From Briefing.com: 4:15 pm : The stock market ended the Thursday affair on a higher note as participants continued to mull over yesterday's policy decision and guidance from the Federal Reserve. The broader market maintained its risk-on posture for a second session as the Nasdaq Composite (+0.8%) finished ahead of both the S&P 500 (+0.7%) and the Dow Jones Industrial Average (+0.5%). The Federal Reserve sparked a risk rally in global markets after voting to leave the target range of the fed funds rate unchanged (0.25% to 0.50%) at yesterday's policy meeting. Investors shook off persisting concerns regarding a potential September rate hike and also adjusted their rate hike expectations for the years ahead. The FOMC lowered its median projections for the fed funds rate to 0.6% for 2016, 1.1% for 2017, and 1.9% for 2018.
It is also worth noting that the committee reported that the case tightening has strengthened in recent months as three members supported a hike at yesterday's meeting. This leaves the door open for a potential rate hike before the end of the year. The implied probability of a rate hike at the December meeting registers at 58.4% after beginning the week at 55.0%.
The benchmark index notched a session high in the opening hour of trade, testing but failing to clear technical resistance near the 2180 price level. The broader market pulled back shortly thereafter as market leadership shifted away from commodity-sensitive energy (+0.2%) and materials (+0.3%) and towards defensively-oriented consumer staples (+0.9%), telecom services (+1.1%), and real estate (+1.9%). This also corresponded with a slight recovery in the U.S. Dollar Index (95.41, -0.25, -0.27%). Dollar-denominated commodities finished mostly higher with WTI crude ending up 2.2% ($46.33/bbl; +$0.99) on the day.
The broader market finished in the upper end of today's trading range as all eleven sectors settled in the green. The heavily-weighted industrial (+0.8%), consumer discretionary (+0.8%), and health care (+0.8%) sectors finished behind consumer staples (+0.9%), telecom services (+1.1%), and real estate (+1.9%). On the flipside, the financial sector (+0.3%) rounded out the leaderboard.
The consumer discretionary space (+0.8%) finished ahead of the broader market as heavily-weighted Amazon (AMZN 804.70, +14.96) displayed relative strength. The name jumped 1.9% after being upgraded to "Buy" from "Hold" at Argus. Meanwhile, Carnival (CCL 46.84, +1.02) and Royal Caribbean (RCL 70.99, +3.13) outperformed after the European Commission proposed a Political Dialogue and Cooperation Agreement with Cuba. Recall that Carnival opened new routes to Cuba earlier in the year.
In the health care space (+0.8%), Mylan Labs (MYL 42.59, +0.68) rallied 1.6% after CEO Heather Bresch testified before the House Oversight and Government Reform Committee yesterday. Ms. Bresch addressed the ongoing controversy regarding Mylan's EpiPen pricing. Mylan has gained 0.5% in September after falling 9.5% in the prior month. The broader iShares Nasdaq Biotechnology ETF (IBB 300.08, +2.55) finished slightly ahead of the health care sector, ticking higher by 0.9%.
The financial sector (+0.3%) underperformed as investors eyed a downturn in long term Treasury yields and diminished rate hike expectations. Wells Fargo (WFC 45.72, -0.11) declined 0.2% after a group of U.S. Senators asked the Labor Department to investigate the bank. Wells Fargo has lost 10.0% in September amid ongoing concerns over prior sales practices. Conversely, the real estate sector (+1.9%) outperforms as rate-sensitive real estate investment trusts have displayed relative strength so far this month.
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 three basis points (1.62%).
Today's participation was roughly in-line with the recent average as more than 833 million shares changed hands on the NYSE floor.
Today's economic data included weekly initial claims, the FHFA Housing Price Index for July, Existing Home Sales for August, and Leading Indicators for August:
Initial jobless claims for the week ending September 17 decreased by 8,000 to 252,000 (Briefing.com consensus 262,000).
Continuing claims for the week ending September 10 decreased by 36,000 to 2.113 million.
The FHFA Housing Price Index for July rose 0.5%, which followed an increase of 0.2% in June.
Existing home sales decreased 0.9% month-over-month in August to a seasonally adjusted annual rate of 5.33 million (Briefing.com consensus 5.50 million), up 0.8% from last year.
Existing home sales in July were revised down to 5.38 million from 5.39 million.
The Conference Board's Leading Economic Index declined 0.2% in August (Briefing.com consensus +0.1%) on the back of an upwardly revised 0.5% increase (from 0.4%) for July.
This was the second time over the last four months that the index has been negative.
For more on these economic releases, be sure to visit Briefing.com's Economic Calendar page.
There is no economic data scheduled to be released tomorrow.
Russell 2000: +11.2% YTD
Nasdaq Composite: +6.6% YTD
S&P 500: +6.5% YTD
Dow Jones: +5.6% YTD
4:04 pm Novatel Wireless to sell mobile broadband business for $50 mln in cash to T.C.L. Industries Holdings, to restructure into public holding company (shares halted; will resume 4:30 p.m. ET) (MIFI) :
Co entered into an agreement with T.C.L. Industries Holdings, a Hong Kong company, whereby MIFI will sell to TCL its mobile broadband business for a cash payment of $50 mln payable at closing. The closing of the transaction is subject to the receipt of various regulatory authority approvals, as well as the approval of MIFI's stockholders and convertible noteholders. The closing of the transaction is expected to occur in the first quarter of 2017.
MIFI then intends to undertake a holding company restructuring, which will result in Newco, a newly-formed wholly-owned subsidiary of MIFI, owning all of the capital stock of MIFI. Pursuant to the proposed
Restructuring, a newly-formed, direct, wholly-owned subsidiary of Newco and an indirect wholly-owned subsidiary of MIFI will be merged with and into MIFI, with MIFI surviving as a direct wholly-owned subsidiary of Newco. Each share of the common stock of MIFI issued and outstanding immediately prior to the merger of MIFI with Merger Sub will automatically convert into an equivalent corresponding share of the common stock of Newco, having the same designations, rights, privileges, qualifications and limitations as the corresponding share of MIFI common stock being converted. Accordingly, upon consummation of the
Restructuring, MIFI's current stockholders will become stockholders of Newco, and the current directors and senior executive management team of MIFI will be the directors and senior executive management team of
Newco.
Shares are slated to resume at 4:30 p.m. ET
Techstocks: Equities began the day on a higher note as global markets reveled in diminished fed funds rate hike expectations. The Federal Reserve voted 7-3 to maintain the target range of the fed funds rate (0.25%-0.50%) while also lowering rate hike expectations for the years ahead. However, the three dissenting members of the committee signaled that there still remains a chance for a rate hike before the end of the year. The implied probability of a rate hike at the December meeting registers at 63.4% after beginning the week at 55.0%.
Market data today included initial jobless claims, which for the week ending September 17 decreased by 8,000 to 252,000. Also, the FHFA Housing Price Index for July rose 0.5%, which followed an increase of 0.2% in June. Existing home sales were down 0.9% month-over-month in August to a seasonally adjusted annual rate of 5.33 million, up 0.8% from last year. Lastly, the Conference Board's Leading Economic Index declined 0.2% in August on the back of an upwardly revised 0.5% increase (from 0.4%) for July.
Stocks extended their Fed Statement rally today, ending with decent gains all around. Leading the rally today, the Nasdaq Composite added 44.34 points (+0.84%) to 5339.52. The S&P 500 was up 14.06 points (+0.65%) to 2177.18, and the Dow Jones Industrial Average was higher by 98.76 (+0.54%) to 18392.46.
All 11 S&P sectors were in the green today with Technology (XLK 47.91, +0.29 +0.61%) ending somewhere in the middle of the pack as a subsector of tech, Telecom (IYZ) was the best performer. Component Red Hat (RHT 80.02, +2.98 +3.87%) was one of the better performing names today as the company's Q2 report beat market expectations on the top and bottom lines. Other sectors as measured by the S&P closed the session IYZ +1.97%, XLRE +1.97%, XLP +0.88%, XLV +0.76%, XLY +0.73%, XLI +0.71%, XLU +0.61%, XLB +0.32%, XLFS +0.29%, XLF +0.21%, XLE +0.12%.
In the S&P 500 Information Technology (803.07, +4.42 +0.55%) sector, trading was higher for most of the day, ending just off highs of the session. Component Alphabet (GOOG) held onto some decent gains on no particular catalyst, as the broader sector surged on the back of the broader market. Other names in the space which outperformed today included FSLR +4.08%, ACN +1.75%, FFIV +1.60%, CTSH +1.42%, APH +1.20%, PAYX +1.16%, ADS +1.13%.
Other notable news items among sector components:
Cisco (CSCO 31.66, +0.30 +0.96%) and Salesforce (CRM 74.59, +0.41 +0.55%) announced a strategic alliance to enable business users to be more productive than ever before. The two companies will jointly develop and market solutions that join Cisco's collaboration, IoT and contact center platforms with Salesforce Sales Cloud, IoT Cloud and Service Cloud.
Accenture (ACN 113.66, +1.96 +1.75%) entered into an agreement to acquire Kurt Salmon. The acquisition will expand Accenture Strategy's capabilities in delivering end-to-end strategy consulting services to top retailers and private equity firms in a world disrupted by digital.
According to Reuters, Facebook's (FB 130.08, +0.14 +0.11%) Instagram has an advertising base of more than 500,000 in seven months.
Neustar (NSR 27.47, +0.76 +2.85%) announced a new advanced marketing analytics partnership with Facebook.
According to TechCrunch, Apple (AAPL 114.62, +1.07 +0.94%) acquired Tuplejump, a 'machine learning company.'
Oracle (ORCL 39.51, flat) announced the US District Court granted the company a permanent injunction against continued copyright infringement by Rimini Street.
Elsewhere in the tech space:
In addition to reporting quarterly results, Jabil Circuit (JBL 22.40, -1.33 -5.60%) announced a restructuring plan which would result in about $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.
Hutchinson Tech. (HTCH 3.97, +2.48 +166.44%) announced that the FTC granted early termination under the HSR Act for the pending acquisition by TDK Corporation. The merger was expected to close no later than October 5.
Scripps Networks Interactive (SNI 61.51, +1.69 +2.83%) and AT&T (T 41.11, +0.54 +1.33%) reached a multi-year, multi-platform agreement for continued distribution of SNI channels both live and on-demand for DIRECTV and AT&T U-verse customers. Financial terms of the deal were not disclosed.
Inovalon (INOV 15.58, -0.12 -0.76%) to acquire Creehan & Company for about $105 million plus additional contingent payments of up to $25 million.
Interdigital Comm (IDCC 79.61, +1.88 +2.42%) increased its quarterly dividend to $0.30 per share from $0.20 per share.
Starz (STRZA 31.69, +0.11 +0.35%) agreed in principle to multi-year extensions of its affiliation agreements with both DIRECTV and AT&T Services (T), subject to the entry into definitive agreements with each of
DIRECTV and AT&T. In addition, in connection with and as a condition to these extensions, Lions Gate Entertainment (LGF 20.99, +0.02 +0.10%) has agreed in principle to issue to AT&T three $16.67 million annual installments of equity following the completion of the proposed merger between Starz and Lions Gate, subject to the entry into a definitive agreement with AT&T. Starz has been advised that Lions Gate is expected to treat the annual issuance or payment as a reduction of Starz Networks' revenue. Starz has further been advised that Lions Gate signed a new multi-year agreement covering transactional video-on-demand, pay-per-view and electronic-sell-through with DIRECTV and AT&T simultaneously with the entrance into the agreement in principle described above.
In reaction to quarterly results:
Red Hat (RHT) reported better than expected Q2 EPS of $0.55 on better than expected revenues of $599.8 million; billings were about $573 million. For Q3, RHT guided EPS of $0.58 on revenues of $613-623 million. For the FY17 period, the company sees EPS of $2.23-2.25 on revenues of $2.415-2.535 billion.
Jabil Circuit (JBL) reported better than expected Q4 EPS of $0.28 on better than expected revenues of $4.4 billion. The company also guided for Q1 EPS of $0.54-0.74 on revenues of $4.8-5.8 billion.
Analyst actions:
ON was upgraded to Equal Weight from Underweight at Morgan Stanley,
AMZN was upgraded to Buy from Hold at Argus;
CBS was downgraded to Market Perform from Outperform at Telsey Advisory Group,
SYNT was downgraded to Mkt Perform from Outperform at Barrington Research,
JBL was downgraded to Hold from Buy at Needham and to Hold from Buy at Standpoint Research;
NLST was initiated with a Buy at B. Riley & Co., IL was initiated with a Mkt Perform at JMP Securities, FORM was initiated with a Buy at Craig Hallum
