend reports that it will raise $400 million in convertible preferred stock. The preferred stock will be convertible into approximately 267 million shares of common stock of the company. The S&P 500 ended higher by 0.2%
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Tuesday began with comments out of Germany where a spokesperson out of Angela Merkel's camp indicated that the German Chancellor has conceded her hard stance and will back the ECB's bond buying program. Most notable earnings report was Chesapeake Energy (CHK 19.68, -0.63), which gained 9.4% for the day after missing earnings estimates by $0.03 but beating revenue expectations handily. The company also made positive commentary on asset sales. With no economic data of note being released, the S&P ended up 0.5%.

On Wednesday, European macro data was light, with Germany's Trade Balance exceeding expectations. In the UK, Bank of England Governor Mervyn King spoke in favor of David Cameron's conservative budget and said that further rate cuts may be counterproductive. Priceline.com (PCLN 563.16, +0.90) plunged 17.3% after missing on revenues. The company issued lower third quarter guidance, blaming the cloudy outlook on the persisting European debt crisis. The S&P 500 finished near the unchanged level.
Thursday's latest weekly initial jobless claims count totaled 361,000, which was lower than the expected 375,000. The trade deficit narrowed to $42.9 billion during June after an upwardly revised prior month deficit of $48.0 billion. Economists polled by Briefing.com had expected that the June deficit would come in at $47.5 billion. Consumer staples were Thursday's main laggard. Monster Beverage (MNST 54.27, -6.93) plunged 9.7% after missing earnings expectations by $0.02 and missing revenue forecasts by $3 million. The S&P was nearly unchanged on the day.

Handful of earnings scheduled to come in
There will be a considerable drop off in the number of companies reporting earnings next week. Just over 20 companies in the S&P 500 are expected to report their quarterly results. Going forward, earnings will largely be dominated by retailers whose fiscal periods end in July. Local deal website Groupon (GRPN 7.44, +0.79) will report Monday after the close, while Home Depot (HD 53.06, -0.09) TJX (TJX 44.46, -0.54) and Michael Kors (KORS 42.32, -0.68) will report on Tuesday morning.

Index	Started Week	Ended Week	Change	% Change	YTD %
DJIA	13096.17	13207.95	111.78	0.9	8.1
Nasdaq	2967.90	3020.86	52.96	1.8	16.0
S&P 500	1390.99	1405.87	14.88	1.1	11.8
Russell 2000	788.48	801.55	13.07	1.7	8.2

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