From Briefing.com: 4:25 pm : The stock market ended Tuesday's session on a sharply lower note as equities endured a broad-based selloff, paced by technical selling and residual concerns related to a strengthening dollar, rising long-term rates, and valuations entering the third-quarter earnings reporting season. The Russell 2000 dropped 1.9% while the Nasdaq Composite finished lower by 1.5% and the S&P 500 ended down 1.2%.
The major averages stumbled out of the gate as buyers remained sidelined by some disappointing news on the earnings front.
Alcoa (AA 27.91, -3.60) came under pressure as a weaker-than-expected revenue outlook for its Arconic segments overshadowed an in-line earnings result for its third quarter. Illumina (ILMN 138.99, -45.86) was also in focus after issuing a warning after Monday's close that third quarter and fourth quarter revenue will be below analysts' consensus estimates.
In turn, the U.S. dollar showed some noticeable strength today, which came largely at the expense of the euro and the British pound, which declined 0.8% and 2.3%, respectively, against the greenback. The unnerving action there served as another deterrent for buyers.
At the same time, the dollar's strength created some angst about earnings prospects for U.S. multinational companies and the economic prospects for emerging markets. The iShares MSCI Emerging Markets ETF (EEM 37.22, -0.88) declined 2.3%, dragged lower by its exposure to Samsung Electronics (SSNLF), which is the second largest holding in the ETF, and worries that a stronger dollar, among other things, will make it more expensive for companies in emerging markets to repay dollar-denominated debt.
Samsung Electronics shocked its investors Tuesday with an announcement that it will be discontinuing production and sales of its Galaxy Note 7, which has been plagued by overheating issues and battery fires that have created safety concerns and a PR mess for the company.
Long-term interest rates were also on the rise as the U.S. Treasury market opened for trading again after the Columbus Day holiday. The long end of the curve underperformed at the start as the yield on the benchmark 10-yr note jumped to 1.78% (+6 bps). The 10-yr yield would pull back slightly, settling the day higher by four basis points (1.76%).
The Tuesday retreat continued up to the final hour as the S&P 500 (-1.2%) struggled to find its bearings. The benchmark index violated technical support at 2150 and 2144 before testing and breaching its 100-day simple moving average (2138.51). Prospective buyers were thought to be a bit skittish after the S&P 500 (-1.2%) tested, but failed to hold above its 50-day simple moving average (2166.18) on Monday.
A downturn in crude oil futures also dampened risk appetite. The energy component finished its day modestly lower after the head of Rosneft, Russia's largest oil producer, walked back expectations for the country to freeze or cut oil production. The International Energy Agency further added to selling interest when it reported that the global oil supply increased by 0.6 million barrels per day in September. WTI crude finished the day lower by 1.2% ($50.71/bbl, -$0.61).
All 11 S&P 500 sectors finished in the red with health care (-2.5%), materials (-1.3%), utilities (-1.2%), technology (-1.2%), and consumer discretionary (-1.1%) leading the retreat.
Biotechnology underperformed and the iShares Nasdaq Biotechnology ETF (IBB 277.00, -11.07) fell 3.8%. The sub-group moved lower in response to the revenue warning from Illumina (ILMN 138.99, -45.86).
In the broader health care sector (-2.5%), medical equipment names underperformed after St. Jude Medical (STJ 78.41, -2.87) issued a medical device advisory for its ICD and CRT-D devices. Abbott Labs (ABT 41.16, -2.34), which is in the process of acquiring St. Jude Medical, finished lower by 5.4%.
The high-beta chipmakers displayed relative weakness after the aforementioned Samsung (SSNLF) announcement. Samsung supplier Integrated Device (IDTI 21.05,-1.00) finished at the bottom of the PHLX Semiconductor Index (-2.1%), falling 4.6%.
In the influential technology sector (-1.2%), top-weighted Apple (APPL 116.30, +0.25) outperformed as Samsung's troubles are seen as an opening for Apple to pick up market share in the smartphone market. Salesforce.com (CRM 72.42, -2.68) for its part declined 3.6% after reports indicated the company may still bid on Twitter (TWTR 18.00, +0.44).
Today's participation was below the recent average as more than 811 million shares changed hands at the NYSE floor.
Investors did not receive any economic data of note today.
Tomorrow's economic data will include the 7:00 a.m. ET release of the weekly MBA Mortgage Index. Separately, the Department of Energy will release its latest inventory report at 10:30 a.m. ET while the Federal Reserve will release the minutes from its September 20-21 FOMC meeting at 2:00 p.m. ET.
Russell 2000: +8.1% YTD
Nasdaq Composite: +4.8% YTD
S&P 500: +4.5% YTD
Dow Jones: +4.0% YTD
DJ30 -200.38 NASDAQ -81.89 SP500 -26.93 NASDAQ Adv/Vol/Dec 469/1.662 bln/2423 NYSE Adv/Vol/Dec 381/810.6 mln/2606 3:30 pm :
The dollar index extended this morning's gains, was +0.8% around the 97.68 level, weighed on precious metals
Commodities, as measured by the Bloomberg Commodity Index, -0.7% around the 86.18 level
Crude oil retreated from yesterday's 1-year highs following the IEA's monthly report which showed a lowered demand growth forecast for the second consecutive month
November crude oil futures fell $0.61 (-1.2%) to $50.71/barrel
IEA data highlights:
IEA lowered their FY16 global oil demand growth forecast for the second consecutive month to +1.2 mln barrels/day, compared to last month's forecast for +1.3 mln barrels/day.
The FY17 demand growth estimate remains unchanged from the previous monthly report at +1.2 mln barrels/day.
IEA sees the oil market re-balancing sooner than after the first half of 2017, if OPEC follows through with the proposed production cuts announced in Algiers,Algeria.
OPEC pumped a record high of about 33.64 mln barrels/day in Sept as Iran, Nigeria, & Libya increased production; all three countries are exempt from the recently announced OPEC production cut.
IEA noted as a result, that larger production cuts would have to be made by other OPEC members to meet the desired overall OPEC production level.
Data reminders:
Weekly EIA petroleum data will be released tomorrow at 10:30 am ET.
Rig count data will be released Friday at 1 pm ET.
API data will be released today after the bell.
Natural gas ended near session lows ahead of Thursday's inventory number
November natural gas closed $0.03 lower (-0.9%) at $3.24/MMBtu
Weekly EIA natural gas data will be released Thursday at 10:30 am ET.
In precious metals, gold's decline is outpaced by the drop in silver; the gold:silver ratio snapped its 2-session loss-streak
December gold ended today's session down $4.50 (-0.4%) to $1255.80/oz
December silver closed today's session $0.17 lower (-1.0%) at $17.50/oz
The gold:silver ratio was ~71.8 compared to yesterday's pit trading close price of ~71.3
The major averages slipped at the start of the session as Alcoa's (AA 27.91, -3.60 -11.42%) disappointing revenue outlook for its Arconic division overshadowed a bottom-line beat. Meanwhile, Illumina (ILMN 138.99, -45.86 -24.81%) also soured investor sentiment by warning that third quarter and fourth quarter sales will fall short of consensus estimates. This was the latest warning in a string of warnings from the company.
A downturn in crude oil futures has also helped keep buying interest in check. The International Energy Agency's monthly report indicated that the global oil supply increased by 0.6 million barrels per day in September. A bearish note from Goldman Sachs has also pressured the energy component through the first half of the day. The firm expressed some skepticism regarding Russia's desire to freeze or cut production. On a related note, the head of Rosneft, Russia's largest oil producer, reportedly said today that Rosneft will not be part of an agreement to cut production.
The U.S. Dollar Index (97.66, +0.77 +0.79%) strengthened on a firming in the U.S. rate hike picture. The fed funds futures market currently indicates there is a 70.2% probability of a rate hike at the December FOMC meeting, up from 61.7% at the end of September. The uptick has come on the heels of the Employment Situation Report for September. Investors will continue to asses the rate hike picture when the FOMC releases the minutes from its September 21 meeting tomorrow at 2:00 p.m. ET.
The broader market finished Tuesday trading with losses across the board. The market stepped lower with each moment that passed, eventually ending with the Nasdaq Composite posting the worst affair, lower by 81.89 points (-1.54%) to 5246.79. The S&P 500 lost 26.93 points (-1.24%) to 2136.73, and the Dow Jones Industrial Average shed 200.38 points (-1.09%) to 18128.66. Losses among heavily weighted Nasdaq 100 components INTC -2.0%, MSFT -1.5%, AMZN -1.3%, CMCSA -1.3% and FB -1.0% gave credence to today's decline.
Technology (XLK 47.41, -0.54 -1.13%) was toward the bottom of S&P sectors today, but managed to meander back to the middle of the pack as losses were more steep elsewhere. Component Seagate Tech (STX 35.10, -2.87 -7.56%) was the worst performer following pre-market guidance. Other sectors as measured by the S&P ended Tuesday XLV -2.51%, XLB -1.36%, XLY -1.20%, XLE -1.19%, XLU -1.14%, XLI -1.04%, XLF -1.01%, XLFS -0.96%, IYZ -0.82%, XLRE -0.77%, XLP -0.52%.
In the S&P 500 Information Technology sector (796.83, -9.48 -1.18%), trading returned to the sub-800 mark as broader market weakness pressured the sector. Despite this weakness, component Apple (AAPL 116.35, +0.30 +0.26%) was able to manage modest gains as competitor Samsung's (SSNLF 1350, flat) Galaxy Note 7 smartphone was rumored to be close to a production halt and permanent discontinuation. Names which followed the broader sector, and broader market lower, however, included WDC -4.45%, MU -3.66%, CRM -3.57%, ADSK -2.83%, TDC -2.74%, MCHP -2.64%, JNPR -2.56%, AMAT -2.52%, GPN -2.51%.
Other notable news items among sector components:
Seagate Tech (STX) raised Q1 revenues guidance to $2.8 billion from at least $2.7 billion, and raised non-GAAP gross margin to about 29% from at least 27%. Management noted, the strength in STX's revenue and gross margin for the quarter was driven primarily by better than expected demand for its high capacity enterprise HDD product portfolio.
Yahoo! (YHOO 42.68, -1.24 -2.82%) ticked higher in the after-hours session last night due to Verizon's (VZ 49.90, -0.29 -0.58%) CEO, Lowell McAdam, in CNBC interview commented that NYPost report that it was looking to have its purchase price for YHOO reduced by $1 billion was completely inaccurate. McAdam said the company continues to still see real value in YHOO and that the logic of the merger still makes 'ton of sense'.
Samsung (SSNLF) said it will ask all global partners to stop sales and exchanges of Galaxy Note7 while further investigation takes place. The Wall Street Journal later reported that SSNLF will discontinue the Galaxy Note 7 devices permanently.
Cognizant (CTSH 49.89, -0.56 -1.11%) announced it helped Standard Life, with its 4.5 million customers, implement next-generation IT infrastructure to support business expansion in its Investments and Pensions, and Savings businesses.
Alliance Data Systems (ADS 208.25, -0.53 -0.25%) announced that its LoyaltyOne European-based BrandLoyalty business signed an agreement with Lowes Foods, a major U.S. regional supermarket chain owned by privately-held Alex Lee, Inc.
IBM (IBM 154.79, -2.23 -1.42%) and Siemens Healthineers (SIEGY 115.71, -1.98 -1.68%) announced a five year, global strategic alliance in Population Health Management (PHM). The alliance aims to help hospitals, health systems, integrated delivery networks, and other providers deliver value-based care to patients with complex, chronic and costly conditions such as heart disease and cancer.
FloSports announced new apps available on the Roku and Apple TV (AAPL) platforms. Using the Cisco (CSCO 31.04, -0.43 -1.37%) Infinite Video Platform, FloSports now offers a complete multi-screen experience for the millions of sports fans it serves each month.
3M Health Information Systems, a business of 3M (MMM 169.68, -1.46 -0.85%), and Verily Life Sciences (formerly Google Life Sciences), an Alphabet (GOOG 783.07, -2.87 -0.37%) company, entered into a strategic agreement to develop new population health measurement technology for managing clinical and financial performance.
The U.S. Department of Agriculture has awarded Xerox (XRX 9.76, -0.20 -2.01%) a 10-year, $110M contract for managed print services (MPS) across all USDA agencies. As part of the agreement, Xerox will install and support up to 16,000 Xerox ConnectKey-enabled printers and multifunction devices at more than 3,000 USDA sites around the globe.
Accenture (ACN 116.97, -0.49 -0.42%) announced a collaboration with SAP SE (SAP 88.61, -1.48 -1.64%) to develop the next generation of predictive analytics solutions for asset management in the utilities industry to enable condition-based maintenance.
Elsewhere in the tech space:
MGT Capital Investments (MGT 2.50, +0.71 +39.66%) updated shareholders on its pending acquisition of D-Vasive and Demonsaw. As previously disclosed on September 20, 2016, the NYSE MKT informed the company that it would not approve for listing on the Exchange the 43.8 million shares required to be issued to complete the closing of the D-Vasive merger. Since that time, the company has had discussions and negotiations with all parties involved, in an effort to reach a revised agreement on acceptable terms. Specifically, MGT plans to terminate the current Asset Purchase Agreement with D-Vasive. However, it has reached tentative agreements with John McAfee and Eric Anderson to execute employment agreements as CEO and Chief Technology Officer, respectively. In addition, MGT reached a tentative agreement to exclusively license or acquire the Demonsaw source code and technology platform from D-Vasive. MGT believes that such a revised deal structure would be acceptable under NYSE MKT rules.
Progress Software's (PRGS 27.37, -0.33 -1.19%) CEO, Phil Pead, is retiring. The company appointed Yogesh Gupta to replace him, and also reaffirmed Q4 guidance of adjusted revenues of $123-126 million and adjusted EPS of $0.55-0.58 per share.
JinkoSolar Holding (JKS 16.55, -0.24 -1.43%) to sell its Jinko Power downstream business in China for $250 million in cash.
CGI Group (GIB 47.00, -0.98 -2.04%) received a task order contract worth up to $824 million through 10 years for financial management shared services across the U.S Federal Government.
Analyst actions:
TWTR was upgraded to Hold from Sell at Evercore ISI,
STX was upgraded to Neutral from Underweight at JP Morgan and to Buy from Hold at The Benchmark Company,
VIAV was upgraded to Overweight from Neutral at JP Morgan,
FNSR was upgraded to Buy from Neutral at Goldman,
CARB was upgraded to Outperform from Perform at Oppenheimer;
LITE was downgraded to Sell from Neutral at Goldman,
APPS was downgraded to Hold from Buy at Craig Hallum;
GRUB was initiated with a Neutral,
AMSC with a Buy at Roth Capital,
EVBG was initiated with an Outperform at Credit Suisse, a Buy at Stifel, BofA/Merrill and Canaccord Genuity, an Outperform at William Blair, and an Overweight at Pacific Crest
I think this recall helps out the suppliers for Samsung. Even discontinuing the Note 7 is not too big a negative as Samsung will still have many buyers of other products. I have a Note 5 and love it but really I use the stylus next to never. I like the big screen and usually find I can get answers from the phone faster than from my computer. RtS
