From Briefing.com: Weekly Recap - Week ending 02-Sep-16The stock market saw another week of limited movement, but managed to erase the bulk of last week's loss nonetheless. The S&P 500 added 0.5% thanks to a Friday rally, which took root after the release of a disappointing Employment Situation report for August.
According to the report, only 151,000 nonfarm payrolls were added, which was short of the Briefing.com consensus estimate of 180,000. Furthermore, average hourly earnings edged up just 0.1% (Briefing.com consensus 0.2%), leaving the year-over-year growth rate at 2.4%, which was down from 2.6% in July. The dollar dipped after the release, but rebounded as the day wore on.
As for the fed funds futures market, the initial reaction to the report saw a dip in near-term rate hike expectations, but only a portion of that move held. The implied likelihood of a hike in September ticked down to 21.0% from 24.0% while the probability of a December hike improved to 54.2% from 53.6% on Thursday.
In sum, the Employment Situation report was not weak enough to convince investors that a September rate hike is out of the question. The Treasury market agreed with that assessment, leading to some steepening in the yield curve on Friday as the long end underperformed.
With Labor Day around the corner, the upcoming weeks are expected to feature increased volume as market participants return from vacations.
Index Started Week Ended Week Change % Change YTD %
DJIA 18396.98 18491.96 94.98 0.5 6.1
Nasdaq 5218.92 5249.90 30.98 0.6 4.8
S&P 500 2169.16 2179.98 10.82 0.5 6.7
Russell 2000 1238.88 1251.28 12.40 1.0 10.2
5:27 pm Samsung establishes US product exchange program for the Galaxy Note7 in response to recent battery cell issues (SSNLF) :
"While there have been only a small number of reported incidents, Samsung is taking great care to provide customers with the support they need. Samsung has identified the affected inventory and stopped sales and shipments of those devices. For customers who have Galaxy Note7 devices, Samsung will voluntarily replace their current device with a new one from today...As a gesture of appreciation, consumers will receive a $25 gift card or bill credit from select carrier retail outlets when choosing a Galaxy S7 family device or the Galaxy Note7 within the exchange program."
4:26 pm MagnaChip Semi extends shareholder rights plan six months to March 5, 2017; continues to consider and evaluate strategic alternatives (MX) : The Rights Agreement is designed to ensure fair and equitable treatment of all MagnaChip shareholders in the event of an unsolicited acquisition offer. The Board has determined that Amendment No. 2 is in the best interest of MagnaChip shareholders, as the Board, with assistance from its Strategic Review Committee, continues to consider and evaluate strategic alternatives that may be available to the Company.
4:13 pm Closing Market Summary: Stocks Gain Following August Jobs Report (:WRAPX) :
The stock market ended the week on a modestly higher note as an inconclusive reading of the Employment Situation Report for August left fed funds rate hike expectations up in the air. The S&P 500 (+0.4%) finished in-line with the Nasdaq Composite (+0.4%) and the Dow Jones Industrial Average (+0.4%). The three indices ended the week higher between 0.5% and 0.6%.
Today's session began on a higher note as weaker-than-expected headline figures from the August employment report spurred buying interest in the broader market. The report indicated that 151,000 nonfarm payrolls were added in August (Briefing.com consensus 180,000) while the July number was revised to 275,000 (from 255,000). Separately, average hourly earnings came in cooler-than-expected, rising 0.1% (Briefing.com consensus 0.2%). The implied probability of an interest rate hike at the September Fed meeting fell to 18.0% shortly after the release of the report.
Participants walked back the knee-jerk reaction throughout the session, eyeing the longer-term trend in labor market data. The monthly nonfarm reading missed consensus estimates, but job growth has still averaged 232,000 over the past three months. Separately, remarks from the likes of Bill Gross and Richmond Fed President (a non-FOMC voter) Jeffrey Lacker worked to keep the possibility of a rate hike in play. The implied probability for a rate hike at the September meeting rebounded to 21.0% by the end of the session, slipping from the prior session estimate of 24.0%.
The S&P 500 (+0.4%) settled off its best level of the day, testing technical support near the 2173/2176 price level. All ten sectors ended in the green with materials (+0.8%), energy (+0.8%), and utilities (+1.2%) leading the pack. Conversely, countercyclical health care (+0.1%) and telecom services (+0.1%) finished with the slimmest gains. Other focal points impacting today's trade included a rebound in crude oil and sector leadership from heavily-weighted financials (+0.5%).
The economically-sensitive financial sector (+0.5%) ended ahead of the benchmark index, extending this week's gain to 2.0%. Money center banks rebounded in the space as investors responded to a steepening yield curve and a reversal in rate hike expectations. JPMorgan Chase (JPM 67.49, +0.28) and Citigroup (C 47.51, +0.15) finished higher by 0.4% apiece.
The Dow Jones Transportation Average (+0.4%) ended in-line with the broader market as shipping names and airlines outperformed. The U.S. Global Jets ETF (JETS 22.75, +0.27) ended higher by 1.4% as investors mulled August operational results from Delta Air Lines (DAL 37.17, +0.35) and Alaska Air (ALK 68.21, +0.95). The broader transportation index ended the week higher by 1.6%.
In the consumer discretionary sector (+0.2%), lululemon athletica (LULU 68.57, -8.09) weighed on the retail sub-group, sinking 10.6%. The name reported in-line quarterly results, but issued full-year guidance that was a bit light relative to expectations. Separately, Gap (GPS 23.92, -0.63) ended lower by 2.6% after reporting that same-store sales fell 3.0% in August. This compares to last August's decline of 2.0%.
The heavily-weighted health care sector (+0.1%) finished near its flat line as biotechnology underperformed. The iShares Nasdaq Biotechnology ETF (IBB 280.61,- 0.83) was under pressure after Democratic Presidential nominee Hillary Clinton unveiled plans to combat "unjustified price hikes" in the pharmaceutical industry. The plan includes making alternative medications available and fining drug makers for excessive price increases for long-standing treatments.
Treasuries ended on a lower note with the long end of the curve demonstrating relative weakness. The yield on the 2-yr note ended higher by one basis point (0.79%) while the yield on the 10-yr note settled higher by three basis points (1.60%).
Today's participation was below the recent average as fewer than 782 million shares changed hands on the NYSE floor.
Today's economic data included the Employment Situation Report for August, the Trade Balance for July, and Factory Orders for July:
The August employment report showed a deceleration in the labor market from recent months.Nonfarm payrolls increased by 151,000 (Briefing.com consensus 180,000). Over the past three months, job gains have averaged 232,000 per month.July nonfarm payrolls revised to 275,000 from 255,000Private sector payrolls increased by 126,000 (Briefing.com consensus 175,000)July private sector payrolls revised to 225,000 from 217,000Unemployment rate was 4.9% (Briefing.com consensus 4.8%) versus 4.9% in JulyPersons unemployed for 27 weeks or more accounted for 26.1% of the unemployed versus 26.6% in JulyAugust average hourly earnings were up 0.1% (Briefing.com consensus 0.2%) after being up 0.3% in JulyOver the last 12 months, average hourly earnings have risen 2.4% versus 2.6% for the 12-month period ending in JulyThe average workweek was 34.3 hours (Briefing.com consensus 34.5) versus 34.4 hours in JulyThe labor force participation rate was 62.8% versus 62.8% in JulyThe July Trade Balance Report showed a narrowing in the trade deficit to $39.5 billion (Briefing.com consensus -$43.0 billion) from a downwardly revised $44.7 billion deficit (from -$44.5 billion) for June. Net exports will provide a positive contribution to third quarter GDP as the real trade deficit of $58.3 billion for July was 4.3% less than the second quarter average.New orders for manufactured goods increased 1.9% in July (Briefing.com consensus +2.0%) following a downwardly revised 1.8% decline (from -1.5%) for June. Excluding transportation, orders were up 0.2% after a 0.4% increase for June.Transportation equipment orders (and particularly nondefense aircraft and parts orders ) drove much of the strength in July factory orders.For further details on these economic releases, be sure to visit Briefing.com's Economic Calendar page.
Bond and equity markets will be closed on Monday in observance of Labor Day. Tuesday's economic data will be limited to ISM Services for August (Briefing.com consensus 54.7), which will cross the wires at 10:00 ET.
Russell 2000: +10.0% YTDS&P 500: +6.7% YTDDow Jones: +6.1% YTDNasdaq Composite: +4.8% YTDWeek in Review: Stocks Climb Ahead of Labor Day
The stock market saw another week of limited movement, but managedto erase the bulk of last week's loss nonetheless. The S&P 500 added 0.5%thanks to a Friday rally, which took root after the release of a disappointing EmploymentSituation report for August.
According to the report, only 151,000 nonfarm payrolls wereadded, which was short of the Briefing.com consensus estimate of 180,000.Furthermore, average hourly earnings edged up just 0.1% (Briefing.com consensus0.2%), leaving the year-over-year growth rate at 2.4%, which was down from 2.6%in July. The dollar dipped after the release, but rebounded as the day wore on.
As for the fed funds futures market, the initial reaction tothe report saw a dip in near-term rate hike expectations, but only a portion ofthat move held. The implied likelihood of a hike in September ticked down to21.0% from 24.0% while the probability of a December hike improved to 54.2%from 53.6% on Thursday.
In sum, the Employment Situation report was not weak enoughto convince investors that a September rate hike is out of the question. The Treasurymarket agreed with that assessment, leading to some steepening in the yieldcurve on Friday as the long end underperformed.
With Labor Day around the corner, the upcoming weeksare expected to feature increased volume as market participants return fromvacations.
The stock market got off to a roaring start on Friday,boosted by a belief that a September rate hike is a lot less likely followingthe release of a disappointing Employment Situation report for August. Thereport missed headline expectations (151,000; Briefing.com consensus 180,000) andaverage hourly wage growth (+0.1%; Briefing.com consensus 0.2%) also missedestimates.
That combination was met with a retreat in the dollar, ajump in Treasuries, and a quick drop in rate hike expectations. Accordingly,stocks spiked out of the gate with the technology sector keeping pace with thebroader market. However, session highs were notched during the opening 30minutes and a pullback ensued as participants considered that maybe the jobsreport was not weak enough to keep the Fed on hold. After all, average hourlywages remain up 2.4% year-over-year and this is the longest stretch of jobgrowth on record. That recognition opened the door to a near-full retracement of thedrop in rate hike expectations while the dollar advanced and the Treasury yieldcurve steepened.
As for the technology sector (XLK 47.35, +0.21), the groupwas beholden to moves in the broader market for the most part. Semiconductornames, however, struggled throughout the day, sending the PHLX SemiconductorIndex lower by 0.2%. Broadcom (AVGO 173.11, -3.98) weighed despite beating earningsestimates. The stock fell 2.3% while NVIDIA (NVDA 62.53, -0.62) was also amongthe semi laggards, surrendering 1.0%. The remaining sectors also posted gains: XLF +0.5%, XLV +0.1%, XLY +0.2%, XLI +0.5%, XLE +1.1%, XLP +0.8%, XLB +1.0%,XLU +1.3%, IYZ +1.2%
Other notable news among sector components:
Samsung (SSNLF) Galaxy Note 7 recalled due to 35 reports of "battery issues." Reports of burning/melting batteries circulated; T-Mobile (TMUS 47.29, +1.04) suspended sales.
Renewed M&A chatter surrounding Cypress Semiconductor (CY 12.19, +0.12).
VeriSign (VRSN 79.02, +4.21) spiked on Cowen tweet about net domain adds tracking well for Q3
Elsewhere in the tech space:
MGT Capital Investments (MGT 3.33, +0.12) disclosed entry into subscription agreement, pursuant to which it sold 450k restricted shares at $3.00/share
Chinese regulators to probe Comcast (CMCSA 66.15, +0.26) acquisition of DreamWorks on anti-trust grounds
Verizon (VZ 52.88, +0.32) filed for mixed securities shelf offering
TIM Participacoes (TSU 12.98, +0.04) Board members elected Adrian Calaza for CFO
In reaction to quarterly results:
Ambarella (AMBA 66.99, -4.79) beat second-quarter earnings and revenue estimates, guided Q3 in line with expectations, and reaffirmed guidance for the fiscal year.
Broadcom (AVGO 173.11, -3.98) beat earnings/revenue estimates and guided Q4 revenue in the neighborhood of market expectations.
SeaChange (SEAC 2.91, +0.15) reported in-line results, but guided cautiously for Q3 and the full year.
VeriFone (PAY 16.81, -3.29) beat earnings estimates on light revenue, but issued defensive guidance for Q4.
Analyst actions:
MELI was upgraded to Overweight at JP Morgan;
ININ was downgraded to Hold at Craig Hallum;
CIEN was downgraded to Hold at Drexel Hamilton and to Equal-Weight at Morgan Stanley;
PAY downgraded to Neutral at Piper Jaffray
