From Briefing.com: 4:21 pm Floor Talk: A Sigh of Rate-Hike Relief (:TALKX) : The Federal Reserve might still raise the target range for the fed funds rate before the year is done, but it didn't do that today and the market breathed a sigh of relief over it.
That may sound strange given the understanding ahead of time that the fed funds futures market placed only a 15% probability on a rate hike at today's meeting; nonetheless, there was still some tension in the market pertaining to the possibility of the Fed springing a rate-hike surprise on the market.
That didn't occur and a non-rate hike rally ensued with intermarket dynamics suggesting as much:
Stock marketEvery sector ended the day higher, with the utilities sector (+2.1%) leading the way and the financials sector (+0.7%), which stands to benefit from a rate hike and a steeper yield curve, trailing the action.Bond marketThe yield on the 2-yr note, which hit 0.80% just before the Fed announcement, traded back down to 0.77%. The yield on the 10-yr note, which stood at 1.68% just before the Fed announcement, traded back down to 1.66% in a curve-flattening tradeCurrency marketThe U.S. Dollar Index declined 0.5% to 95.50. It stood at 95.85 just before the Fed announcement, but a pop in the euro after the decision reined it back in. That pop was presumably driven an unwinding of some policy divergence trades as the Fed was perceived to be less hawkish than feared
Commodity market
Riding the strength of oil (+2.9% to $45.34/bbl) and bolstered by the weaker dollar, commodity indexes pushed higher
The CBOE Volatility IndexThe index hit an intraday peak of 15.65 shortly before 1:00 p.m. ET, but cratered to 13.18 by the time the stock market closedTomorrow is a new day and new attitudes could prevail, yet the action in the capital markets on Wednesday after the Fed decision revolved around an understanding that the fed funds rate is going to remain unchanged for the time being.
4:20 pm Red Hat beats by $0.01, beats on revs and billings; guides Q3 and FY17 EPS and revs above consensus (RHT) :
Reports Q2 (Aug) earnings of $0.55 per share, $0.01 better than the Capital IQ Consensus of $0.54; revenues rose 19.0% year/year to $599.8 mln vs the $589.97 mln Capital IQ Consensus. Billings were approximately $573 mln vs. expectations for around $558 mln.Co issues upside guidance for Q3, sees EPS of $0.58 vs. $0.57 Capital IQ Consensus Estimate; sees Q3 revs of $613-623 mln vs. $611.48 mln Capital IQ Consensus Estimate. Co issues upside guidance for FY17, sees EPS of $2.23-2.25 vs. $2.21 Capital IQ Consensus Estimate; sees FY17 revs of $2.415-2.535 bln vs. $2.4 bln Capital IQ Consensus Estimate."We continued to close a record number of deals over $1 million in our second quarter, which are up more than 60% year over year. This further demonstrates our customers' commitment to Red Hat and the broad demand for our expanding technology portfolio as enterprises embrace digital transformation and the hybrid cloud."
4:06 pm Jabil Circuit beats by $0.03, beats on revs; guides Q1 EPS in-line, revs in-line; discloses restructuring plan (JBL) :
Reports Q4 (Aug) earnings of $0.28 per share, excluding non-recurring items, $0.03 better than the Capital IQ Consensus of $0.25; revenues fell 6.0% year/year to $4.4 bln vs the $4.26 bln Capital IQ Consensus.
Co issues in-line guidance for Q1, sees EPS of $0.54-0.74 vs. $0.61 Capital IQ Consensus Estimate; sees Q1 revs of 4.8-5.8 bln vs. $4.88 bln Capital IQ Consensus Estimate.
"In fiscal 2017, we'll continue to deliver upon our recently communicated capital return framework, ensure our global operations are efficiently managed to support our customers and continue to aggressively grow key areas of our business," added Mondello.
In addition, Jabil announced its intention to realign the Company's global capacity and administrative support infrastructure in order to optimize organizational effectiveness in a more moderate growth environment. The company estimates that the realignment shall result in approximately $195 million in total charges over a two year period. It is currently estimated that $120 million to $150 million will be recorded in fiscal year 2017 and the balance during fiscal year 2018. Jabil estimates that the cash component of these actions is $50 million of which $25 million will be incurred in fiscal year 2017.
4:15 pm : The stock market ended the midweek affair broadly higher as participants responded to the latest policy statements from the Federal Reserve and Bank of Japan. The S&P 500 (+1.1%) finished slightly ahead of the Nasdaq Composite (+1.0%) and the Dow Jones Industrial Average (+0.9%).
The broader market began the day on a higher note as a leg higher in crude oil and an accommodative policy decision from the Bank of Japan boosted risk appetite. The central banked opted to maintain its key policy rate (-0.10%) while shifting away from a monetary base target. Instead the central bank will establish interest rate controls designed to steepen the yield curve through quantitative and qualitative easing flows. The foreign exchange market appeared disappointed with the plan as the yen strengthened throughout the session. The dollar/yen pair finished lower by 1.2% (100.52).
Equity indices extended their gains in the opening hour as participants pored over weekly inventory data from the Department of Energy. The EIA reported that crude oil stockpiles declined by 6.20 million barrels (consensus: +3.35 million) while gasoline stockpiles fell by 3.20 million barrels (consensus: -0.57 million). The benchmark index gained lockstep with crude oil, but was unable to clear technical resistance near the 2150/2153 price level. The broader market retraced the bulk of its opening gain by midday. The energy component settled higher by 2.6% ($45.22/bbl; +$1.17).
The major averages recovered in the final hour of trade, notching new session highs as participants mulled over the latest policy statement from the FOMC and commentary from Fed Chair Janet Yellen. The FOMC opted to leave the target range for the fed funds rate unchanged at 0.25% to 0.50%. However, three committee members dissented, indicating that they supported an interest rate hike at the September meeting. Additionally, the committee lowered rate hike expectations going forward, estimating one rate hike in 2016, two to three in 2017, and three in 2018.
The benchmark index finished near its best level of the day, climbing above technical resistance near the 2160 price level. All eleven sectors ended in the green with telecom services (+1.3%), materials (+1.5%), utilities (+2.1%), and energy (+2.1%) leading the advance.
The Dow Jones Transportation Average (+1.8%) finished ahead of the broader market as FedEx (FDX 173.86, +11.21) led the index. The stock jumped 6.9% after reporting a top- and bottom-line beat and increasing its full-year earnings outlook. On the flipside, airline names rounded out the group after American Airlines (AAL 34.67, -0.48) was downgraded to "Market Perform" from "Outperform" at Raymond James. The broader U.S. Global Jets ETF (JETS 22.38, +0.02) inched higher by 0.1%.
In the influential technology sector (+1.1%), the high-beta chipmakers outperformed, evidenced by the 1.4% gain in the PHLX Semiconductor Index. Meanwhile, Adobe Systems (ADBE 107.78, +7.16) notched a new all-time high (108.22) after beating top- and bottom-line estimates for the quarter and issuing above-consensus fourth-quarter guidance. Conversely, top-weighted Apple (AAPL 113.55, -0.02) finished behind the broader sector.
Health care providers outperformed in the health care sector (+1.0%) as Anthem (ANTM 128.59, +2.83) rallied 2.3%. The stock rebounded after being removed from the US 1 List at Bank of America/Merrill Lynch in the prior session. Separately, biotechnology extended its recent winning streak as the iShares Nasdaq Biotechnology ETF (IBB 297.53, +1.83) advanced 0.6%. This follows yesterday's 1.4% gain.
The financial space (+0.7%) finished behind the broader market as participants continued to adjust rate hike expectations for the year. The fed funds futures market indicates that the implied probability of a rate hike at the November meeting has declined to 14.5% (from 22.0%) while the probability of a rate hike at the December meeting rose to 63.4% (from 59.2%). In the group, Wells Fargo (WFC 45.83, -0.73) fell 1.6% after being downgraded to "Neutral" from "Overweight" at JP Morgan.
Treasuries ended on a mixed note with the long end of the curve outperforming. The yield on the 2-yr note finished flat (0.77%) while the yield on the 10-yr note declined four basis points (1.65%).
Today's participation was roughly in-line with the recent average as more than 873 million shares changed hands on the NYSE floor.
Today's economic data was limited to the weekly MBA Mortgage Index:
The MBA Mortgage Index indicated that mortgage applications declined 7.3% in the week ending September 17. This followed a 4.2% gain in the prior week.
Tomorrow's economic data will include weekly initial claims (Briefing.com consensus 262k) and the FHFA Housing Price Index for July, which will cross the wires at 8:30 ET and 9:00 ET, respectively. Separately, Existing Home Sales for August (Briefing.com consensus 5.50 million) will be released at 10:00 ET.
Russell 2000: +9.6% YTD
S&P 500: +5.8% YTD
Nasdaq: +5.8% YTD
Dow Jones +5.0% YTD
DJ30 +163.74 NASDAQ +53.83 SP500 +23.36 NASDAQ Adv/Vol/Dec 2063/1.836 bln/792 NYSE Adv/Vol/Dec 2600/873.7 mln/416
3:30 pm :
The dollar index was -0.4% around the 95.64 level after the FOMC announced the FFR will be unchanged as expected, aided commodities
Commodities, as measured by the Bloomberg Commodity Index, were +0.7% around the 84.91 level
Crude oil extended yesterday's rally, broke above & closed over the $45.00/barrel resistance zone post-EIA
November crude oil futures rose $1.26 (+2.9%) to $45.34/barrel
The next OPEC meeting will take place in Algiers, Algeria from Sept 26-28
Baker Hughes rig count data will be released Friday at 1 pm ET.
Contributing factors affecting the price of oil include:
Last night's API data showed API data showed a surprise draw of -7.5 mln barrels of oil for the week ended Sept 16, compared to last week's build of +1.438 mln barrels.
Oil service worker strike in Oslo, Norway potentially threatening production.
Yesterday's statements from Russia's OPEC envoy discussing they are willing to cooperate on a potential 1-year deal to stabilize oil prices.
EIA inventory data showed surprise draws for both crude oil & gasoline inventories, crude oil inventories showed a draw of -6.20 mln (consensus called for a build of about +3.35 mln barrels) & gasoline inventories showed a draw of -3.20 mln (consensus called for a draw of about -0.57 mln barrels).
A weakening dollar after the FOMC announcement, -0.4% around the 95.64
Natural gas futures closed at 1.5-year highs for the second consecutive session ahead of tomorrow's inventory number
October natural gas closed $0.01 higher (+0.3%) at $3.06/MMBtu
EIA natural gas inventory data will be released tomorrow at 10:30 am ET
Contributing factors affecting the price of natural gas include:
Yesterday, EVA released its Aug coal stockpile report showing a decline of utility stocks by over 9 mln to 164 mln tons on continued strong summer coal burn of 75 mln tons vs shipments of 66 mln tons. The Aug drawdown was above the historical five-year avg stockpile decline of over 5 mln tons
Coal stocks showing notable gains include: ADES, +1.3%; ARLP, +3%; BHP, +3%; CNX, +5%; HW, +1%; CLD, +20%; TCK, +2%; YZC, +1%
In precious metals, gold's gains were outpaced by silver as the dollar collapsed after the FOMC announced the Fed Funds Rate will be unchanged
December gold ended today's session up $13.50 (+1.0%) to $1331.50/oz
December silver closed today's session $0.49 higher (+2.5%) at $19.76/oz
Base metal copper inched lower in afternoon pit trading
December copper closed $0.01 lower (-0.5%) at $2.15/lb
Equity indices began the day on a higher note as an accommodative policy statement from the Bank of Japan stoked risk appetite. The central bank voted to maintain its key lending rate (-0.10%), but also announced changes to its monetary policy framework. The central bank will shift away from its monetary base target, moving toward interest rate controls. The policy includes plans to keep the yield on Japan's 10-yr note near 0.00%, which should result in some steepening in the yield curve. The Bank of Japan also indicated that it is committed to maintaining easing measures until inflation is above the target rate, in a sustainable fashion. However, the response in the currency market was the opposite of what the Bank of Japan hoped to see.
An upswing in crude oil futures also contributed to early strength. The energy component was bid overnight as investors responded to a better-than-expected reading of the American Petroleum Institute's weekly inventory report. Oil extended its winning streak after the Department of Energy confirmed the bullish reading with its more influential inventory report. The EIA reported that crude oil stockpiles fell by 6.20 million barrels while gasoline inventories declined by 3.20 million barrels. The session ended with November crude oil futures up $1.26 (+2.9%) to $45.34/barrel.
The lone piece of market data today came in the form of the MBA Mortgage Index which indicated that mortgage applications declined 7.3% in the week ending September 17. This followed a 4.2% gain in the prior week.
Stocks ended Wednesday near highs as the Federal Reserve policy statement launched stocks, and action never looked back. Leading the way higher today, the S&P 500 added 23.36 points (+1.09%) to 2163.12. The Nasdaq Composite closed at a new all-time high today, ultimately higher by 53.83 points (+1.03%) to 5295.18, and the Dow Jones Industrial Average gained 163.74 points (+0.90%) to 18293.70.
Following the Fed, Technology (XLK 47.62, +0.53 +1.13%) surged to highs as modest gains were turned into a +1% session. Component Adobe Systems (ADBE 107.78, +7.16 +7.12%) was the best performer today in the sector on the back of the company's better than expected Q3 report. All 11 S&P sectors closed higher today, landing with XLE +2.36%, XLU +2.03%, XLB +1.52%, XLI +1.30%, XLRE +1.15%, XLV +1.00%, XLY +0.97%, XLF +0.67%, IYZ +0.66%, XLFS +0.59%, XLP +0.55% higher at the bell.
In the S&P 500 Information Technology (798.65, +8.64 +1.09%) sector, trading surged higher with the broader market and closed at highs. Component Apple (AAPL 113.55, -0.02 -0.02%) was the lone underperformer among sector components today following unconfirmed chatter than the company might purchase McLaren Technology Group and LIT Motors. Other names in the space which outperformed today included JNPR +5.26%, MU +4.37%, ADSK +4.22%, CSRA +3.78%, STX +3.26%, YHOO +3.15%, WDC +3.14%, HPQ +3.09%, NVDA +2.81%, GPN +2.55%.
Other notable news items among sector components:
Microsoft (MSFT 57.76, +0.95 +1.67%) announced a $40 billion share buyback and increased its dividend to $0.39 from $0.36 per share.
Intuit (INTU 110.78, +1.81 +1.66%) reaffirmed guidance for Q1 (Oct), sees EPS of $0.01-0.03 on revenues of $740-760 million. Further, INTU sees QuickBooks Online subscribers of about 1.6 million in the period. The company also reaffirmed guidance for FY17 (Jul) with expectations for EPS of $4.30-4.40 on revenues of $5.0-5.1 billion. The company also sees QuickBooks Online subscribers of 2.0 million to 2.2 million for the period.
CA Tech (CA 32.72, +0.40 +1.24%) to acquire BlazeMeter. Financial terms of the deal were not disclosed.
Samsung (SSNLF 1250, flat) announced that over 500,000 new Galaxy Note7 replacement devices have arrived in the U.S. and have been shipped to carrier and retail stores.
IBM (IBM 115.53, +1.08 +0.70%) announced the opening of a new cloud data center in Fetsund, 30 km outside Oslo, Norway, the industry's first cloud data center in the region.
According to an FT article, Apple (AAPL) might acquire McLaren Technology Group. Also, the NY Times later suggested AAPL might also buy LIT Motors.
Elsewhere in the tech space:
Commscope (COMM 30.64, -0.19 -0.62%) announced the sale of 10 million shares of common stock by affiliate of The Carlyle Group (CG 15.65, +0.13 +0.84%).
Booz Allen Hamilton (BAH 30.89, +0.55 +1.81%) was awarded a five-year time and materials task order with a maximum ceiling value of $268,000,000 if all options are exercised.
Inteliquent (IQNT 15.79, +0.45 +2.93%) appointed Eric Carlson as interim Principal Financial Officer and interim Principal Accounting Officer effective Sept 24. The company stated it is in the process of identifying a candidate to serve as CFO.
In reaction to quarterly results:
Adobe Systems (ADBE) reported better than expected Q3 EPS and revenues of $0.75 and $1.46 billion, respectively. For Q4, the company sees EPS of $0.83-0.89 on revenues of $1.55-1.60 billion. This raises FY16 EPS expectations to $2.94-3.00 from $2.80, and revenue expectations to $5.80-5.85 billion from $5.8 billion.
Airgain (AIRG 16.05, -0.07 -0.43%) reported Q2 EPS of $0.15 on revenues of $9.86 million.
Stocks slated to report quarterly results tonight: JBL, RHT
Analyst actions:
JBL was upgraded to Buy from Neutral at UBS,
NTES was upgraded to Buy at Daiwa;
DTSI was downgraded to Neutral from Buy at Dougherty & Company, and to Neutral from Buy at B. Riley & Co.,
WIX was downgraded to Neutral from Overweight at JP Morgan,
FICO was downgraded to Equal Weight from Overweight at Barclays,
AIRG was downgraded to Hold from Buy at Wunderlich;
SPLK was initiated with a Neutral at Mizuho
