From Briefing.com: Weekly Recap - Week ending 16-Sep-16
The stock market endured a volatile week, but was able to settle above last Friday's levels. The Nasdaq Composite was a clear outperformer, climbing 2.3%, while the S&P 500 added 0.5% after testing its 100-day moving average (2122.5) on several occasions.
The rate hike conversation remained top of mind throughout the week, but fears of a September hike were stomped out by the weekend. A disappointing August Retail Sales report (-0.3%; Briefing.com consensus -0.1%) contributed to the change in expectations, but somewhat surprisingly, Treasuries still sold off. Weakness in the 10-yr note drove its yield to a brief test of 1.75% before ending the week at 1.69% (+1 bp). The retreat in Treasuries suggest the bond market may be sniffing out some inflation down the road.
Taking a glance at the fed funds futures market, the implied likelihood of a September hike declined to 15.0% from last week's 24.0% while the implied odds of a hike in December slipped to 55.5% from 58.4% last week.
The technology sector (+3.0%) was a clear outperformed during the week, largely thanks to an 11.4% surge in the shares of Apple (AAPL). The top-weighted stock rallied on reports of strong iPhone 7 sales, ending the week near levels not seen since the end of 2015.
Index Started Week Ended Week Change % Change YTD %
DJIA 18085.45 18123.18 37.73 0.2 4.0
Nasdaq 5125.91 5244.57 118.66 2.3 4.7
S&P 500 2127.81 2139.11 11.30 0.5 4.7
Russell 2000 1219.21 1223.10 3.89 0.3 7.7
4:12 pm Closing Market Summary: Stocks End Volatile Week on a Lower Note (:WRAPX) :
The stock market ended a volatile week on a lower note as participants responded to a downturn in European banking names and a hotter-than-expected reading of the Consumer Price Index (CPI) for August. The Dow Jones Industrial Average (-0.5%) settled behind the S&P 500 (-0.4%) and the Nasdaq Composite (-0.1%). For the week, the S&P 500 gained 0.5% while the Nasdaq surged 2.3%.
European markets led to the downside as financials paced the retreat. Deutsche Bank (DB 13.37, -1.39) was under pressure after the U.S. Department of Justice proposed that the bank pay $14 billion in order to settle civil claims associated with the residential mortgage-backed securities crisis. Deutsche Bank has since announced that it is negotiating with the Justice Department to have the penalty reduced.
The future path of interest rate normalization was also in focus as investors assessed another round of inflation data for August. Total CPI increased 0.2% (Briefing.com consensus +0.1%) in August while core CPI, which excludes food and energy, jumped 0.3% (Briefing.com consensus +0.2%). On a year-over-year basis, CPI has increased 1.1% while core CPI is up 2.3%. The report signaled that inflation is firming, which underpinned a similar observation in yesterday's in-line core PPI reading.
Fed funds futures ticked higher following the inflation data, however, rate hike expectations remain tempered for next week's policy meeting. The implied probability of an interest rate hike at the September meeting increased to 15.0% from 12.0% in the prior session. Meanwhile, the implied probability of an interest rate hike at the December meeting rose to 52.9% from yesterday's 47.4% likelihood. The U.S. Dollar Index (96.06, +0.77, +0.81%) and short term Treasury yields also gained on the news.
The S&P 500 (-0.4%) remained pressured throughout the session as participants continued to assess a resurgence in volatility ahead of central bank policy meetings next week. Other factors impacting today's trade included a downturn in crude oil futures and another mixed performance from the Treasury complex. The energy (-0.9%) and financial (-0.9%) sectors ended with the largest losses while health care (+0.1%) and utilities (+0.9%) finished with the only gains.
In the financial sector (-0.9%), money center banks underperformed as Citigroup (C 46.41, -0.67) and Wells Fargo (WFC 45.43, -0.72) declined 1.4% and 1.6%, respectively. Wells Fargo was under pressure after being downgraded to "Underweight" from "Neutral" at Atlantic Equities. The stock declined 6.8% this week amid concerns regarding its sales practices. The broader space fell 1.3% this week, leading only energy (-0.9%; week-to-date: -2.9%) over that time.
The commodity-sensitive energy sector (-0.9%) was under pressure as crude oil extended its recent losing streak. The energy component ended the day lower by 1.9% ($43.04/bbl; -$0.81), extending its weekly loss to 6.2%. In the sector, Dow components Exxon Mobil (XOM 84.03, -1.05) and Chevron (CVX 97.84, -1.66) each finished behind the price-weighted index. The broader sector has declined 1.7% so far in September.
The technology sector (-0.3%) finished ahead of the broader market as the group pulled back from a larger weekly gain. Apple (AAPL 114.92, -0.65) finished lower by 0.6%, narrowing its weekly gain to 11.4%. Meanwhile, Oracle (ORCL 38.92, -1.94) fell 4.8% after missing bottom-line estimates for the quarter and issuing disappointing second-quarter guidance.
In the health care space (+0.1%), health care plan providers outperformed as Anthem (ANTM 125.52, +1.18) and CIGNA (CI 131.99, +3.35) gained 1.0% and 2.6%, respectively. The names outperformed following reports that the Department of Justice has dropped a claim in the lawsuit to block their potential merger. Separately, Abbott Labs (ABT 41.87, +0.75) gained 1.8% after Johnson & Johnson (JNJ 118.25, -0.38) agreed to acquire Abbott's Medical Optics division for $4.325 billion in cash.
Treasuries ended on a mixed note with the short end of the curve demonstrating relative weakness. The yield on the 2-yr note rose four basis points to 0.77% while the yield on the 10-yr note finished flat at 1.69%. The spread between the 2-yr and 10-yr note expanded to 92 basis points from 89 basis points last Friday.
Today's participation was above the recent average as more than two billion shares changed hands on the NYSE floor.
Today's economic data included CPI for August and the Michigan Sentiment Index for September:
Total CPI increased 0.2% in August (Briefing.com consensus +0.1%) while core CPI, which excludes food and energy, increased 0.3% (Briefing.com consensus +0.2%).
On a year-over-year basis, CPI is up 1.1% (vs. +0.8% in July), while core CPI is up 2.3% (vs. +2.2% in July).
Consumer inflation is firming (as is producer price inflation) and there is some data-based rationalization in the core CPI rate for the Fed to raise the fed funds rate.
However, the Fed keys in on the PCE Price Index as its primary inflation gauge and that index -- both total and core -- still shows consumer inflation below the Fed's 2 percent objective.
The preliminary reading of the University of Michigan Consumer Sentiment Survey for September was unchanged from the final August reading, holding at 89.8.
For more on these economic releases, be sure to visit Briefing.com's Economic Calendar page.
Monday's economic data will be limited to the NAHB Housing Market Index (Briefing.com consensus 59), which will cross the wires at 10:00 ET.
Russell 2000: +7.8% YTD
S&P 500: +4.7% YTD
Nasdaq: +4.7% YTD
Dow Jones: +4.0% YTD
Week in Review: Nasdaq Leads Stocks Higher
The stock market endured a volatile week, but was able tosettle above last Friday's levels. The Nasdaq Composite was a clearoutperformer, climbing 2.3%, while the S&P 500 added 0.5% after testing its100-day moving average (2122.5) on several occasions.
The rate hike conversation remained top of mind throughoutthe week, but fears of a September hike were stomped out by the weekend. Adisappointing August Retail Sales report (-0.3%; Briefing.com consensus -0.1%)contributed to the change in expectations, but somewhat surprisingly,Treasuries still sold off. Weakness in the 10-yr note drove its yield to abrief test of 1.75% before ending the week at 1.69% (+1 bp). The retreat inTreasuries suggest the bond market may be sniffing out some inflation down theroad.
Taking a glance at the fed funds futures market, the impliedlikelihood of a September hike declined to 15.0% from last week's 24.0% whilethe implied odds of a hike in December slipped to 55.5% from 58.4% last week.
The technology sector (+3.0%) was a clear outperformedduring the week, largely thanks to an 11.4% surge in the shares of Apple (AAPL). The top-weighted stock ralliedon reports of strong iPhone 7 sales, ending the week near levels not seen sincethe end of 2015.
5:43 pm TerraForm Global reports prelim Q2 results with adj EBITDA $40-46 mln and revs $52-56 mln vs $57.17 mln Cap IQ consensus (GLBL) :
Net MW Owned increased by 26 MW in 2Q due to the acquisition of Alto Cielo (Uruguay solar) in April.
Production and Revenue below management expectations due primarily to curtailment in China, and some wind turbines offline in India and Brazil.
Total production up 20% from 1Q 2016 primarily due to normal seasonality.
Revenue / MWh down 11% from 1Q 2016 due to mix, as a larger percentage of total production was from lower priced wind PPAs in 2Q 2016.
CAFD negatively impacted by $13M in accumulation of restricted cash in South Africa and India due to SunEdison (SUNEQ) bankruptcy-triggered or related defaults.
5:40 pm TerraForm Power releases prelim Q2 results with adj $152-160 mln and adj revs $198-206 mln (TERP) :
Production and revenue somewhat below management expectations due to wind resource 7% below normal, primarily in the Northeast. Fleet operations slightly better than expected.
Revenue per MWh up 27% vs. 1Q due to mix, as a higher percentage of 2Q production was from solar, which has higher pricing
($68M) negative impact to CAFD as a result of accumulation of restricted cash due to SunEdison bankruptcy-triggered or related defaults; CAFD midpoint would have been $55M had there been no change in restricted cash due to SunEdison bankruptcy-triggered or related defaults.
5:21 pm SolarCity issues statement on Nevada Public Utilities Commission vote to grandfather existing solar customers (SCTY) :
Co confirms the Public Utilities Commission's unanimous vote to ratify the stipulation negotiated by SolarCity, the Bureau of Consumer Protection, NV Energy and Public Utilities Commission Staff to grandfather solar customers in Nevada, Jon Wellinghoff, former Consumer Advocate for the State of Nevada and current SolarCity Chief Policy Officer.
The ratified agreement will grandfather all Nevadans who applied to install rooftop solar before December 31, 2015 on the net metering program they signed up under, for a period of 20 years. These customers include thousands of Nevadans who applied to go solar but have not yet installed their systems, and now have the ability to install solar under the grandfathered net metering program. SolarCity intends to commit the resources necessary to complete those installations and help all of their existing customers power their homes and communities. This order does not reverse the higher fees and charges on Nevadans who wish to go solar in the future. SolarCity intends to work with the Public Utilities Commission, legislators, and stakeholders to find a long-term solution that gives all Nevadans the freedom to install rooftop solar without being punished with higher charges.
Equity indices began the day under pressure as investors responded to a downturn in European markets. Regional bourses tilted to the downside amid weakness in financial names. Deutsche Bank (DB) led the retreat after the U.S. Department of Justice proposed a $14 billion settlement for civil claims relating to the bank's role in the residential mortgage-backed securities crisis. Deutsche Bank has since confirmed that it is negotiating with the DoJ and is seeking to have the fine reduced.
The U.S. Consumer Price Index (CPI) for August also contributed to early selling interest. CPI rose 0.2% in August while core CPI, which excludes food and energy, increased 0.3%. The inflation reading raised rate hike expectations for the coming months as participants mulled a firming inflation picture. CPI has increased 1.1% year-over-year while core CPI is up 2.3% year-over-year. The fed funds futures market shows that the implied probability of a rate hike at the September meeting has ticked up to 15.0% (from 12.0%) while the odds of a rate hike at the December meeting register at 52.9% (from 47.4%).
Also among market data readings, the preliminary reading of the University of Michigan Consumer Sentiment Survey for September was unchanged from the final August reading, holding at 89.8.
The markets closed out the week in the red. Losses were led by the Dow Jones Industrial Average which shed 88.68 points (-0.49%) to 18123.80. The S&P 500 was next, lower by 8.10 (-0.38%) to 2139.16, and the Nasdaq Composite lost 5.12 points (-0.10%) to 5244.57. This week's movements left the three major US indices +4.0%, +4.7% and +4.7%, respectively. Therefore, the lone bright spot this week was the Nasdaq, which added +2.3% in the past five trading days, as the other two indices hovered near flat lines. Top Nasdaq 100 components which aided today's advance included TSLA +2.5%, INCY +2.2%, NFLX +2.2%, BMRN +1.6% and REGN +1.5%.
As it were, all S&P sectors were lower today with Technology (XLK 47.21, -0.37 -0.78%) falling somewhere in the middle of the pack as losses went today and was near the middle of the daily trading range when the bell rang. Component Oracle (ORCL 38.92, -1.94 -4.75%) posted the worst session among sector constituents today following worse than expected Q1 EPS and in-line revenues. Other sectors as measured by the S&P closed Friday XLE -1.55%, XLFS -1.51%, XLF -1.38%, XLI -1.38%, XLP -0.94%, XLB -0.91%, XLY -0.60%, XLRE -0.34%, XLV -0.32%, IYZ -0.25%, XLU -0.04%.
In the S&P 500 Information Technology (792.05, -2.61 -0.33%) sector, trading capped off the week with modest losses as the sector was down -0.8% at lows. Component Intel (INTC 37.67, +1.11 +3.04%) was among the better performers today, resisting the broader market selling, as the company raised guidance in the premarket session for revenues and gross margins in the Q3 period. Other names in the space which under-performed today included JNPR -2.35%, GPN -2.30%, FIS -2.04%, TSS -1.92%, CA -1.57%, FSLR -1.50%, CSCO -1.49%, CTSH -1.44%, QRVO -1.36%, TDC -1.33%, PAYX -1.32%.
Other notable news items among sector components:
Oracle (ORCL) reported worse than expected Q1 EPS of $0.55 on in-line revenues which rose 1.9% compared to a year ago to $8.61 billion. SaaS and PaaS revenue were up 82% year-over-year and are expected to grow 75-80%. Software and Cloud were up 5% compared to a year ago, and are expected to grow 5-7%. ORCL guided on the conference call for Q2 in constant currency of $0.59-0.62 and revenue growth in constant currency of 0-3%.
Intel (INTC) raised its Q3 revenue and gross margin guidance, primarily driven by replenishment of PC supply chain inventory and an improving PC demand market. Specifically, INTC raised Q3 revenue guidance to $15.3-15.9 billion from $14.4-15.4 billion. Gross margin guidance also goes to 63%, up 1 point from the prior 62% guidance.
VeriSign's (VRSN 76.88, -0.33 -0.43%) Q2 domain name registrations were up 2.4% versus last quarter or by about 7.9 million.
PayPal's (PYPL 40.70, -0.13 -0.32%) Braintree detailed its partnership with China's UnionPay.
IBM (IBM 153.84, -1.82 -1.17%) and JFE Steel Co., Ltd., signed a five-year outsourcing agreement enabling the steel company to migrate core systems to the IBM Cloud while consolidating its IT infrastructure and streamlining its business operations. The company also signed a contract with the Bank of Tokyo-Mitsubishi UFJ (BTMU) to examine the design, management and execution of contracts among business partners using blockchain technologies. The two companies will begin by piloting blockchain to automate business transactions between the two companies.
Elsewhere in the tech space:
Samsung (SSNLF 1250, flat) to recall about 1 million Galaxy Note7 smartphones. The company also said new Note7 replacement devices will be available in the United States at most retail locations no later than September 21.
Pandora Media (P 13.45, +0.14 +1.05%) and Warner Music Group announce direct licensing agreement.
Mad Catz (MCZ 0.24, +0.05 +28.03%) announced the sale of Saitek Simulation product line to Logitech (LOGI 21.78, -0.23 -1.04%) for $13 million in cash.
Travelport Worldwide (TVPT 14.02, -0.25 -1.75%) announced an underwritten public offering of 7,986,979 common shares by selling shareholders.
Benchmark Electronics (BHE 23.93, -0.66 -2.68%) appointed Paul Tufano as President and CEO to replace Gayla Delly, who resigned to pursue other interests. The company also reaffirmed certain Q3 guidance for revenues between $570-660 million; also, diluted non-GAAP EPS between $0.33-0.38 (ex-restructuring charges).
ComScore (SCOR 32.46, +2.38 +7.91%) determined that various prior financial statements should no longer be relied upon. Further, based on the results of the Audit Committee investigation to date and management's review, the company cannot support the prior accounting for the non-monetary transactions recorded by the company during the years ended December 31, 2013, 2014 and 2015. The company later stated it expects to be a current SEC filer by early 2017.
Mobileye N.V. (MBLY 42.94, -1.27 -2.87%) issued a statement responding to allegations made by Tesla (TSLA 205.40, +4.98 +2.48%). The company noted it believes allegations recently attributed to a spokesperson for Tesla regarding Mobileye's position in respect of Tesla internal computer visions efforts are incorrect and can be refuted by the facts.
Demand Media (DMD 5.91, +0.22 +3.87%) acquired The Other Art Fair. Financial terms of the deal were not disclosed.
Analyst actions:
MU was upgraded to Buy from Neutral at Cleveland Research;
GWRE was downgraded to Underperform from Neutral at BofA/Merrill;
GPRO was initiated with a Buy at BofA/Merrill,
BOX was initiated with a Neutral at Mitsubishi UFJ
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