From Briefing.com: Weekly Recap - Week ending 21-Oct-16The stock market meandered through a lazy week with the S&P 500 adding 0.4% after spending the week in a 24-point range. The benchmark index was outpaced by the Nasdaq Composite (+0.8%) while the Dow Jones Industrial Average (UNCH) settled little changed.
The week started on a quiet note as participants awaited a slew of earnings and Thursday's policy decision from the European Central Bank. However, range bound action continued through Friday.
The European Central Bank made no changes to its interest rate corridor and President Mario Draghi made sure to avoid any specific references to either tapering or extending the purchase program before March 2017. The euro climbed immediately after the policy announcement, but retreated during Mr. Draghi's press conference. The single currency continued declining on Friday, ending the week near 1.0875 against the dollar, near levels from early March.
To be fair, the decline in the euro was facilitated by all-around dollar strength as the greenback benefited from economic data and comments from FOMC Vice Chair William Dudley, who said a rate hike before the end of 2016 makes sense to him. The implied probability of rate hike in December stands at 69.9%, according to the fed funds futures market. For its part, the Dollar Index registered its third consecutive weekly gain, climbing 0.7% to levels not seen since late January.
The strength in the dollar prevented crude oil from making big strides. The energy component settled at $50.85/bbl, just above its closing level from last week.
Market participants received another batch of quarterly results with the reporting season set to hit full stride next week. Investors did receive above-consensus results from a large share of Dow components like American Express (AXP), General Electric (GE), Goldman Sachs (GS), IBM (IBM), Johnson & Johnson (JNJ), Microsoft (MSFT), McDonald's (MCD), UnitedHealth (UNH), and Verizon (VZ). Interestingly, the batch of beats did not spark a buying frenzy. On the whole, tech earnings were received with the warmest reception, evidenced by the outperformance in the Nasdaq Composite.
Index Started Week Ended Week Change % Change YTD %
DJIA 18138.38 18145.71 7.33 0.0 4.1
Nasdaq 5214.16 5257.40 43.24 0.8 5.0
S&P 500 2132.98 2141.16 8.18 0.4 4.8
Russell 2000 1212.41 1218.11 5.70 0.5 7.2
The stock market closed out the week split as the Nasdaq Composite was the lone index in positive territory today, adding 15.57 points (+0.30%) to 5257.40. The Dow Jones Industrial Average, by contrast, was the worst performer today, albeit only ending down 16.64 points (-0.09%) to 18145.71. The S&P 500 posted a tame session, ending down less than one point (-0.01%) to 2141.16. This week's moves take the three major US indices +5.0%, +4.1%, and +4.8% YTD, respectively.
The major averages began the day under pressure as strengthening in the dollar and the latest batch of quarterly earnings contributed to opening hour weakness.
The U.S. Dollar Index (98.64, +0.33, +0.33%) extended its winning streak last evening as the pound and the euro each lost ground to the greenback. The buck continued to receive support from an improved U.S. rate hike picture and recent safe-haven flows. Furthermore, the move lower in European currencies came ahead of this weekend's EU Economic Summit, which may provide some Brexit-related headline volatility. The euro and the pound finished down a respective 0.4% (1.0882) and 0.2% (1.2226) against the dollar.
A stronger dollar served as a headwind for dollar-denominated commodities and the earnings prospects of multinational companies. This was on display when General Electric (GE 28.98, -0.09 -0.31%) beat bottom-line estimates for the quarter, but narrowed its guidance range. Meanwhile, Honeywell (HON 108.96, +0.82) gained 0.8% after reporting bottom-line results that fell in-line with the company's earnings warning.
The broader market reversed course after the first hour as a fresh dose of M&A chatter helped boost investor sentiment.The Wall Street Journal reported that AT&T (T 37.49, -1.16 -3.00%) is in advanced talks to acquire Time Warner (TWX 89.48, +6.49 +7.82%). The headline came on the heels of a similar report from Bloomberg in the prior session. Separate rumors indicated that Softbank (SFTBY 31.68, -0.29 -0.92%) could be interested in acquiring Twitter (TWTR 18.09, +1.19 +7.04%). The social media name finished higher by 7.0%.
Technology (XLK 47.53, +0.13 +0.27%) turned in a modest, albeit positive session to close out the week. Component PayPal (PYPL 44.15, +4.06 +10.13%) was the best performer following the company's mostly in-line Q3, as growing TPV and guidance clarity took shares higher. Other sectors as measured by the S&P closed Friday XLY +0.80%, XLP +0.54%, XLB -0.04%, XLF -0.05%, XLRE -0.06%, XLI -0.14%, XLFS -0.16%, IYZ -0.32%, XLU -0.58%, XLE -0.65%, XLV -0.83% as Consumer Staples and Consumer Discretionary were the only other sectors to join Tech in positive territory.
In the S&P 500 Information Technology (801.93, +4.58 +0.57%) sector, trading closed above the $800-level for the first time since October 10. Component Microsoft (MSFT 59.69, +2.44 +4.26%) broke out to fresh all-time highs today after a strong Q1 showing. Other names in the space which were modestly higher today included CRM +1.94%, JNPR +1.67%, AKAM +1.66%, FB +1.59%, QCOM +0.88%, LRCX +0.69%, INTU +0.51%, ATVI +0.50%, EA +0.42%, CA +0.41%, FSLR +0.40%, TXN +0.32%, GOOG +0.30%, MA +0.29%.
Other notable news items among sector components:
VeriSign (VRSN 81.56, +5.00 +6.53%) disclosed amendments to the company's Cooperative Agreement with the U.S. Department of Commerce, and an amendment to the Registry Agreement with ICANN.
The YouTube app, a product of Alphabet (GOOG 799.37, +2.40 +0.30%), debuted on DISH's (DISH 57.40, -1.78 -3.01%) Hopper 3 DVR.
According to CNBC's David Faber, NXP Semi (NXPI 101.71, -2.78 -2.66%) and Qualcomm (QCOM 67.93, +0.59 +0.88%) have agreed to a $110 per share price but that the deal was not done yet. (reportedly in cash and stock)
Elsewhere in the tech space:
According to the Wall Street Journal (and later numerous other sources), AT&T (T 37.49, -1.16 -3.00%) and Time Warner (TWX 89.48, +6.49 +7.82%) are in advanced talks about a deal. Apparently, Reuters was out later in the day suggesting 21st Century Fox (FOXA 25.83, +0.56 +2.22%) was not interested in making a bid for TWX; Bloomberg also chimed in, suggesting Apple (AAPL 116.60, -0.46 -0.39%) wasn't likely interested in TWX.
Everyday Health (EVDY 10.45, +1.05 +11.17%) to be acquired by j2 Global (JCOM 67.44, +4.75 +7.58%) for $10.50 per share in cash, or about $465 million.
Infoblox (BLOX 26.42, +0.01 +0.04%) and Vista Equity received approval from the German Federal Cartel Office for proposed $26.50 per share in cash transaction. The deal is expected to close in the second quarter of fiscal 2017.
In addition to reporting quarterly results, Proofpoint (PFPT 77.39, +7.61 +10.91%) to acquire FireLayers for about $55 million in cash and stock.
Allscripts Healthcare (MDRX 12.48, -0.35 -2.77%) acquired CarePort. Financial terms of the deal were not disclosed.
VTech (VTKLY 11.83, +0.02 +0.21%) to acquire Snom Technology AG. Financial terms of the deal were not disclosed.
In reaction to quarterly results:
Microsoft (MSFT) reported better than expected Q1 EPS and revenues of $0.76 and $22.33 billion, respectively. Guided Q2 productivity and business revenues of $6.9-$7.1 billion; also sees personal computing revenues of $11.2-11.6 billion and cloud revenues of $6.55-6.75 billion.
SAP AG (SAP 88.82, +1.54 +1.76%) reported worse than expected Q3 EPS of EUR0.91 and better than expected revenues of EUR5.38 billion. Also, raised FY16 guidance for full year 2016 non-IFRS cloud subscriptions and support revenue to be in a range of EUR3.00-3.05 billion at constant currencies (2015: EUR2.30 billion), from prior guidance of EUR2.95-3.05 billion at constant currencies. SAP added it expects full year 2016 non-IFRS cloud and software revenue to increase by 6.5-8.5% at constant currencies (2015: EUR17.23 billion), compared to prior guidance of increase by 6-8%. Lastly, the company now expects full-year 2016 non-IFRS operating profit to be in a range of EUR6.5-EUR6.7 billion at constant currencies (2015: EUR6.35 bln), compared to prior guided range of EUR6.4-6.7 billion.
PayPal (PYPL) reported in-line Q3 EPS and revenues of $0.35 and $2.67 billion, respectively. Processed $87 billion in TPV, up 25%, or 28% on an FX-neutral basis. Also guided Q4 EPS of $0.40-0.42 on revenues of $2.920-2.990 billion.
Wipro (WIT 9.78, -0.14 -1.41%) reported better than expected Q2 EPS and revenues of INR8.52 and INR137.66 billion.
Ericsson (ERIC 5.10, -0.27 -5.03%) reported worse than expected Q3 EPS of $0.34 on revenues which fell 13.7% compared to last year to $51.1 billion.
KLA-Tencor (KLAC 73.64, +1.65 +2.29%) reported better than expected Q1 EPS and revenues of $1.16 and $751 million. Also, guided Q2 revenue growth of about 11% sequentially at the midpoint to $805-865 million. Additionally, sees EPS in the range of $1.28-1.48 for Q2.
Proofpoint (PFPT) reported better than expected Q3 EPS and revenues of $0.19 and $99.8 million, respectively. Also, sees Q4 EPS and revenues ahead of market expectations at $0.10-0.14 and $103-105 million, respectively.
Advanced Micro (AMD 6.52, -0.44 -6.32%) reported better than expected Q3 EPS and revenues of $0.03 and $1.31 billion, respectively. AMD also guided Q4 revenues at $1.03-1.11 billion (or down 21-15%).
Companies scheduled to report Monday morning: CYOU, SOHU, TMUS
Analyst actions:
MSFT was upgraded to Outperform from Market Perform at William Blair and to Buy from Hold at Wunderlich,
PYPL was upgraded to Buy from Hold at Stifel,
EBAY was upgraded to Buy from Long-Term Buy at Hilliard Lyons,
AVT was upgraded to Buy from Neutral at Longbow,
UBNT was upgraded to Mkt Perform from Mkt Underperform at JMP Securities;
YHOO was downgraded to Hold from Buy at Jefferies,
DATA was downgraded to Mixed from Positive at OTR Global,
BHE was downgraded to Sell from Hold at Cross Research;
OTEX was initiated with an Overweight at Mitsubishi UFJ,
ASUR was initiated with a Buy at Roth Capital
