From Briefing.com: 4:15 pm : The stock market ended the Thursday affair on a lower note as concerns regarding Deutsche Bank's (DB 11.48, -0.82) capital position weighed on the major averages. The Dow Jones Industrial Average (-1.1%) finished slightly behind the Nasdaq Composite (-0.9%) and the S&P 500 (-0.9%).
Equity indices began the day on a quiet note, looking to consolidate after yesterday's oil-fueled risk rally. The benchmark index occupied a narrow nine-point trading range through the first half of trade as participants mulled over a recently-minted production cap agreement. OPEC surprised participants yesterday by announcing that it would limit production to between 32.5 million and 33.0 million barrels per day. However, specific terms of the agreement will not be released or put into effect until the oil collective meets on November 30.
The broader market broke lower near midday as reports indicated that approximately ten hedge funds have reduced their exposure to Deutsche Bank in recent days. The stock was down as much as 9.1%, ending lower by 6.7%. The German lender issued a statement in the afternoon, asserting that there had been recent outflows from its hedge fund business, but that Deutsche Bank's prime brokerage division remains profitable. Recall that capital concerns increased after the U.S. Department of Justice requested that the bank pay $14 billion to settle civil claims associated with the residential mortgage-backed securities crisis. The major averages notched session lows shortly after midday as heavily-weighted financials (-1.5%) and health care (-1.8%) led to the downside. The S&P 500 settled lower by 0.9%, testing technical support near the 2153/2151 price level. All eleven sectors finished in the red with utilities (-1.5%), financials (-1.5%), and health care (-1.8%) underperforming while energy (-0.1%) led to the upside.
The economically-sensitive financial sector (-1.5%) moved lower in sympathy with Deutsche Bank (DB 11.48, -0.82) as participants expressed concerns over the global banking landscape. Meanwhile, Wells Fargo (WFC 44.37, -0.94) declined 2.1% after CEO John Stumpf testified before the House Financial Services Committee. The congressional hearing was again heated as lawmakers questioned the sales tactics that led to the creation of more than two million fake deposit and credit-card accounts. The broader space extended its monthly loss to 4.2%, trailing the remaining sectors.
In the health care sector (-1.8%), biotechnology underperformed, evidenced by the 3.1% decline in the iShares Nasdaq Biotechnology ETF (IBB 285.87, -9.21). Mylan (MYL 38.47, -1.75) fell 4.4% after the CMS indicated that it had previously informed the company that it had misclassified its EpiPen device under the Medicaid Drug Rebate program. Recall that a group of U.S. lawmakers have recently pushed for the DoJ to investigate Mylan for this misclassification.
In the technology sector (-0.6%), the high-beta chipmakers outperformed, evidenced by the 1.3% gain in the PHLX Semiconductor Index. NXP Semiconductor (NXPI 96.12, +13.88) rallied 16.9% after reports indicated that Qualcomm (QCOM 67.45, +4.00) could be looking to acquire the company. Conversely, Apple (AAPL 112.17, -1.78) underperformed after it was removed from Barclay's Top Pick list. The firm also lowered its 2016 smartphone revenue and unit growth estimates for Apple.
The commodity-sensitive energy sector (-0.1%) finished at the top of the board as crude oil extended its rally. WTI crude finished higher by 1.4% ($47.73/bbl; +$0.66), showing marked resilience to the downturn in the broader market.
Treasuries ended on a higher note with yields slipping through the curve. The yield on the 10-yr note finished lower by one basis point at 1.56%.
Today's participation was above the recent average as more than 971 million shares changed hands on the NYSE floor.
Today's economic data included the third estimate of second quarter GDP, weekly initial claims, International Trade in Goods for August, and Pending Home Sales for August:
The third estimate for second quarter GDP checked in at 1.4% (Briefing.com consensus 1.3%), up from the second estimate of 1.1%. The GDP Deflator was unchanged at 2.3%.
Initial claims for the week ending September 24 increased by 3,000 to 254,000 (Briefing.com consensus 259,000), marking the 82nd straight week they have been below 300,000.
Continuing claims for the week ending September 17 decreased by 46,000 to 2.062 million.
The Advance International Trade in Goods report for August showed a narrowing in the goods deficit to $58.4 billion from an upwardly revised $58.8 billion (from -$59.3 billion) in July.
Pending Home Sales for August fell by 2.4% while the Briefing.com consensus expected an increase of 1.0%. Separately, the July reading was revised to 1.2% from 1.3%.
Tomorrow's economic data will include Personal Income (Briefing.com consensus +0.2%), Personal Spending (Briefing.com consensus +0.2%), and Core PCE Prices (Briefing.com consensus +0.2%) for August, which will each be released at 8:30 ET. Separately, Chicago PMI (Briefing.com consensus 52.0) and the final reading of the University of Michigan Sentiment Index for September (Briefing.com consensus 90.0) will cross the wires at 9:45 ET and 10:00 ET, respectively.
Russell 2000: +9.2% YTD
S&P 500: +5.2% YTD
Nasdaq: +5.2% YTD
Dow Jones: +4.1% YTD
DJ30 -195.79 NASDAQ -49.39 SP500 -20.24 NASDAQ Adv/Vol/Dec 700/1.777 bln/2196 NYSE Adv/Vol/Dec 925/971.3 mln/2377 3:30 pm :
Commodities, as measured by the Bloomberg Commodity Index, were +0.1% around the 85.22 level
Crude oil extended yesterday's notable +5.4% surge, closing at 3-week highs for the second consecutive session after yesterday's OPEC announcement to cut production
November crude oil futures rose $0.66 (+1.4%) to $47.73/barrel
Baker Hughes rig count data will be released tomorrow at 1 pm ET
Monthly IEA data will be released on Oct 11
Reminder: OPEC announced yesterday that they would reduce output by 32.5 mln barrels/day, compared to July's production levels of around 33.1 mln barrels/day. Details will be announced at the next official OPEC meeting on November 30 in Vienna, Austria.
Natural gas ended lower after EIA data showed a smaller-than-expected build compared to Consensus
November natural gas closed $0.04 lower (-1.3%) at $2.96/MMBtu
EIA highlights:
Natural gas inventory showed a build of +49 bcf vs expectations for inventory to be a build of approximately +55 bcf.
Working gas in storage was 3,600 Bcf as of Friday, September 23, 2016, according to EIA estimates.
Stocks were 90 Bcf higher than last year at this time and 220 Bcf above the five-year average of 3,380 Bcf.
At 3,600 Bcf, total working gas is above the five-year historical range.
In precious metals, gold's gains are outpaced by the rally in silver, the gold:silver ratio ended near parity with the previous sesson's close
December gold ended today's session up $2.20 (+0.2%) to $1326.10/oz
December silver closed today's session $0.07 higher (+0.4%) at $19.20/oz
The gold:silver ratio was at ~69.1, compared to yesterday's pit trading close ratio of ~69.1
Today's session began on a choppy note as equity indices found it difficult to build on yesterday's post-OPEC rally. The oil cartel announced yesterday afternoon that it would limit production to between 32.5 million and 33.0 million barrels per day. However, the official terms of the agreement will not be released or implemented until OPEC members meet on November 30. The clandestine nature of the agreement has understandably bred some concerns regarding whether the collective will honor this accord. Today, November crude oil futures were up $0.66 (+1.4%) to $47.73/barrel.
A number of Federal Reserve officials also contributed to early weakness, indicating that a rate hike might soon be appropriate. Philadelphia Fed President Patrick Harker (FOMC voting member in 2017) stated ahead of the session that the Fed should raise rates sooner rather than later while Kansas City Fed President Esther George (an FOMC voter) continues to favor the removal of policy accommodation. Odds of an interest rate hike before the end of the year improved with the implied probability of a rate hike at the December meeting rising to 57.4% from yesterday's estimate of 53.1%.
There were a few points of market data today, headlined by the third estimate for second quarter GDP checked in at 1.4%, up from the second estimate of 1.1%. The GDP Deflator was unchanged at 2.3%. Also, initial claims for the week ending September 24 increased by 3,000 to 254,000, marking the 82nd straight week they have been below 300,000. Additionally, the Advance International Trade in Goods report for August showed a narrowing in the goods deficit to $58.4 billion from an upwardly revised $58.8 billion (from -$59.3 billion) in July. Lastly, Pending Home Sales for August fell 2.4%. Separately, the July reading was revised to 1.2% from 1.3%.
Following yesterday's strength which was tied to Reuters reporting that OPEC had reached a production agreement, the broader market ended the Thursday affair on a lower note as concerns regarding Deutsche Bank's (DB 11.48, -0.82 -6.67%) capital position weighed on the major averages. The Dow Jones Industrial Average was the worst performer today, shedding 195.79 points (-1.07%) to 18143.45. The S&P 500 was down 20.24 points (-0.93%) to 2151.13, and the Nasdaq Composite lost 49.39 points (-0.93%) to 5269.15.
Technology (XLK 47.53, -0.29 -0.61%) finished among sectors with modest losses today as the session held onto flat lines for the majority of the morning but lost momentum into the close. Component Qualcomm (QCOM 67.45, +4.00 +6.30%) was higher today on speculation that the company may make a bid for NXP Semi (NXPI 96.12, +13.88 +16.88%). Other sectors as measured by the S&P closed the session XLV -1.76% XLU -1.48% XLFS -1.44% XLF -1.40% XLRE -1.23% XLP -0.98% XLI -0.81% XLB -0.77% IYZ -0.77% XLY -0.51% XLE -0.17% as Healthcare and Utilities weighed.
In the S&P 500 Information Technology (797.28, -4.51 -0.56%) sector, trading edged lower today, modestly off lows of the session. Component eBay (EBAY 32.30, +0.45 +1.41%) was among the best performers today on the back of a premarket upgrade to Buy at Deutsche Bank. Other names in the space which underperformed today included TDC -2.75%, YHOO -2.56%, TSS -2.14%, QRVO -1.72%, AAPL -1.56%, TEL -1.55%, KLAC -1.55%, ADBE -1.54%, VRSN -1.52%, CA -1.50%.
Other notable news items among sector components:
According to the Wall Street Journal, Qualcomm (QCOM) may be in discussions with NXP Semi (NXPI) to acquire the company for more than $30 billion.
Qualcomm (QCOM) announced that its subsidiary, Qualcomm Technologies, Inc. (QTI), and SK Telecom (SKM 22.60, +0.05 +0.22%) announced the first over-the-air technology demonstration of eLAA (Enhanced Licensed Assisted Access) and LAA (Licensed Assisted Access) that utilizes both licensed and unlicensed spectrum at SK Telecom's Corporate R&D Center in Bundang, Korea.
Analog Devices (ADI 63.74, -0.19 -0.30%) entered into a new term loan facility and an amended and restated revolving credit agreement. The company's new term loan facility will consist of a 3-year unsecured term loan facility in the principal amount of $2.5 billion and a 5-year unsecured term loan facility in the principal amount of $2.5 billion.
IBM (IBM 158.11, -0.18 -0.11%) to acquire Promontory Financial Group, a global market-leading risk management and regulatory compliance consulting firm. Financial terms of the deal were not disclosed.
CSRA (CSRA 27.06, -0.03 -0.11%) was awarded a contract by the U.S. Department of Health and Human Services (HHS) to upgrade the agency's PeopleSoft Human Capital Management system. The new, single-award contract is valued at $38.9 million including a one-year base period and four, one-year extension options.
Green Dot (GDOT 22.91, -0.12 -0.52%) announced the launch of the Green Dot Platinum Visa (V 81.92, -1.05 -1.27%) Secured Credit Card, a secured credit card that is designed to help people with no prior credit history or those with poor credit scores build a positive credit history.
Microsoft (MSFT 57.40, -0.63 -1.09%) announced it has formed the Microsoft AI and Research Group, bringing together Microsoft's world-class research organization with more than 5,000 computer scientists and engineers focused on the company's AI product efforts.
Epsilon, an Alliance Data (ADS 212.95, -1.26 -0.59%) company, has signed a new, multi-year agreement with CNO Financial (CNO 15.55, -0.31 -1.95%), a national holding company to insurance brands Bankers Life, Washington National and Colonial Penn.
Samsung Electronics (SSNLF 1550.00, flat) and SAP SE (SAP 89.54, -2.54 -2.76%) held the opening ceremony for a joint research center where engineers will conduct R&D for memory solutions to be used in next-generation in-memory computing.
NetSuite (N 109.85, -0.32 -0.29%) announced a host of product enhancements to NetSuite OneWorld, delivering deep global financial capabilities designed for Australia and New Zealand-headquartered businesses and multinational companies in both countries. Additionally, co announced that Paycorp, a leading Australian provider of enterprise payment processing solutions, has joined the NetSuite SuitePayments program.
Elsewhere in the tech space:
Compass Minerals (CMP 73.73, -0.29 -0.39%) issued a new $450 million senior secured term loan, which matures July 1, 2021, and carries an interest rate of LIBOR plus 2%.
WEX Inc. (WEX 107.24, -0.22 -0.20%) announced that WEX Australia has entered into a multi-year fuel card system processing contract with Caltex (CTXAY 46.60, flat). Financial terms of the deal were not disclosed.
Mimecast (MIME 1910, +1.81 +10.47%) priced a secondary public offering by selling shareholders of 4 million ordinary shares at $16.50 per share.
Canadian Solar (CSIQ 14.12, +0.51 +3.75%) announced commercial operation of the 60 MWac/78 MWp Barren Ridge solar photovoltaic (PV) project developed by the company's wholly owned subsidiary Recurrent Energy.
In reaction to quarterly results:
Accenture (ACN 121.64, +4.99 +4.28%) reported better than expected Q4 EPS of $1.31 on revenues which were up 7.6% compared to a year ago to $8.49 billion. The company also guided Q1 revenues of $8.40-8.65 billion. For FY17, the company sees GAAP EPS of $5.75-5.98 on revenue growth of 5-8% to about $34.53-35.51 billion.
Progress Software (PRGS 27.21, -1.19 -4.19%) reported worse than expected Q3 EPS of $0.44 on worse than expected revenues of $102.4 million. For Q4, the company sees EPS of $0.55-0.58 on revenues of $123-126 million.
Analyst actions:
EBAY was upgraded to Buy from Hold at Deutsche Bank,
BBRY was upgraded to Neutral from Underperform at Macquarie,
NMBL was upgraded to Outperform from Market Perform at Wells Fargo;
FIT was downgraded to Underweight from Sector Weight at Pacific Crest,
MANT was downgraded to Underperform from Neutral at Credit Suisse,
IMPV was downgraded to Neutral from Buy at Buckingham Research,
SONS was downgraded to Underperform from Market Perform at Cowen;
SIMO, SLAB, MX, IDTI, HIMX, KN, AMBA and CEVA were initiated with Buy ratings at Roth Capital,
FTV was initiated with a Neutral at Goldman,
GRPN was initiated with a Neutral at Boenning & Scattergood,
NTES was initiated with a Hold at Jefferies
4:25 pm CalAmp reports EPS in-line, misses on revs; guides Q3 below consensus excluding the satellite business (CAMP) :
Reports Q2 (Aug) earnings of $0.27 per share, excluding non-recurring items, in-line with the Capital IQ Consensus of $0.27; revenues rose 29.6% year/year to $90.5 mln vs the $92.26 mln Capital IQ Consensus. Revenue in the second quarter of fiscal 2017 included $31.9 million from LoJack products and services and $6.7 million from the Satellite segment. Co issues downside guidance for Q3 excluding the satellite segment that ceased operations at the end of Q2, sees EPS of $0.24-0.30, excluding non-recurring items, vs. $0.32 Capital IQ Consensus Estimate; sees Q3 revs of $81-87 mln vs. $95.01 mln Capital IQ Consensus Estimate.The Company remains cautious in the very near-term as macro conditions in North America have continued to result in softer-than-expected demand from key customers for MRM telematics products. Though CalAmp has experienced weakness through the first half of this year, the company is seeing some firming of demand and is optimistic that the company will see MRM product revenues begin to improve later this fiscal year and into fiscal 2018.One of the largest telematics service providers in North America has chosen various CalAmp LMU and TTU telematics device lines for its range of fleet and asset management solutions. This recent development follows another significant customer win in the first quarter with Omnitracs.
