>>> US Close Dow-1,65% S&P-1,34% Nasdaq-1,89% Russell-0,51%

Closing Market Summary: Blue Chips Lead Stock Market Lower

The major averages stumbled on Tuesday with the S&P 500 (-1.3%) returning below its 50-day moving average (2,047). The benchmark index settled ahead of the Dow Jones Industrial Average (-1.7%), but behind the Russell 2000 (-0.5%).

Stocks careened lower at the start of today's session after several large companies cautioned that dollar strength will present a headwind to their future earnings. Most notably, Caterpillar (CAT 79.92, -6.11), DuPont (DD 73.18, -0.93), Microsoft (MSFT 42.66, -4.35), and Procter & Gamble (PG 86.49, -3.09) lost between 1.3% and 9.3% while Pfizer (PFE 32.60, -0.20), and United Technologies (UTX 119.16, +0.41) held up relatively well despite their warnings.

However, cautious guidance from six Dow components was not the only issue as investors had to digest a disappointing Durable Orders report while Consumer Confidence and New Home Sales beat expectations.

The Russell 2000 was able to stay ahead of the broader market as domestically-oriented small cap stocks benefitted from having limited exposure to currency fluctuations. Today's outperformance lifted the small-cap index ahead of the S&P 500 for the month of January. The Russell is lower by 0.8% since the end of 2014 while the S&P 500 has surrendered 1.4% so far this month.

Overall, cyclical sectors bore the brunt of today's losses with the top-weighted technology sector tumbling 3.3%. Microsoft's 9.3% decline was a notable drag on the index, but other large cap names also registered losses. Google (GOOGL 521.55, -15.17) and Intel (INTC 34.19, -1.62) lost 2.8% and 4.5%, respectively, while Apple (AAPL 109.13, -3.97) fell 3.5% ahead of its quarterly report. Investors are likely to pay close attention to Apple's guidance to see if the company joins the chorus of influential names voicing concern over greenback strength.

Elsewhere, the industrial sector (-1.3%) was the only other underperformer on the cyclical side, but the group caught up to the S&P 500 just ahead of the close. Caterpillar's 7.2% dive pressured the sector while transport stocks settled just ahead of the broader market. The Dow Jones Transportation Average fell 1.2%.

Over on the countercyclical side, consumer staples (-1.2%) finished in-line with the S&P 500 while health care (-0.8%), telecom services (-1.1%), and utilities (+0.2%) outperformed.

Similar to utilities, the energy sector (-0.2%) spent the day ahead of the broader market with crude oil lending support. The energy component rose 2.3% to $46.21/bbl while the energy sector narrowed its weekly gain to 1.2%.

Treasuries round tripped, spiking in the morning just to spend the remainder of the session in a slide from highs. The benchmark 10-yr yield slipped one basis point to 1.81% after testing the 1.76% level in the morning.

Today's participation was below average with fewer than 700 million shares changing hands at the NYSE floor.

Economic data included Durable Orders, Consumer Confidence, New Home Sales, and Case-Shiller 20-city Index:
  • Durable goods orders declined 3.4% in December after declining a downwardly revised 2.1% (from -0.9%) while the consensus expected an increase of 0.5% 
    • A significant portion of the negative surprise came from seasonal adjustments in the aircraft sector. Even though Boeing (BA 132.48, -1.59) reported a positive increase in orders on a month-to-month basis, sales actually declined significantly once seasonal factors were taken into consideration. Aircraft orders declined 46.4% in December, which led to a 9.2% decline in overall transportation orders 
    • Excluding transportation, durable goods orders fell 0.8% in November after declining a downwardly revised 1.3% (from -0.7%) while the consensus expected an increase of 0.7% 
  • New home sales increased 11.6% in December to 481,000 from a downwardly revised 431,000 (from 438,000) while the consensus expected a reading of 450,000
    • That was the most new homes sold since 487,000 were sold in June 2008 
    • Total sales in 2014 were marginally better than 2013, inching up 1.2% to 435,000 from 429,000 in 2013 
  • The Case-Shiller 20-city Home Price Index for November rose 4.3%, which is what the consensus expected 
  • The Conference Board's Consumer Confidence Index jumped to 102.9 in January from an upwardly revised 93.1 (from 92.6) while the consensus expected an increase to 96.0 
    • According to the index, consumer confidence is at its strongest level since August 2007 when the index reached 105.6 
Tomorrow, the weekly MBA Mortgage Index will be reported at 7:00 ET while the FOMC will release its latest policy directive at 14:00 ET.
  • Russell 2000 -0.8% YTD 
  • Nasdaq Composite -1.2% YTD 
  • S&P 500 -1.4% YTD 
  • Dow Jones Industrial Average -2.5% YTD

FT : Vitol to develop $7bn oil and gas project in Ghana with ENI

Vitol to develop $7bn oil and gas project in Ghana with ENI

Vitol, one of the world’s leading commodities traders, is to develop a $7bn offshore oil and gas project in Ghana with ENI, the Italian energy group.
The development, called Offshore Cap Three Point, will produce 15 years worth of gas for Ghana’s domestic power stations as well as crude oil for sale on international markets. It is the largest project backed by foreign investment in Ghana since the country gained independence in the 1950s.

The deal shows how trading houses continue to move away from their traditional role as middlemen — selling and buying commodities in large volumes — to invest in production, logistics, trading and processing. A year ago, Vitol announced its biggest acquisition, spending $2.6bn to buy an oil refinery and a large petrol station business in Australia from Royal Dutch Shell.
Vitol and ENI received the final go-head for the project from Ghana’s government on Tuesday. They expect oil to start flowing from the project’s five fields in 2017, with gas production expected to start a year later.
“This is a transformational project for Ghana,” Ian Taylor, chief executive of Vitol, said. “Vitol has been supplying energy to Ghana for over 25 years and we are delighted to be able to contribute to the development of Ghana’s economy through a major domestic energy solution.”
Ghana’s energy sector has expanded significantly since the discovery of the Jubilee oilfield in 2007.
Output has increased from 7,000 barrels a day in 2009 to about 100,000 b/d, according to the US Energy Information Administration.
However, Ghana has struggled to attract foreign investment. The World Bank has described the Offshore Cap Three Point gasfields as “top priority” for the country, saying they can help accelerate its industrial development.
The decision to go ahead with Offshore Cap Three Point project comes as many oil and gas companies are looking to cut costs and reduce spending on big developments because of the near 60 per cent drop in oil prices since the middle of June. It shows that if reserves can be developed economically and at low cost, energy companies are still willing to invest.
The project has attractions for ENI. Not only is it a conventional offshore discovery that can be developed simply but first production is due in a relatively short timeframe. It has also renegotiated supplier contracts for the project following the sharp slide in crude prices.
The exploration blocks that make up Offshore Cap Three Point were originally given to Vitol and a local partner several years ago, who then brought in ENI to help search for oil. ENI is now the operator and has a 47.2 per cent stake in the project. Vitol owns 37.8 per cent and Ghana’s national oil company, 15 per cent.
For Vitol, Offshore Cap Three Point is unusual in that it usually focuses on arrangements where it can sell oil and gas on international markets. In this case, all of the gas produced will be sold into the domestic market. The oil will be exported, however.
Vitol is the world’s biggest oil trader, handling more than 5m barrels a day of oil and products — equivalent to the daily consumption of Japan. It has more than 5,000 employees.
The privately owned company generated pre-tax profits of $845.4m in the year to December 2013.

(Re/Code.net) Why You Shouldn’t Bet on a Takeover of AMD

Why You Shouldn’t Bet on a Takeover of AMD

Shares of chipmaker Advanced Micro Devices are rising by more that 4 percent today in the wake of a report in Chinese media speculating that it could be the target of a buyout by the China-based chip firm BLX IC.

AMD would seem a tempting target. Its shares have fallen by more than 60 percent in three years, and even after today’s rumor-based rally, the company is valued at about $2 billion, making it a relatively inexpensive target for a potential acquirer.

But there is one really big reason that you should not put much trust in these rumors just yet: Its name is Intel.

AMD has long been a competitive irritant to Intel, though less so in recent years as its chips for PCs and servers have become ever less competitive to Intel’s. But the most important fact concerning their relationship is this: AMD has a long-term license to the use the crown jewels of Intel’s intellectual property, the x86 instruction set, and this agreement is one of AMD’s most important assets.

The x86 instruction set dates back to the days when Intel-made chips going into PCs made in the 1980s and 1990s were known by numbers and not names. There was the 386, then the 486, which evolved into the Pentium line, and now the Core processor line. It’s basically a set of fundamental rules that tell the chip how to behave, and thus has a lot to do with what makes a PC a PC. (And since Apple adopted Intel chips in 2006, this applies to the Mac, too!)

AMD has operated with a license to use the x86 instruction set for decades, negotiated only at great difficulty. (See the book “Inside Intel” by Tim Jackson for the epic history on this subject.) Terms of the license agreement are confidential, and it’s technically a cross-license as Intel uses some AMD patents too, but even so, it’s pretty clear that those rules are strict and ironclad, and they have frequently brought Intel and AMD to serious legal loggerheads.

For instance, when AMD sought to spin off its manufacturing operations and create the company now known as GlobalFoundries, Intel cried foul, saying that AMD could not extend the license to a third party. AMD might have been prevented from executing on a strategic move that essentially saved it from financial oblivion: At the time those, expensive factories were dragging it down.

The cross-licensing agreement was last extended in 2009 at a series of deeply contentious meetings in Maui between AMD’s lawyers and Andy Bryant, Intel’s longtime CFO and now its chairman. The meetings involved a mediator, San Francisco lawyer Antonio Piazza, who had helped the companies strike a similar deal in the mid-1990s. The deal formed a portion of the settlement of an even more complicated antitrust lawsuit AMD had brought.

That instance illustrates the extent to which Intel would quickly assert itself as a third party in any takeover talks between AMD and a potential buyer. Intel would essentially have the right to veto a buyout because it could easily cancel the x86 license, making AMD fundamentally less attractive to own. It would be no easy deal to conclude. And even if Intel did approve, the license is subject to occasional renewal. Some years down the road, Intel could simply refuse to engage in any renewal talks with the new owner.

The prospect of complicated negotiations alone is probably enough to scare off a potential acquirer. So don’t bet any money on an AMD buyout until there’s a formal offer on the table, and Intel has signaled it is unlikely to stand in the way. Until that happens, these rumors are just that: Rumors.

>>> US Companies reporting tomorrow before the open

MKC, PGR, STJ, TXT, PCH, CUBI, EAT, BA, BABY, GD, GNTX, HCBK, KNX, MKTX, SEIC, TUP, ACAT, AEP, CRS, MDP, TROW, UTL, AHGP, ARLP, SPIL, AME, CVLT, RDWR, STM, BAH, BOKF, CFR, EVER, FCAU, FCF, HES, PX, RES, ROL, RYAM, TEL, ANTM, ABC, ABMD, MDC, IP, HTCH, KLIC, ADT, ENR, MTOR, ROK, GIB, GWB

>>> Facebook: Expecting Q4 upside despite F/X headwinds; Bullish on FB's positio

Facebook: Expecting Q4 upside despite F/X headwinds; Bullish on FB's position for video ad growth

MKM Partners remains at Buy on FB shares, noting they consider co's results the most important for investor sentiment toward the Internet sector overall following a disappointing 2014 for stock performance and terrible Q3 reporting season for stock performance across the group. Firm expects strong pricing will be a consistent theme in 2015 and beyond as video ads become more common on Facebook and Instagram. Firm believes that expenses are more dollar denominated than rev, creating an even larger EPS impact.