Fiscal Cliff Optimism?

Indie Research

Stocks finished higher on a seesaw day on Wall Street. Some positive commentary out of Washington over optimism of finding a resolution to the fiscal cliff helped give stocks a modest lift after a generally weak week for equities. We think the sell-off has led to a number of buying opportunities, particularly in traditional income-oriented groups like MLPs.

The Nutrition Product Stocks Index was the top performing tickerspy Index on the day, led by Schiff Nutrition (SHF) with a 29% gain. The Chinese Online Gaming Stocks Index was the day's worst performing tickerspy Index, with NetEase.com (NTES) down -7%.

Stocks rose on the day, with the Dow up 46 points to 12,588. The S&P climbed 7 points to 1,360, while the Nasdaq added 16 points to 2,853. Oil rose $1.22 to $86.67 a barrel, while gold edged up 90 cents to $1,714.70 an ounce.

In economic news, the Federal Reserve said U.S. industrial production fell -0.4% in October following an upwardly revised 0.2% increase in September. Economists had expected a 0.2% October increase.

In earnings news, apparel retailer Gap (GPS) raised its full-year EPS guidance to $2.00-$2.25 from $1.95-$2.00 a share. Analysts were expecting EPS of $2.25. Gap posted a fiscal third-quarter profit of $308 million, or 63 cents per share, compared with $193 million, or 38 cents per share, a year earlier. Revenue rose 8% to $3.86 billion from $3.59 billion. Analysts had expected a profit of 62 cents per share on revenue of $3.84 billion. Shares of Gap rose 1.0%.

Shares of discount retailer Sears Holding (SHLD) plunged -18.8% after the company said its third-quarter loss widened to -$498 million, or -$4.70 per share, from -$421 million, or -$3.95 per share, a year earlier. On an adjusted basis, Sears lost -$1.99 a share compared with -$2.50 a year earlier. Revenue fell -6% to $8.86 billion. Analysts were looking for a loss of -$2.18 per share. Eleven pros counted Sears among their top holdings at the end of Q3 and 370 tickerspy members own the stock in their portfolios.

Personal computer maker Dell (DELL) said its fiscal third-quarter profit slid to $475 million, or 27 cents per share, from $732 million, or 42 cents per share, a year earlier. On an adjusted basis, the company earned 39 cents a share on revenue of $13.72 billion. Analysts had expected a profit of 40 cents on revenue of $14.4 billion. Dell said it expects fourth-quarter revenue to rise 2-5% from the third quarter. The company also reaffirmed full-year EPS guidance of at least $1.70 a share. Shares of Dell fell -7.5%. Thirty-one pros held Dell in their portfolios at the end of Q3 and nearly 960 tickerspy members own the stock in their portfolios.

Shares of casino operator Penn National Gaming (PENN) surged 28.2% after the company said it will spin-off at least 17 properties into the first-ever casino real estate investment trust. The publicly traded REIT will be known as PropCo. Through a tax-free dividend, PENN shareholders will receive PropCo common stock. PropCo will subsequently declare a taxable dividend of approximately $1.4 billion of accumulated earnings and profits equivalent to approximately $15.40 per PENN share comprised of approximately $487 million of cash, or an approximately $5.35 cash dividend per PENN share, with the remainder comprised of PropCo shares, according to a statement issued by Penn National.

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