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By The Hot List | TradingMarkets.com | February 06, 2012 05:47 PM

Symbols: NVLS, KLAC, TQNT

 

Being a semiconductor stock is like being from the “technology wing of the technology party.” Whether it is in PCs or mobile devices, due to the advent of smart cars and smart appliances or the rise of The Cloud, few things seem to drive the tech sector like the capacity of semiconductor companies to make our machines move faster, work harder and make our lives that much better.

This is why the group is considered the leader of the overall technology sector. This is why some traders look to such phenomena as divergences between the behavior of semiconductor stocks compared to technology as a whole for potential clues as to whether the larger sector, or even the larger economy, is due for a surprising move.

Here our take on semiconductor stocks is in many ways more pedestrian. Many of these stocks have had great runs. And many traders who have benefitted from those runs appear to be at least starting the process of taking profits. And if that profit-taking continues, many of these semiconductor stocks could be available at their lowest, most oversold levels in weeks if not months.

The semiconductor stock that is most interesting in this regard right now is Novellus Systems (NASDAQ: NVLS). Shares of NVLS rallied to new, 52-week highs late last week, and have pulled back over the past two days as traders have locked in gains and taken profits. Down more than 2% and trading midway between recent, short-term highs and recent, short-term lows, NVLS has a positive edge of more than three-quarters of a percent and neutral ratings of 6 out of 10.

Other semiconductor stocks that have begun to sell off significantly as the week gets underway are Kla-Tencor Corporation (NASDAQ: KLAC), whch pulled back by more than 2% to finish at its lowest level in a week. KLAC has a positive edge of half a percent in the short-term, and has earned a two-point ratings upgrade based on Monday’s selling alone. Additional weakness in the stock could help KLAC earn another two-point upgrade which would put Kla-Tencor in our “consider buying” category in the near-term.

Sellers have already appeared to take control of Triquint Semiconductor (NASDAQ: TQNT). Unlike KLAC and NVLS, shares of TQNT are trading below their 200-day moving average – and have been since the summer of 2011. The stock had rallied into overbought territory on Friday, after climbing for four consecutive sessions. Shares of TQNT sold off by more than 2%, and still have “consider avoiding” ratings of 2 out of 10.

Want more stocks? Read our latest from 7 Stocks You Need to Know: “The Intel Pullback as Pitstop: Three Down, Six Up”

David Penn is Editor in Chief of TradingMarkets.com

Published: Wednesday, 25 Jan 2012 | 12:04 PM ET

By: Jeff Cox
CNBC.com Senior Writer

Sebastien Bozon | AFP | Getty Images

The Dogs of the Dow – those high-yielding stocks that are supposed to represent the bottom of the blue-chip barrel – have some unlikely company.

General Electric once stood as the bellwether of American industry but now sits among the 10 Dow stocks that produce the highest yield and, theoretically at least, represent the most risk for investors.

GE’s [GE  19.121    0.281  (+1.49%)   ] yield is clocking in at a robust 3.6 percent, more than double the 1.7 percent that Dow stalwart Caterpillar [CAT  107.43    1.14  (+1.07%)   ] produces. (GE is minority owner of CNBC.com-parent NBC Universal.)

Joining GE as newcomers to the 2012 Dog pound is Procter & Gamble, with a 3.2 percent yield.

The two companies replace Chevron [CVX  107.071    0.351  (+0.33%)   ] (3 percent) and McDonald’s [MCD  99.22    0.47  (+0.48%)   ] (2.8 percent), both of which boosted the Dogs to the status as one of the top trades of 2011.

As the Dow 30 gained about 5 percent and the Standard & Poor’s 500 finished flat for the year, the Dogs posted an average total return of 16.7 percent, according to calculations from Bank of America Merrill Lynch.

 

But the strategy has been a loser so far in 2012.

The Dogs, as tracked through their ETF proxy, the Deutsche Bank ELEMENTS Dogs [DOD  9.77    0.03  (+0.31%)   ] has gained just 1.2 percent even though the Dow had gained 3.7 percent and the S&P 500 4.5 percent heading into Wednesday trading.

That’s been the story of trading this year: What worked in 2011 has faltered in 2012. High-yield boomed last year but has faltered this year; high short interest worked as a contrary indicator then but not so much now, and non-domestic stocks are crushing their U.S.-based counterparts, again reversing a 2011 trend.

Still, the Dog collar hasn’t chased away those who believe the hunt for yield will resume.

“Yield is expected to remain scarce as the 76 million baby boomers head into their retirement years,” said Mary Ann Bartels, technical research analyst at BofA. “The equity market is supplying an abundance of yield and investors can get paid to wait for price appreciation.”

The rest of the current Dog pack: AT&T [ATT  25.388    0.006  (+0.02%)   ] , DuPont [DD  50.16    0.75  (+1.52%)   ] , Intel [INTC  26.9001    0.0051  (+0.02%)   ] , Johnson & Johnson [JNJ  65.16    0.16  (+0.25%)   ] , Kraft Foods [KFT  38.31    0.01  (+0.03%)   ] , Merck [MRK  38.71    -0.07  (-0.18%)   ] , Pfizer [PFE  21.661    0.001  (+0.01%)   ] and Verizon [VZ  37.5999    -0.1901  (-0.5%)   ] .

 

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Mr. Najarian has a knack for using options activity to spot impending stock moves.  Check this one out for American Eagle.

Trader Jon Najarian has spotted unusual activity in a major specialty retailer.

He tells us his proprietary OptionMonster heat seeker has identified an unusually high number of November 15 calls that recently traded in American Eagle[AEO  13.383    0.383  (+2.95%)   ].

”It’s not my number 1 pick in the space but there’s not doubt big investors have their eye on this stock, It’s a lot of upside buying.”

It suggests at least some institutional investors expect the stock to make a sharp move higher.

Elsewhere in the space trader Zach Karabell is watching VF Corp [VFC  136.93    4.24  (+3.2%)   ], Bed Bath & Beyond[BBBY  62.3802    0.5702  (+0.92%)   ], Nike[NKE  94.98    0.63  (+0.67%)   ]Limited [LTD  43.90    1.19  (+2.79%)   ]and Ralph Lauren[RL  157.85    7.11  (+4.72%)   ]which all hit record highs.

”High end retail is keyed into the discretionary spend. If people have money they continue to spend it.”

JJ Kinahan agrees. “For the high end this could be a much better holiday than many investors expect.”

 While not completely unexpected, this is not a fun prospect.  Seems likely that many traders will be looking to gold for some capital appreciation in the coming months.

The United States will likely suffer the loss of its triple-A credit rating from another major rating agency by the end of this year due to concerns over the deficit, Bank of America Merrill Lynch forecasts.

The trigger would be a likely failure by Congress to agree on a credible long-term plan to cut the U.S. deficit, the bank said in a research note published on Friday.

A second downgrade — either from Moody’s[MCO  32.00    0.62  (+1.98%)   ]or Fitch — would follow Standard & Poor’s downgrade in August on concerns about the government’s budget deficit and rising debt burden.

A second loss of the country’s top credit rating would be an additional blow to the sluggish U.S. economy, Merrill said.

“The credit rating agencies have strongly suggested that further rating cuts are likely if Congress does not come up with a credible long-run plan” to cut the deficit, Merrill’s North American economist, Ethan Harris, wrote in the report.

“Hence, we expect at least one credit downgrade in late November or early December when the super committee crashes,” he added.

The bipartisan congressional committee formed to address the deficit — known as the “super committee” — needs to break an impasse between Republicans and Democrats in order to reach a deal to reduce the U.S. deficit by at least $1.2 trillion by November 23.

If a majority of the 12-member committee fails to agree on a plan, $1.2 trillion in automatic spending cuts will be triggered, beginning in 2013.

Those automatic cuts, mostly in discretionary spending, would weigh further on a fragile U.S. economy, Merrill said.

In the same report, the bank reduced its 2012 and 2013 growth forecasts for the United States to 1.8 percent and 1.4 percent, respectively.

If there were a downgrade, it was not clear which ratings agency would move first.

Moody’s Investors Service, which has a negative outlook on the United States’s Aaa rating, said it is looking at several other factors, including the results of presidential elections and the expiration of the Bush-era tax cuts late in 2012, to decide on the rating.

“It’s not that we’re waiting just for this committee to decide on the rating,” Steven Hess, Moody’s lead analyst for the United States, told Reuters in an interview last week.

Failure by the committee to come up with an agreement, he said, “would be negative information but it is not decisive in our view about the rating.” To be sure, Hess did not rule out the possibility of an early move on U.S. ratings if the country’s economy slips into recession.

So far, however, the economic performance “is certainly not super positive but not a disaster either,” he said.

Fitch Ratings, on the other hand, still has a stable outlook on its AAA rating on the United States, meaning it is more likely to revise that outlook to negative before actually downgrading the rating.

In its latest report on the United States, Fitch says a “negative rating action,” which could be only an outlook revision, could result from a weaker-than-expected economic recovery or by failure by the bipartisan committee to reach agreement on at least $1.2 billion in deficit-reduction measures.

See full article here

This horrible idea pops up in the U.S. every few years, too.  Apparently, politicians everywhere have a difficult time with the idea that there is chunk of money somewhere they aren’t carving a piece out of. 

 

A financial transaction tax? It didn’t work when it was tried in Sweden.

Another potential factor in today’s late market drop: word that the European Commission will unveil a financial transaction tax on bond and stock trading, as reported by DealBook.

This is a variation on the Tobin Tax, first suggested by Nobel Laureate James Tobin, who proposed a tax on currency transactions.

France and Germany are reportedly in favor, but the UK and Sweden are not, and with good reason: it didn’t work when it was tried in Sweden.

In 1984 Sweden instituted an 0.5 percent tax on the purchase or sale of equities…a 1 percent tax on a round trip! It was doubled in 1986, and was subsequently modified depending on how long the security was held.

The result: taxable trading volumes fell, and the taxes collected were disappointing. Also, revenues from capital gains taxes fell at the same time (duh), so any gains from the transaction tax were offset by the fall in capital gains taxes.

The tax was abolished in 1991.

Read original article here

 

 

After much delay, the SEC is filing proposals to revise the existing market-wide circuit breakers.

The changes reduce the percentage declines needed to halt trading and simplifies the structure of the circuit breakers. It also changes the reference index from the Dow Industrials to the S&P 500.

The current circuit breakers, adopted in October 1988, kick in when the Dow Industrials drop 10, 20, and 30 percent.

The only time the circuit breakers actually kicked in was Oct. 27, 1997, when traded was halted twice.

And that’s the problem: they were useless during the “Flash Crash,” because the Dow never dropped more than 10 percent.

The SEC has put out the proposed changes for a 21-day comment period.

The changes will greatly simplify the current cumbersome structure. It will:

1) Reducethe market decline percentage thresholds necessary to trigger a circuit breaker. Instead of 10, 20, and 30 percent declines, the threshold will be reduced to 7, 13, and 20 percent declines from the prior day’s closing price.

2) Shorten the duration of the trading halts to 15 minutes.

3) Simplify the time when the trading halts kick in. Now there will be only two trigger periods: those that occur before 3:25pm (when trading would be halted for 15 minutes), and those that occur on or after 3:25pm, when there would be no halt in trading.

4) Recalculate the trigger thresholds on a daily, rather than quarterly, basis.

The individual stock circuit breakers, which halt trading if the price of an individual stock moves 10 percent or more in a five-minute period, remains in effect.

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Read original article here

Published: Wednesday, 14 Sep 2011 | 12:59 PM ET

 

Jon Corzine left government reluctantly, but there’s at least one reason why he doesn’t mind being out of office.
Dealing with the current federal debt and deficit problems, he said, is a job someone else can have.

That’s because he and fellow panelists gathered at the Delivering Alpha conference Wednesday agreed that controlling costs of large-scale entitlement programs such as Medicare and Medicaid are at the core of getting spending under control.

For those uninitiated in the way of U.S. politics, those programs are considered the proverbial third rails—touch them and you die.

“Entitlements absolutely have to be addressed in a way that I would have been uncomfortable talking about as an elected official,” said Corzine, the former New Jersey governor and U.S. senator. Republican Chris Christie defeated Corzine in the 2009 gubernatorial race.

The remark was telling during a lively debate over just what policymakers can do to address the U.S. spending issues. The federal budget deficit is approaching $1.5 trillion and the national debt is $14.5 trillion and growing.

Despite agreement that the issue must be addressed, reaching consensus on how to go about it is a difficult exercise. The problem is that cutting off spending could stymie growth, but allowing the debts and deficits to continue to balloon unabated pose what could be an even greater threat to national economic stability, as resources are diverted towards paying foreign creditors.

“There’s no question that in order for us to do right, we’re going to undergo less growth than we hoped for and less growth than a lot of people expect,” said Thomas F. Steyer, senior managing member at Farallon Capital Management. “Do I think it’s going to affect the way I am investing and the ways I think about the future? Yes, I do.”

Yet the notion that Washington will take away benefits from its big-ticket entitlements is troubling to some at at time of economic malaise.

As such, the populist battle to preserve the social compact against the practical realities of fiscal management continues to rage.

“This is a conversation about the responsibility of America’s elite. America’s elite is on this panel and gathered in this room. Exactly what level of responsibility do you people take to the rest of the people in this country?” said Damon Silvers, director of policy and special counsel for the AFL-CIO. “By cutting off the health care to poor, elderly Americans, think about what the public response to you might look like over the next generation.”

But Emil W. Henry Jr., former assistant Treasury secretary and CEO at Henry, Tiger, said the U.S. needs political change to take on difficult issues that are being ignored by the Obama administration.

He cited a speech earlier in the day from current Treasury Secretary Timothy Geithner as being evasive on what the White House will to do foster economic growth.

“Growth is the answer. I think (Geithner) gave lip service to growth,” Henry said. “I haven’t seen a single growth policy out of this administration.”

Ultimately, according to Corzine, who currently runs MF Global, resolving the issues may fall to those who are willing to sacrifice their political future.

“Politics is not going to go away,” he said. “People have to be willing to lose to have society win.”

Published: Friday, 2 Sep 2011 | 11:25 AM ET

 

U.S. securities regulators have taken the unprecedented step of asking high-frequency trading firms to hand over the details of their trading strategies, and in some cases, their secret computer codes.

Getty Images

The requests for proprietary code and algorithm parameters by the Financial Industry Regulatory Authority (FINRA), a Wall Street brokerage regulator, are part of investigations into suspicious market activity, said Tom Gira, executive vice president of FINRA’s market regulation unit.

“It’s not a fishing expedition or educational exercise. It’s because there’s something that’s troubling us in the marketplace,” he said in an interview.

The Securities and Exchange Commission, meanwhile, has also begun making requests for proprietary algorithmic trading data as part of its authority to examine financial firms for compliance with U.S. regulations, according to agency officials and outside lawyers.

The requests by SEC examiners are not necessarily related to any suspicions of specific wrong-doing, although the decision to ask for it can be triggered by a tip, complaint or referral.

According to interviews with attorneys, traders, industry executives and regulators, the unusual requests for algo code and other computerized trading strategies really ramped up this year and have targeted stock-trading firms such as broker dealers and hedge funds.

It has alarmed some traders who are afraid their “secret sauce”—intellectual property sometimes developed over years and at great cost—could get into the wrong hands, especially when SEC and FINRA examiners leave for the private sector.

“I’d be disappointed and upset” if they asked for code, said a high-frequency trading firm executive who declined to be named. “I mean, are these people all going to work at the SEC forever?”

The SEC’s new focus on algo strategies will likely help inform any new structural rules the government agency applies to an electronic market, criticized by some as unstable or unfair, especially after the “flash crash” on May 6, 2010.

While anything the regulators find could lead to legal action such as market manipulation suits, FINRA’s effort appears more targeted at wrong-doing.

FINRA, which reports to the SEC, usually focuses its requests on flawed codes in an effort to better understand how they are constructed, operate, and how they are supervised, Gira said. An unusually large wave of orders for a lightly traded stock, for example, could lead to a request, he said.

“The Next Level”

Trading code is a high-stakes secret for high-frequency firms that battle each other to earn razor-thin profits on tiny price imbalances in the market. Such firms can make thousands of trades per second and provide much liquidity to the market.

High-frequency trading is estimated to be involved in more than half of all U.S. stock trading. Regulators have said the algos behind such trading were a factor in the flash crash, but that they did not cause it.

Carlo di Florio, who heads the SEC’s Office of Compliance, Inspections and Examinations, said the agency started asking firms for proprietary algorithmic trading data over a year ago, and has since more broadly incorporated such requests into its risk-based exams.