The Weekly View

Week of February 04, 2013

A volatile week slowed the rising momentum in the market. Economic slowdown along with lack of earnings surprise has taken out some of the driving force for a bull market. US, suing Standard & Poors; has caused a considerable stir in the market. Anticipation of high premium in the aftermath of Nemo has given the insurance companies an edge for the week. Apples stack of cash comes into news when David Einhorn pushed for more cash for shareholders. LinkedIn surprised with their last quarter earnings and is on way to become the major internet player in the market. One major new story was the EU leaders discuss on definite budget cuts. But, the influx of small investor money that partially drove the January rally is now becoming a factor of tension as the economy slows down.

Regional banks influence confidence Commercial lending has been on the upswing lately, and is expected to increase by another ten percent here in 2013. Consequently, regional banks based in places such as Connecticut have been attempting to expand their geographic footprint in major markets such as Boston and New York. This strategy has proven beneficial for a number of regional banks who have seen increased demand for loans and higher yields. Such examples of this would be banks such as Websters bank and Peoples United Bank, both based in Connecticut. In addition to these banks expansion into larger markets, these banks have also seen a significant increase in small business loans within the state which bodes well for the future. Websters Bank saw small business loans increase over twenty percent in last years fourth quarter while Peoples United Bank saw almost $900 million in commercial and commercial real estate loans in the fourth quarter, an increase of over thirteen percent. The increase in commercial lending as well as the presence and influence of regional banks indicates more and more confidence among investors and small business owners. The health of these regional banks, the outlook of which is becoming positive, are good indicators of the recovery in the market as well as the confidence of the people in the market moving forward.

Dual effect of blizzard Nemo Once again, the Industrials sector is continuing to improve as a whole. It has risen .79% over the past five day and 3.19% over the past month. The Dow Jones Transportation Average is rapidly climbing towards 6000, indicating an increasingly successful transportation sector. Troubles continue for Boeing (NYSE: BA), as the company continues to lose money and time due to the issues with its 787 Dreamliner. The firm has delayed deliveries of its new aircraft among concerns regarding the planes lithiumion batteries. A massive blizzard is set to assault the northeast, causing delays in travel and transportation. Airlines such as Southwest (NYSE: LUV) have already begun canceling flights in anticipation of potentially two feet of snow in some areas. Simultaneously, the storm presents a great business opportunity for firms such as Generac Holdings Inc. (NYSE: GNRC) who manufacture generators for residential and light commercial use. Their share price rose 80 cents as on Friday. Another stock continuing to perform well is Susser Holdings (NYSE: SUSS), a fuel distributer and convenience store operator mentioned several weeks ago. Transportation stocks also continue to be a good pick.

Drexel Finance and Investment Group; Weekly View of February 04, 2013 DELL LBO stirs the market This past week has been an interesting one for the IT sector. Computer giant, Dell, moved closer to a buyout that would once again make them a privately company. If the deal goes through they would be the biggest leveraged buyout since the financial crisis. The proposed deal, as it stands now, would be worth nearly $24 billion. Negotiations are narrowing to a price of $13.50-$13.75 a share. This move is led by Dell founder and CEO, Michael Dell. Microsoft is expected to invest $2 billion in the buyout deal. The deal has been facing a variety of problems though, since its announcement. The deal is being opposed by a major shareholder in the company. He believes that Dell is really worth about $42 billion, and that the shareholders will be unfairly compensated for their shares of the company. His fears are justified as Dell is currently trading higher than the proposed buyout price. The buyout would also leave the company with a massive amount of debt, $15 billion. The successful deal could trigger a series of LBOs in the market. It already lead to speculation of HP breakout. Linkedin, the professional social networking site passed 200 million members this week. Its shares have had a 17% growth since they released their Q3 results. The stock is currently trading at $135 a share. There has been some talk and speculation that it would be a wise move for Facebook to acquire Linkedin. Only time will tell if that will happen. Dividend yielding keeps up with the bull The utilities sector is up 0.88% from last week in the Dow Jones Industrial Index. The bullish trend for the utilities sector thus far appears to be steady. The gas, multi-utilities and water industries are up this week, though alternative and conventional electricity industries have decreased in the last day by 0.13% and 0.02% respectively. The S&P 500 Utilities Sector has also risen by .11% since the start of the month. The bullish trend for this sector may be accounted for because of the high yields offered by the utility sector along with stable earnings. The average dividend yield is 4% which is quite attractive to investors. The sector is expected to stay on its current upward climb. It comes as a shock to some since it fell during its last quarter of 2012, but now the sector poses as a great opportunity. Sales are In and Up for January The sales numbers for January are in and they are looking good. Kohls Corporation (NYSE: KSS) reported a 13.3 percent increase in store sales for the month compared to January 2012. Macys (NYSE:M) reported same store sales up 11.7%. Gap (NYSE: GPS) had a double dose of good news with increased sales in January and strong 4Q12 results. Ross (Nasdaq: ROST) reported a 4% sales gain and raised the 4Q12 estimate. These are just a few highlights from the many. News of these gains were unexpected as Fiscal Cliff Tax hikes were suppose to scare consumers away from stores with a lower disposable income. Yet, we saw a different trend. Consumer confidence gained a little during the month due to positive market gains and decreases in jobless claims. The upcoming months may be a little bleaker with gas prices are on the rise and further political uncertainty potentially causing volatility.

The week of February 11, 2013 The big event of the week is going to be Tuesdays state of the union speech from the president. This will give an indication of the coming budget battle and the possible sequester. A report on New York Fed areas manufacturing will shed light on the growth of the economy. University of Michigans consumer sentiment report will give us an indication of this consumption based economys future direction. Some reports on January retail condition will also become available. Globally, the G20 summit in Moscow will probably gear the direction towards the currency market.

Drexel Finance and Investment Group; Weekly View of February 04, 2013 A few major earning reports are coming this week. CISCO will report on Wednesday; it will be important to see if they keep up with the IBM results, or was IBM more of a company success than an industry wide trend. COMCAST will report on Wednesday while one of its big competitors, DirecTV will be publishing on Thursday. General Motors will provide another indication of US manufacturing with its earnings on Thursday. PEPSICO will also be publishing on Thursday and we will get a chance to compare it with Coca Cola earnings. Zipcar will be reporting its first earnings after the takeover decision.

Contributors: Regional banks influence confidence Vincent Laudicina Dual effect of blizzard Nemo Jeffrey Herr DELL LBO stirs the market Jocelynn Ritchey Dividend yielding keeps up with the bull Jane Beadling Sales are In and Up for January Maureen Gribb

Director Maureen Gribb Editor Tafhimul Huda