Intraday Market Update
US equities have rebounded from early morning pressure and are in positive territory despite more disappointing economic news from around the globe. The S&P 500 futures were volatile in the overnight session, trading in a 13 point range. A big miss in preliminary Q2 GDP data out of Japan sparked the overnight selling and it continued before the bell when the Empire State Manufacturing survey showed its first negative new order component in 14 months. The NAHB housing market index for fell for the third consecutive month to 13 in August, and is down -9 points from a recovery peak of 22 in May. Homebuilders continue to complain about tight credit, inaccurate appraisals and competition from distressed properties. The Treasury International Capital (TIC) report showed that China's investment in US Treasuries continues to decline, falling -2.8% in June after a -3.8% drop in May. Nonetheless, the bulls are showing some resiliency as all of the major indexes have reversed early -1% losses to slight gains in early afternoon trading. Overseas, the Asia-Pacific markets were mostly lower with the exception of a +2.1% rally in the Shanghai Index. European markets were flat to slightly lower.
In earnings, home improvement retailer Lowes posted a slight miss in both earnings and revenue in their Q2 report. On the conference call executives said that despite economic uncertainty, its prudent expense management yielded solid results. And "with limited visibility into near-term demand," it continues to focus on operational efficiency to create shareholder value. LOW narrowed its full-year EPS and revenue forecast. Shares of LOW and competitor Home Depot HD are up +1.9% and +1.5% respectively. HD reports before the bell tomorrow.
There are few mergers & acquisitions making the rounds this morning. Notably, Dell announced that it has signed an agreement to acquire storage solutions firm 3PAR (PAR) for $18 per share in cash, valuing the deal at $1.15 billion which is a +86% premium to PAR's Friday close. PAR is up +86% while DELL is slightly negative. Flir Systems (FLIR) said it would acquire ICx Technologies (ICXT) for $7.55 per share in cash. ICXT is up +12% while FLIR is slightly positive.
For-profit colleges have been under the microscope recently. On Friday the Secretary of Education Arne Duncan said they would enforce deeper regulation of the for-profit education sector, citing that the Department of Education (DOE) will conduct twice as many investigations and possibly seek criminal penalties against certain individuals. Over the weekend the department said it would set up new benchmarks requiring for-profit institutions to show their programs improve graduate job prospects without burdening them with large amounts of debt. Strayer and the Washington Post Co. both warned that they may be impacted by the new rules. STRA and WPO and are down -15% and -8% respectively. Corinthian College COCO is down -20%, Education Management (EDMC) has shed -17%, DeVry is off -9%, and Lincoln Educational Services (LINC) is down -7%. Apollo Group (APOL) has gained +6% after the firm stated they believe they are in full compliance with the DOE's criteria.
Core Sector List:
Overall reading: 14 sectors advancing, 6 sectors declining
Strongest Sectors: Coal, Gold Miners, Oil Services, Biotechnology
Weakest Sectors: Insurance, Healthcare, Banks
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