From Briefing.com: Weekly Recap - Week ending 26-Aug-16The stock market spent the bulk of the week inside a narrow range, but Friday was a bit more active as participants responded to remarks from Federal Reserve Chair Janet Yellen, who spoke at the Kansas City Fed Economic Symposium in Jackson Hole, Wyoming.
During her speech, Ms. Yellen said that the case for a rate hike has strengthened in recent months, but she also noted that business investment remains soft and subdued foreign demand has restrained exports. Furthermore, Chair Yellen noted that future policymakers should explore the possibility of purchasing a broader range of assets. Overall, Ms. Yellen's speech could be deemed as hawkish or dovish depending on which elements one chose to focus on.
Ms. Yellen was followed by Fed Vice Chair Stanley Fischer, who appeared on CNBC and indicated that more than one rate hike could take place, but more data needs to be analyzed before that decision is made. Stocks retreated after these comments while rate hike expectations were pulled forward.
According to the fed funds futures market, the implied likelihood of a September rate hike increased to 36.0% from 21.0% on Thursday while the implied probability of a rate hike in December increased to 63.7% from yesterday's 51.7%.
The S&P 500 lost 0.7% for the week while the Nasdaq (-0.4%) outperformed slightly.
The first half of the trading week was very quiet even though participants received a few more quarterly reports from retailers. Best Buy (BBY), Guess? (GES), and PVH (PVH) surpassed estimates while Express (EXPR), Dollar General (DG), and Dollar Tree (DLTR) disappointed.
Although Friday's focus was squarely on the speech from Fed Chair Yellen, investors also received the second estimate of second-quarter GDP, which was revised down to 1.1% from 1.2%, as expected, while the GDP Price Deflator was revised up to 2.3% (Briefing.com consensus 2.2%) from 2.2%. There was no real change to second-quarter GDP, which everyone had already realized was quite disappointing despite the strong pickup in consumer spending.
Index Started Week Ended Week Change % Change YTD %
DJIA 18552.57 18396.98 -155.59 -0.8 5.6
Nasdaq 5238.38 5218.92 -19.46 -0.4 4.2
S&P 500 2183.87 2169.16 -14.71 -0.7 6.1
Russell 2000 1236.86 1238.88 2.02 0.2 9.1
4:18 pm Market Internals (:MKTIN) :
The Dow Jones Industrial Average ended down to 18395.4 ( -0.29%). The Nasdaq Composite ended higher at 5218.92 ( 0.13%) and the S&P 500 closed down at 2169.04 ( -0.16%). Action came on lower than average volume(NYSE 797 mln vs avg. of 900 mln; Nasdaq 1472 mln vs avg. of 1687 mln), w/ decliners outpacing advancers (NYSE 1206/1820, NASDAQ 1337/1497) andnew highs outpacing new lows (NYSE 196/11, NASDAQ 145/27).
Relative Strength:
S&P 500 VIX ST Futures-VXX +1.05%, U.S. Nat Gas -UNG +0.95%, Vietnam -VNM +0.87%, Nasdaq Biotechs-IBB +0.82%, Livestock-COW +0.739%, S&P Bank -KBE +0.738%, Emerging Middle East & Africa-GAF +0.35%, Provident Financial Services-PFS +0.14%, Indian Rupee -ICN +0.0471%, Emerging Markets Eastern Eur-ESR +0%
Relative Weakness:
Grains Subindex-JJG -2.333%, Utilities Select-XLU -2.05%, Greece 20-GREK -2.045%, South Africa-EZA -2.01%, Teucrium Corn-CORN -1.9046%, Poland-EPOL -1.87%, Mexico-EWW -1.75%, Singapore-EWS -1.597%, U.S. Home Construction -ITB -1.16%, Steel -SLX -1.11%
4:13 pm Closing Market Summary: Stocks Mixed as Investors Examine Rate Commentary (:WRAPX) :
The stock market ended a downbeat week on a flat note as commentary from the Jackson Hole Symposium boosted U.S. rate hike expectations and weighed on the major averages. The Dow Jones Industrial Average (-0.3%) settled behind the S&P 500 (-0.2%) and the Nasdaq Composite (+0.1%).
Equity indices enjoyed a modest bid at the start of the session as investors pored over a less-hawkish-than-feared interpretation of Fed Chair Yellen's seminal address. Chair Yellen indicated that the case for a rate hike had improved in recent months, but she also acknowledged that monetary policy is not on a preset course.
Investors initially shrugged off the commentary, evidenced by a transitory decline in the fed funds futures market. The implied probability of a rate hike at the September meeting briefly fell to 18.0%, slipping from the prior session's estimate of 21.0%. Additionally, equities and Treasuries rallied to session highs while the U.S. Dollar Index (95.49, +0.72, 0.76%) carved out a session low.
The broader market shifted gears near midday when Federal Reserve Vice Chairman Stanley Fischer resuscitated concerns regarding the speed and path of interest rate normalization. In a CNBC interview, Mr. Fischer indicated that more than one rate hike could take place before the end of the year. However, the Fed Vice Chair conditioned the potential hikes on a steady improvement in economic data. In response, the implied probability of a rate hike at the September meeting rose to 36.0% while the odds of an interest rate hike at the December meeting moved to 63.7%.
The S&P 500 (-0.2%) pared losses in the final hour, reclaiming technical support near the 2168/2171 price level. Despite the rebound, seven sectors ended in the red with the defensively-oriented telecom services (-1.1%) and utilities (-2.1%) sectors rounding out the leaderboard. On the flipside, heavily-weighted financials (+0.1%), technology (+0.1%), and health care (+0.4%) outperformed.
The countercyclical health care sector (+0.4%) ended in front of the pack, narrowing its week-to-date loss to 1.8%. Biotechnology displayed relative strength as the iShares Nasdaq Biotechnology ETF (IBB 285.14, +2.27) rebounded 0.8%. In the group, Amgen (AMGN 171.97, +1.74) outperformed while Mylan Labs (MYL 43.03, +0.18) recovered 0.4%. Mylan was under pressure this week as investors weighed criticisms regarding the price of its EpiPen device. Conversely, St. Jude Medical (STJ 78.01, +0.19) ended higher by 0.2% after responding to yesterday's bearish commentary from Muddy Waters Capital.
In the technology sector (+0.1%), the high-beta chipmakers outperformed, evidenced by the 0.5% gain in the PHLX Semiconductor Index. Micron (MU 16.51, +0.31) rallied 1.9%, sporting a week-to-date gain to 1.6%. This compares to a gain of 0.5% in the price-weighted index. Separately, large cap component Facebook (FB 124.96, +1.07) outperformed.
The consumer discretionary space (-0.3%) demonstrated relative weakness as retail names underperformed. The SPDR S&P Retail ETF (XRT 45.02, -0.34) ended lower by 0.8%, extending its week-to-date loss to 2.0%. Dow component Nike (NKE 59.00, -0.24) settled lower by 0.4% after being downgraded to "Neutral" from "Buy" at B. Riley & Company. Separately, Big Lots (BIG 50.57, -2.37) underperformed as investors evaluated mixed quarterly results.
Treasuries ended on a lower note as yields rose through the curve. The yield on the benchmark 10-yr note finished higher by four basis points (1.62%) while the yield on the 2-yr note finished at 0.84% (+5 bps).
Today's participation was above the recent average as more than 797 million shares changed hands on the NYSE floor.
Today's economic data included the second estimate of Q2 GDP, July International Trade in Goods, and the final reading of the University of Michigan Consumer Sentiment Survey for August:
Second quarter GDP was revised down to 1.1% from 1.2%, as expected, while the GDP Price Deflator was revised up to 2.3% (Briefing.com consensus 2.2%) from 2.2%.There was no real change to second quarter GDP, which everyone had already realized was quite disappointing despite the strong pickup in consumer spending.July International Trade in Goods showed a deficit of $59.32 billion, compared to the June deficit of $64.5 billion.The final reading for the University of Michigan Consumer Sentiment Survey for August dipped to 89.8 (Briefing.com consensus 90.6) from the preliminary reading of 90.4. The reading checked in just below the final reading of 90.0 for July.For further details on these economic releases, be sure to visit Briefing.com's Economic Calendar page.
Monday's economic data will include July Personal Income (Briefing.com consensus 0.4%), Personal Spending (Briefing.com consensus 0.3%), and Core PCE Prices (Briefing.com consensus 0.1%), which will each be released at 8:30 ET.
Russell 2000 +9.0% YTDS&P 500 +6.1% YTDDow Jones +5.6% YTDNasdaq Composite +4.2% YTD Week in Review: All Eyes on Jackson Hole
The stock market spent the bulk of the week inside a narrow range,but Friday was a bit more active as participants responded to remarks fromFederal Reserve Chair Janet Yellen, who spoke at the Kansas City Fed EconomicSymposium in Jackson Hole, Wyoming.
During her speech, Ms. Yellen said that the case for a ratehike has strengthened in recent months, but she also noted that businessinvestment remains soft and subdued foreign demand has restrained exports. Furthermore,Chair Yellen noted that future policymakers should explore the possibility ofpurchasing a broader range of assets. Overall, Ms. Yellen's speech could bedeemed as hawkish or dovish depending on which elements one chose to focus on.
Ms. Yellen was followed by Fed Vice Chair Stanley Fischer,who appeared on CNBC and indicated that more than one rate hike could takeplace, but more data needs to be analyzed before that decision is made. Stocksretreated after these comments while rate hike expectations were pulledforward.
According to the fed funds futures market, the impliedlikelihood of a September rate hike increased to 36.0% from 21.0% on Thursdaywhile the implied probability of a rate hike in December increased to 63.7%from yesterday's 51.7%.
The S&P 500 lost 0.7% for the week while the Nasdaq (-0.4%) outperformed slightly.
The first half of the trading week was very quiet eventhough participants received a few more quarterly reports from retailers. BestBuy (BBY), Guess? (GES), and PVH (PVH) surpassed estimates while Express(EXPR), Dollar General (DG), and Dollar Tree (DLTR) disappointed.
Although Friday's focus was squarely on the speech from FedChair Yellen, investors also received the second estimate of second-quarterGDP, which was revised down to 1.1% from 1.2%, as expected, while the GDP PriceDeflator was revised up to 2.3% (Briefing.com consensus 2.2%) from 2.2%. Therewas no real change to second-quarter GDP, which everyone had already realizedwas quite disappointing despite the strong pickup in consumer spending.
The major averages began the day on a modestly higher note as investors weighed mixed performances from global bourses and waited to hear from speakers at the Kansas City Fed's Economic Symposium. Japan's Nikkei (-1.2%) led to the downside overnight as disappointing inflation data spurred questions regarding the efficiency of monetary policy in dealing with slow consumer spending.
Equity indices notched session highs in the first hour of trade as investors responded to less-hawkish-than feared commentary from Fed Chair Yellen. Ms. Yellen stated that the case for increasing the fed funds rate has strengthened, but that monetary policy is not on a preset course. As such, Chair Yellen failed to offer a timetable for a rate hike despite her upbeat read on the U.S. economy. In response, equities and Treasuries rallied in lockstep while the dollar slipped.
The bullish response would prove to be short-lived as commentary from Fed Vice Chair Stanley Fischer renewed fears regarding a sooner-than-expected fed funds rate hike. Mr. Fischer stated that there was a chance that the Fed could hike rates twice before the end of the year, but followed the remarks by stating that the Fed needs to see a steady improvement in economic data.
Additional economic data today included the second quarter GDP was revised down to 1.1% from 1.2%, as expected, while the GDP Price Deflator was revised up to 2.3% from 2.2%. Also, July International Trade in Goods showed a deficit of $59.32 billion, compared to the June deficit of $64.5 billion. Lastly, the final reading for the University of Michigan Consumer Sentiment Survey for August dipped to 89.8 from the preliminary reading of 90.4.
Pressured by the latest round of Fed comments out of Jackson Hole, the broader market posted modest losses today albeit for the Nasdaq Composite which climbed out of the red in the final hour of action. Friday came to a close with the Nasdaq up 6.71 points (+0.13%) to 5218.92. The Dow Jones Industrial Average posted the worst session, losing 53.01 points (-0.29%) to 18395.40, and the S&P 500 was down 3.43 points (-0.16%) to 2169.04. This weeks movements take the three major US indices +4.2%, +5.6% and +6.1% YTD, respectively.
The Technology (XLK 47.05, +0.02 +0.04%) sector as a whole today jockeyed between gains and losses as investors attempted to digest the latest round of Fed speak. Other sectors as measured by the S&P closed today XLV +0.38%, XLF +0.12%, XLY -0.28%, XLI -0.29%, XLE -0.34%, IYZ -0.50%, XLP -0.51%, XLB -0.57%, XLU -2.07%.
In the S&P 500 Information Technology (783.65, +1.13 +0.14%) sector, trading escaped losses as buyers came out from the bushes in the final moments of action. Component Autodesk (ADSK 68.87, +5.17 +8.12%) was notably strong today following its latest quarterly print. Names in the space which managed modest gains today included ADSK +8.12%, STX +3.99%, MU +1.91%, TDC +1.70%, AKAM +1.37%, FSLR +1.32%, AMAT +1.08%, WDC +1.06%, MA +0.92%, FB +0.86%, NVDA +0.81%.
Notable news in the tech space:
Rackspace (RAX 31.50, +1.31 +4.34%) agreed to be acquired by Apollo Global (APO 18.46, -0.01 -0.05%) for $32.00 per share in cash, or approximately $4.3 billion. In connection with the transaction, funds managed by Searchlight Capital Partners, L.P. will make a strategic equity investment in the acquired company. The transaction has a total value of $4.3 billion, which includes the assumption of $43 million of net cash. Upon completion of the transaction, Rackspace will become a privately held company.
BlackBerry Ltd (BBRY 7.97, -0.01 -0.13%) announced the amendment of the indenture governing its 6% unsecured convertible debentures to permit optional redemption prior to November 13, 2016. The company also announced it entered into an agreement pursuant to which Fairfax Financial Holdings Limited and other institutional investors will subscribe for 3.75% unsecured convertible debentures of BlackBerry on a private placement basis for an aggregate subscription price of $605 million.
BT Group's (BT 26.03, -0.16 -0.61%) unit EE announced an exclusive offer that includes six months of
Apple (AAPL 106.94, -0.63 -0.59%) Music membership for new and upgrading EE pay monthly customers.
Bottomline Tech (EPAY 23.39, +2.57 +12.34%) announced a $60 million stock repurchase program.
Covisint (COVS 2.18, +0.10 +4.55%) reached an agreement with Dialectic Capital Management, will appoint three new independent directors to the Board.
Littelfuse (LFUS 126.99, +1.95 +1.56%) to acquire the product portfolio of transient voltage suppression diodes, switching thyristors, and insulated gate bipolar transistors for automotive ignition applications from ON Semiconductor (ON 11.03, +0.02 +0.18%) for $104 million; LFUS expects earnings accretion from the deal.
In reaction to quarterly results:
Brocade (BRCD 9.24, -1.22 -11.66%) reported better than expected Q3 EPS and revenues of $0.21 and $590.7 million, respectively. For Q4, BRCD sees EPS of $0.21-0.23 on revenues of $630-650 million. BRCD also noted expectations for SAN product revenue in Q4 (Oct) to be up +1-4% sequentially as they see a seasonal improvement although not as strong as co typically experiences.
Autodesk (ADSK) reported better than expected Q2 EPS and revenues of $0.05 and $550.7 million, respectively. For Q3, the company sees EPS and revenues coming in ahead of market expectations at ($0.27)-($0.22) and $470-475 million, respectively. For FY17, the company also sees EPS and revenues ahead of market expectations at ($0.70)-($0.55), up from prior ($0.95)-($0.55) and $2.0-2.05 billion, up from $1.95-2.05 billion.
Zayo Group Holdings (ZAYO 28.49, -0.75 -2.56%) reported a Q4 loss of $0.13 per share on revenues which came in ahead of market expectations at $507.3 million.
Splunk (SPLK 58.52, -6.58 -10.11%) reported better than expected Q2 EPS and revenues of $0.05 and $212.8 million, respectively. For Q3, the company sees revenues of $228-230 million. For FY17, the company sees revenues in the range of $910-914 million.
Analyst actions:
SPLK was downgraded to Hold from Buy at Stifel,
LEJU was downgraded to Sell from Underperform at CLSA;
RNG and EGHT were initiated with Neutral ratings at Robert W. Baird,
MEET was initiated with a Buy at Loop Capital,
IT was initiated with an Outperform at Macquarie,
FDS initiated with a Neutral at Macquarie,
RPD was initiated with a Buy at Rosenblatt,
CYBE was initiated with a Buy at Lake Street
