From Briefing.com: 4:10 pm : The major averages ended the midweek affair on a higher note as a leg higher in crude oil boosted risk appetite in the broader market. The energy component rallied in afternoon trade amid reports that OPEC reached a production cap agreement. The Dow Jones Industrial Average (+0.6%) finished ahead of the S&P 500 (+0.5%) and the Nasdaq Composite (+0.2%). Equity indices began the day on a choppy note as volatility from the oil pit weighed on the broader market. Crude oil was in focus as a negative reading of the Department of Energy's weekly inventory report weighed on the energy component. The EIA reported that crude oil stockpiles fell by 1.88 million barrels (consensus: +2.99 million) while gasoline inventories rose by 2.02 million barrels (consensus: +0.17 million). Oil ticked lower following the data, falling to the $44.50/bbl price level.
The energy component staged a reversal shortly after midday as Reuters reported that OPEC agreed to lower its production to 32.5 million barrels per day from approximately 33.2 million barrels. However, the reduction will not go into effect until OPEC meets on November 30. Nevertheless, WTI crude rallied into its pit close, finishing higher by 5.4% ($47.07/bbl; +$2.40).
The rebound in oil boosted risk appetite as heavily-weighted consumer discretionary (+0.3%), technology (+0.3%), and financials (+0.5%) each erased modest losses. The benchmark index finished at its best level of the day, testing technical resistance near the 2168/2173 price level. Eight sectors ended in the green with industrials (+0.7%), materials (+1.0%), and energy (+4.3%) leading the pack. Conversely, countercyclical health care (-0.1%), utilities (-0.3%), and telecom services (-1.0%) lagged.
The heavily-weighted financial sector (+0.5%) finished behind the broader market as participants responded to commentary from Federal Reserve Chair Janet Yellen. Chair Yellen testified before the House Financial Services Committee today, keeping the majority of her remarks centered on regulatory policies. Ms. Yellen indicated that the Fed is exploring stricter capital requirements for Global Systemically Important Banks (GSIBs) while also looking to lower regulatory requirements for community banks. The commentary initially spurred some risk aversion among GSIBs, but the group recovered before the close. JPMorgan Chase (JPM 66.71, +0.35) and Citigroup (C 46.87, 0.50) finished higher by 0.5% and 1.1%, respectively. Separately, Wells Fargo (WFC 45.31, +0.22) finished in-line with the sector despite reports that the California State Treasurer sanctioned the bank for prior sales practices.
Biotechnology underperformed in the health care space (-0.1%), evidenced by the 0.8% decline in the iShares Nasdaq Biotechnology ETF (IBB 295.08, -2.40). In the ETF, Mylan Labs (MYL 40.22, -1.09) fel 2.6% after the company indicated in the prior session that that there may be discrepancies between EpiPen profit data and previous information provided to Congress on the profitability of the device. The EpiPen manufacturer remains in the spotlight following the recent drug pricing controversy. The biotechnology ETF narrowed its monthly gain to 5.1%, which compares to a gain of 0.2% in the broader sector.
In the consumer discretionary space (+0.3%), media names outperformed after reports indicated that Sumner Redstone's National Amusements is pushing for Viacom (VIAB 36.56, +1.09) and CBS (CBS 54.15, +2.10) to hold merger talks. Conversely, retail names underperform as the SPDR S&P Retail ETF (XRT 43.31, -0.28) ended lower by 0.6%. Dow component Nike (NKE 53.25, -2.09) finished lower by 3.8% after the company's futures orders and gross margins came in below consensus.
Treasuries ended on a lower note with yields rising through the curve. The yield on the 10-yr note finished higher by one basis point at 1.57%.
Today's participation was above the recent average as more than 903 million shares changed hands on the NYSE floor.
Today's economic data included the weekly MBA Mortgage Index and the Durable Goods Orders report for August:
The MBA Mortgage Index indicated that mortgage applications declined 0.7% in the week ending September 24. This followed a 7.3% decline in the prior week.
Total durable goods orders were unchanged in August (Briefing.com consensus -1.9%), which was better than expected, while orders excluding transportation were down 0.4%, as expected.
Total orders growth for July was revised down to 3.6% from 4.4% while growth in orders excluding transportation was also revised down to 1.1% from 1.5%.
For more on these economic releases, be sure to visit Briefing.com's Economic Calendar page.
Tomorrow's economic data will include the third estimate of second quarter GDP (Briefing.com consensus 1.3%), the third estimate for the second quarter GDP deflator (Briefing.com consensus 2.3%), weekly initial claims (Briefing.com consensus 259k), and International Trade in Goods for August, which will each cross the wires at 8:30 ET. Separately, Pending Home Sales for August (Briefing.com consensus 1.0%) will be released at 10:00 ET.
Russell 2000: +10.5% YTD
S&P 500: +6.2% YTD
Nasdaq: +6.2% YTD
Dow Jones: +5.3% YTD
DJ30 +110.94 NASDAQ +12.84 SP500 +11.44 NASDAQ Adv/Vol/Dec 1714/1.672 bln/1142 NYSE Adv/Vol/Dec 2273/903.9 mln/727 3:30 pm :
Commodities, as measured by the Bloomberg Commodity Index, were +1.2% around the 85.14 level
Crude oil surged near 3-week highs after OPEC reached a deal to cut production in Nov to 32.5 mln barrels/day, compared to July production levels around 33.1 mln barrels/day
November crude oil futures rose $2.40 (+5.4%) to $47.07/barrel
OPEC meeting highlights:
OPEC members announced a deal to cut production to 32.5 mln barrels/day, about 600k less than July production levels of 33.1 mln barrels.
Details will be announced at the official OPEC meeting to be held in Vienna, Austria on November 30.
Earlier this morning, Qatar president stated market rebalancing is taking longer than expected, may not happen until the second half of 2017, now more urgency to ensure a quick rebalancing.
The next OPEC meeting will take place in Vienna, Austria on November 30.
EIA highlights:
Crude oil inventories had a draw of -1.882 mln (consensus called for a build of about +3.00 mln barrels)
Gasoline inventories had a build of +2.027 mln (consensus called for a build of about +0.18 mln barrels)
Distillate inventories had a draw of -1.915 mln
Natural gas extended yesterday's losses ahead of tomorrow's inventory data
November natural gas closed $0.05 lower (-1.6%) at $3.00/MMBtu
Weekly EIA natural gas inventory data will be released tomorrow at 10:30 am ET
In precious metals, gold's decline outpaced the drop in silver, the gold:silver ratio snapped its 3-day streak
December gold ended today's session down $6.30 (-0.5%) to $1323.90/oz
December silver closed today's session $0.04 lower (-0.2%) at $19.13/oz
The gold:silver ratio is ~69.2, compared to yesterday's level of ~69.4
Base metal copper inched notably higher in afternoon pit trading
December copper closed $0.02 higher (+0.9%) at $2.19/lb
Equity indices began the day on a choppy note as participants eyed a mixed performance from global markets and an upswing in crude oil. The energy component rebounded overnight as investors responded to a better-than-expected reading of the American Petroleum Institute's weekly inventory report. However, crude oil futures briefly erased their gain after the Department of Energy's more influential inventory data failed to confirm the reading.
The energy component staged a reversal shortly after midday as Reuters reported that OPEC agreed to lower its production to 32.5 million barrels per day from about 33.2 million barrels. However, the reduction will not go into effect until OPEC meets on November 30. Nevertheless, WTI crude rallied into its pit close, finishing higher by 5.4% ($47.07/bbl; +$2.40).
The economically-sensitive financial sector (XLF 19.31, +0.09 +0.47%) was also in focus today as participants mull over recent commentary from Fed Chair Janet Yellen. Ms. Yellen addressed the House Financial Services Committee today, keeping the majority of her remarks centered on regulatory policies. Chair Yellen stated that the Federal Reserve is exploring stricter capital buffers for Global Systemically Important Banks (GSIBs) while looking to lower regulatory hurdles for community banks. The policies are just ideas, but appear to have created some risk aversion in the sector and the broader market.
Additionally, market data today included the MBA Mortgage Index which indicated that mortgage applications declined 0.7% in the week ending September 24. This followed a 7.3% decline in the prior week. Also, total durable goods orders were unchanged in August, which was better than expected, while orders excluding transportation were down 0.4%, as expected.
Today's action began in the green and quickly turned lower as the market started to fall into a relative lull. Midday losses were quickly turned around, however, on the aforementioned Reuters headlines regarding the OPEC agreement. These headlines drove stocks into the green once again, as all three major US indices ended the session with gains, led by the Dow Jones Industrial Average which added 110.94 points (+0.61%) to 18339.24. The S&P 500 was higher by 11.44 points (+0.53%) to 2171.37, and the Nasdaq Composite edged up 12.84 points (+0.24%) to 5318.55.
Technology (XLK 47.80, +0.07 +0.16%) escaped Wednesday with gains as the sector spent the majority of the session in the red, but climbed out of negative territory in the final moments of action. Component Paychex (PAYX 57.50, -2.77 -4.60%) was the worst performer in the sector today on the back of a FY17 guidance cut and mostly in-line Q1 results. Other sectors as measured by the S&P ended the session XLE +4.34%, XLB +1.14%, XLI +0.78%, IYZ +0.77%, XLRE +0.69%, XLF +0.57%, XLFS +0.43%, XLY +0.30%, XLP +0.17%, XLV -0.15%, XLU -0.18%.
In the S&P 500 Information Technology (801.79, +2.53 +0.32%) sector, trading was weaker during midday, but finished in the green. Component Alphabet A (GOOGL 810.06, -0.67 -0.08%) were modestly weaker today as the stock was downgraded to an Underperform rating at Wedbush. Other names in the space which outperformed today included CRM +2.24%, CA +2.02%, TDC +1.84%, RHT +1.83%, GLW +1.29%, XRX +1.28%, WU +1.18%, ADSK +1.03%.
Other notable news items among sector components:
Motorola Solutions (MSI 76.79, +0.47 +0.62%) was awarded a $70 million firm-fixed-price, indefinite delivery/indefinite quantity contract for the Europe Enterprise Land Mobile Radio system.
Harris (HRS 91.95, +0.37 +0.40%) was awarded a $92.8 million single award, indefinite-delivery/indefinite-quantity contract for Harris Radio Communication Systems.
Harris (HRS) and Boeing (BA 132.23, +0.91 +0.69%) are developing next-generation avionics technology for current and future military aircraft to improve and protect aviators' missions.
NVIDIA (NVDA 66.78, +0.24 +0.36%) and TomTom (TMOAY 4.33, flat), the Dutch mapping and navigation group, announced they are partnering to develop artificial intelligence to create a cloud-to-car mapping system for self-driving cars.
Super Micro Computer (SMCI 23.59, +0.8 +0.34%) announced the general availability of its SuperServer solutions optimized for NVIDIA (NVDA 66.78, +0.24 +0.36%) Tesla P100 accelerators with the new Pascal GPU architecture.
Akamai Tech (AKAM 52.28, -0.37 -0.70%) acquired Concord Systems, Inc., a provider of technology for the high performance processing of data at scale, in an all cash transaction. Financial details of the deal were not disclosed.
Samsung Electronics (SSNLF 1550.00, flat) and Hewlett Packard Enterprise (HPE 23.04, +0.12 +0.52%) announced a partnership that will provide carriers with integrated network functions virtualization (NFV) infrastructure and virtual network functions (VNF) solutions.
IBM (IBM 158.29, +1.52 +0.97%) announced that Bank Sohar selected IBM Cloud and mobile to accelerate its digital transformation.
IBM (IBM) announced that Clarient Global LLC has selected VMware (VMW 73.85, +0.25 +0.34%) Cloud Foundation on IBM Cloud to continue to enhance its existing SoftLayer private cloud implementation for its Clarient Entity Hub platform.
Mastercard (MA 101.51, +0.06 +0.06%) launches Mastercard Developers, a solution that enables Mastercard partners to access a diverse range of Application Programming Interfaces (APIs) across payments, data and security.
Elsewhere in the tech space:
In addition to reporting quarterly results, BlackBerry (BBRY 8.33, +0.45 +5.71%) appointed Steven Capelli as CFO. The company also announced a newly formed joint venture PT BB Merah Putih to license BlackBerry software and services for the production of handsets for the Indonesian market.
SolarCity (SCTY 20.48, +0.49 +2.45%) partnered with Citi (C 46.87, +0.50 +1.08%) to create two separate funds to finance more than $347 million in solar projects. The company also promoted EVP of Global Capital Markets Radford Small to the role of CFO, reporting to CEO Lyndon Rive.
Harmonic (HLIT 5.83, +1.17 +25.11%) entered into a warrant agreement with Comcast (CMCSA 66.68, +0.51 +0.77%) which provides Comcast with the opportunity to acquire shares of common stock of Harmonic based on specific CableOS and other Harmonic product sales.
TerraForm Global (GLBL 4.05, -0.05 -1.22%) reached an agreement with subsidiaries of SunEdison (SUNEQ 0.05, -0.00 -0.92%) to buy certain assets from a third party buyer.
TerraForm Power (TERP 14.01, -0.02 -0.14%) settled litigation with Appaloosa.
Straight Path Comms (STRP 25.65, -0.37 -1.42%) received an FCC letter requesting additional documents and information regarding the 39 GHz and 28 GHz spectrum licenses.
In reaction to quarterly results:
BlackBerry (BBRY) reported better than expected Q2 net of breakeven on revenues which fell 28.2% compared to a year ago to $352 million. BBRY also issued upside guidance for FY17, sees EPS of ($0.05)-0.00, excluding non-recurring items.
Paychex (PAYX) reported better than expected Q1 EPS of $0.60 on revenues which were modestly ahead of market expectations and grew 8.6% compared to last year to $785.5 million. Management also lowered payroll service revenue growth expectations to 3-4% from 4%. PAYX also lowered net income growth guidance to about 7% from growth of 8-9% to reflect the impact of the discrete tax items recognized in the respective first quarter of fiscal years 2017 and 2016.
Analyst actions:
WDAY was upgraded to Neutral from Underperform at Wedbush;
GOOGL was downgraded to Underperform from Neutral at Wedbush,
TWTR was downgraded to Sell from Hold at Loop Capital,
TWTR was downgraded to Underperform from Neutral at Mizuho,
T was downgraded to Neutral from Buy at UBS,
BIDU was downgraded to Hold from Buy at Deutsche Bank,
SHOP was downgraded to Equal Weight from Overweight at Morgan Stanley;
CHKP was initiated with an Overweight at Piper Jaffray,
VSM was initiated with an Overweight at KeyBanc Capital Mkts
