Netflix tops S&P 500; Expedia sinks on downgrade

SAN FRANCISCO (MarketWatch) — Netflix Inc. shares were the biggest winners in the S&P 500 on Monday on a report that the video streaming company is in talks with major cable operators to add its video service to set-top boxes.

Expedia Inc. slumped in the wake of an analyst downgrade prompted by escalating competition.

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Netflix (NFLX)  shares surged 7.8%. Netflix is negotiating with Comcast Corp. (CMCSA)  and Time Warner Cable Inc. (TWC)  to make its content available on set-top boxes via a Netflix app, according to reports. However, it's not clear how close they are to a deal, with some operators worried about Netflix using the app as a "Trojan Horse" to sell programs that compete with their own offerings, The Wall Street Journal said. Last month, Sweden's Com Hem and Britain's Virgin Media reached deals to allow Netflix to be accessed via Tivo set-top boxes, according to Reuters.

Western Digital Corp. (WDC)  rose 3.3% while its peer Seagate Technology Inc. (STX)   is 2.3% higher. Total addressable market, or potential revenue opportunity available, for Seagate and Western Digital is expected to have risen slightly in the third quarter from the previous quarter, according to Sherri Scribner, an analyst at Deutsche Bank.

"We remain positive on the group, driven by our long-standing view that robust data growth will be the key driver of demand and that industry consolidation will lead to more stable pricing and profitability. We are buyers of both STX and WDC," said Scribner in a report.

Vertex Pharmaceuticals Inc. (VRTX)  shares gained 3.9%. Geoff Meacham, an analyst at J.P. Morgan, said last week that he rates the drug maker's stock at overweight due to opportunities for the company in the cystic fibrosis area.

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Decliners

Expedia (EXPE)  shares skidded 6.2%. The stock was downgraded to hold from buy and its target price slashed to $51 from $66 by analyst Ross Sandler at Deutsche Bank. "[Expedia's] challenges in 2013 are fairly well documented, its brands are facing much more intense competition in the U.S. market and customer acquisition costs are inflating," said Sandler in his note.

Whirlpool Corp. (WHR) shed 6.5%. Shares of the home appliances company were pressured due to a report suggesting that appliance demand has slowed with shipments up 5% to 7% in September compared to double-digit growth in August, according to StreetInsider.com.

Homebuilders were among the worst laggards as investors became more jittery ahead of the looming deadline on Thursday for lifting the debt limit. D.R. Horton Inc. (DHI)  is off 2.1% while Lennar Corp. (LEN)  shed 1.5%. PulteGroup Inc. (PHM)  slid 0.7%.

Top Tickers Trending

$YHOO: Yahoo Inc. (YHOO)  shares fell 0.4%. The Internet company is scheduled to release quarterly results on Tuesday. Analysts surveyed by Thomson Reuters forecast Yahoo to report earnings of 33 cents a share in the third quarter.

$C: Citigroup Inc. (C)  shares were up 0.8%. Citi is on tap to report third-quarter earnings early Tuesday. Analysts project the bank to earn $1.04 a share on revenue of $18.62 billion.

$FB: Facebook Inc. (FB)  has bought start-up Onavo, which was founded in 2010. Onavo's Tel-Aviv office will remain open for business and will become Facebook's new Israeli office. Shares of Facebook bounced back from negative territory to rise 0.8%.

$STZ: Constellation Brands Inc. (STZ)  shares recovered to trade up 0.3%. The alcoholic beverages company, which owns beer brands including Corona and Modelo, notched its all-time closing high of $62.99 on Friday, according to FactSet.

$KLAC: KLA-Tencor Corp. (KLAC)  shares rose 1.9%. Analysts at J.P. Morgan on Monday initiated coverage of KLA-Tencor and Lam Research Corp. (LRCX)  at overweight.

"We recommend exposure to semiconductor capital equipment stocks as we believe the semiconductor manufacturing industry is transitioning through significant inflection points in technology over the next two to three years," said Harlan Sur at J.P. Morgan said in a report. However, Sur initiated Applied Materials Inc. (AMAT)  at neutral, noting that its valuation suggests limited upside potential. Lam gained 0.9% and Applied Materials rose 0.6%.