From Briefing.com: The stock market secured its third consecutive weekly advance with the S&P 500 rising 0.8%. The benchmark index posted gains in four of the first six weeks of 2016 while the two down weeks in the middle of January shaved a whopping 0.25% off the index.
The first half of the week featured sideways action just below record highs from late January, but the market snapped out of that range on Thursday after comments from President Donald Trump reminded investors that tax reform remains a priority. Mr. Trump announced that something "phenomenal" on the tax front would be announced in the next two or three weeks. The comments, which did not include specific details, were enough to encourage investors, who were starting to worry that a major campaign promise may go unaddressed.
Market participants received another heavy dose of quarterly reports, but the earnings had more influence on individual stocks than the broader market. At the end of the week, more than 71.0% of S&P 500 components had reported their results, generating blended earnings growth of 4.9%, according to FactSet. This represented a modest shortfall relative to the estimate from the end of September, which called for growth of 5.2%.
The past week was quiet on the economic front, leaving investors with just a few second-tier reports to digest. The preliminary reading of the Michigan Sentiment index for February declined to 95.7 from 98.5, almost entirely due to a pullback in the Expectations Index. That index fell to 85.7 from 90.3 while the Current Economic Conditions Index ticked down to 111.2 from 111.3.
Rate hike expectations barely budged on a week-over-week basis. The fed funds futures market ended the week showing a 67.3% implied probability of a rate hike in June, up from last week's 63.5%, but down slightly from 69.2% two weeks ago.
Index Started Week Ended Week Change % Change YTD %
DJIA 20071.46 20269.37 197.91 1.0 2.6
Nasdaq 5666.77 5734.13 67.36 1.2 6.5
S&P 500 2297.42 2316.10 18.68 0.8 3.5
Russell 2000 1377.83 1388.44 10.61 0.8 2.3
4:22 pm Closing Market Summary: Another Record Close for Equities (:WRAPX) :
Equity indices closed the week on an upbeat note, climbing to fresh record highs for the second consecutive day. The Dow (+0.5%) led the advance while the Nasdaq (+0.3%) finished just behind the S&P 500 (+0.4%).
The optimism surrounding today's session had its roots in President Trump's upcoming tax-related announcement. On Thursday, the president promised the unveiling of a "phenomenal" tax plan in the coming weeks, but didn't provide any specific details on what the plan will include. Still, it was enough to push the stock market to record highs on Thursday and then again on Friday.
It is worth noting that Federal Reserve Governor Daniel Tarullo announced on Friday that he will be resigning from his position, effective April 5. As a result, President Trump will have the opportunity to fill three of the seven seats on the Federal Reserve Board of Governors.
On the earnings front, NVIDIA's (NVDA 113.62, -2.76) earnings report lived up to lofty expectations that accompanied the company's massive 55.8% gain in the fourth quarter. However, the stock fell 2.4% on Friday as better than expected top and bottom lines and above-consensus first quarter guidance was met with a sell-the-news response from investors. In addition to Apple's (AAPL 132.12, -0.30) lackluster performance, the response to NVIDIA's earnings report put a lid on the top-weighted technology sector's (+0.2%) gain.
Elsewhere on the earnings front, Skechers (SKX 27.78, +4.50) and Columbia Sportswear (COLM 59.83, +6.54) spiked 19.3% and 12.3%, respectively, following the release of their quarterly reports. SKX's jump can be attributed to its above-consensus revenues and upbeat Q1 revenue guidance, whereas COLM's surge was fueled by better than expected earnings.
However, Yelp (YELP 35.83, -5.66) didn't share the good fortune of its consumer discretionary peers. The company plunged 13.6% following worse than expected first quarter revenue guidance. The consumer discretionary space took in the positive and brushed off the negative to close 0.5% higher.
Energy (+0.8%) also finished Friday's session solidly higher thanks to the uptick in crude oil; the commodity finished its trading day up 0.9% at $53.85/bbl. WTI crude's third consecutive advance followed a bullish International Energy Agency report, which showed 90.0% OPEC compliance with agreed-upon production cuts and an increased oil demand growth forecast for 2017.
On the countercyclical side, consumer staples (-0.1%) finished at the bottom of the day's leaderboard, while the influential health care space (+0.1%) finished just a step ahead. Health care overcame weakness in biotech names with a 1.0% jump in the sector's largest component by market cap, Johnson & Johnson (JNJ 115.24, +1.16).
JNJ's uptick was the result of a positive development involving the European Medicines Agency. As a reminder, Johnson & Johnson agreed to acquire Actelion in late January for roughly $30 billion. The EMA stated that Actelion's Uptravi may continue to be used, after the agency reviewed the safety of the drug following the deaths of five patients in France who were taking it.
In the Treasury market, government-issued debt extended Thursday's downtick with minor losses on Friday. The benchmark 10-yr yield closed two basis points higher at 2.41%.
Today's economic data included January Export/Import Prices, the preliminary Michigan Sentiment Index for February, and the January Treasury Budget:
Import prices excluding oil declined 0.2% in January after ticking down 0.1% in December (revised from -0.2%). Export prices excluding agriculture increased 0.1% in January after rising 0.4% in December.
The key takeaway from the report is that nonfuel import prices remain in check, but nonetheless, inflation concerns could get dialed up just a bit on the notion of a potential pass-through effect should higher fuel prices persist.
The preliminary reading of the University of Michigan Consumer Sentiment Index for February declined to 95.7 (Briefing.com consensus 97.9) from 98.5 in the prior month.
While consumer sentiment faded, the key takeaway is that it is still high, as there have only been five higher readings in the past decade.
The Treasury Budget for January showed a deficit of $51.3 billion versus a deficit of $55.2 billion for January 2016. The Treasury Budget data is not seasonally adjusted, so the January deficit cannot be compared to the $27.5 billion deficit registered in December.
Investors will not receive any economic data on Monday.
Nasdaq Composite +6.5% YTD
S&P 500 +3.5% YTD
Dow Jones Industrial Average +2.6% YTD
Russell 2000 +2.3% YTD
Week in Review: Evergreen Trade Remains Alive
The stock market secured its third consecutive weeklyadvance with the S&P 500 rising 0.8%. The benchmark index postedgains in four of the first six weeks of 2016 while the two down weeks in themiddle of January shaved a whopping 0.25% off the index.
The first half of the week featured sideways action justbelow record highs from late January, but the market snapped out of that rangeon Thursday after comments from President Donald Trump reminded investors thattax reform remains a priority. Mr. Trump announced that something "phenomenal"on the tax front would be announced in the next two or three weeks. Thecomments, which did not include specific details, were enough to encourageinvestors, who were starting to worry that a major campaign promise may gounaddressed.
Market participants received another heavy dose of quarterlyreports, but the earnings had more influence on individual stocks than thebroader market. At the end of the week, more than 71.0% of S&P 500components had reported their results, generating blended earnings growth of4.9%, according to FactSet. This represented a modest shortfall relative to theestimate from the end of September, which called for growth of 5.2%.
The past week was quiet on the economic front, leavinginvestors with just a few second-tier reports to digest. The preliminaryreading of the Michigan Sentiment index for February declined to 95.7 from98.5, almost entirely due to a pullback in the Expectations Index. That indexfell to 85.7 from 90.3 while the Current Economic Conditions Index ticked downto 111.2 from 111.3.
Rate hike expectations barely budged on a week-over-weekbasis. The fed funds futures market ended the week showing a 67.3% impliedprobability of a rate hike in June, up from last week's 63.5%, but down slightlyfrom 69.2% two weeks ago.
Averages made all-time highs again today as the broader market showed no signs of slowing down from the Trump bump. The Dow Jones Industrial Average added 96.97 points (+0.48%) to 20269.37. The S&P 500 gained 8.23 points (+0.36%) today to end 2316.10, and the Nasdaq Composite was up 18.95 points (+0.33%) to 5743.13 when the bell rang. This week's moves take the three major US indices to +2.6%, +3.5% and +6.5% YTD, respectively.
Today's economic data included import prices excluding oil which declined 0.2% in January after ticking down 0.1% in December (revised from -0.2%). Export prices excluding agriculture increased 0.1% in January after rising 0.4% in December. Also, the preliminary reading of the University of Michigan Consumer Sentiment Index for February declined to 95.7 from 98.5 in the prior month.
The Technology (XLK 51.32, +0.15 +0.29%) sector closed out the week with modest gains, propelling higher off mid-morning lows. Gaming name Activision Blizzard (ATVI 47.23, +7.50 +18.88%) was the best performer today after reporting Q4 results last night. Other sectors as measured by the S&P closed Friday XLB +0.91%, XLI +0.81%, IYZ +0.79%, XLE +0.77%, XLRE +0.68%, XLU +0.63%, XLY +0.61%, XLF +0.30%, XLV +0.20%, XLP +0.06%.
In the S&P 500 Information Technology (865.88, +1.91 +0.22%) space, trading mounted a strong advance following mid-morning weakness, following the broader market to all-time highs. Component Western Union (WU 19.75, -0.63 -3.09%) was among some of the worst performers today after last night's Q4 print. Other names in the space which closed higher with the sector included EA +3.50%, QCOM +2.12%, FSLR +1.92%, EBAY +1.54%, CSRA +1.51%, ORCL +1.39%, INTU +1.24%, HRS +1.20%, JNPR +0.88%, IBM +0.83%.
Other notable news items among sector components:
SunPower (SPWR 7.16, +0.19 +2.73%) Chief Operating Officer Marty Neese notified the company of his intent to leave to accept a position with another company.
NXP Semi (NXPI 101.99, +0.39 +0.38%) announced its gross debt will be reduced to $6.5 billion from the $9.2 billion reported at the end of 4Q16.
In addition to reporting quarterly results, A10 Networks' (ATEN 9.51, +0.91 +10.58%) announced CFO Greg Straughn has stepped down.
In addition to reporting quarterly results, VeriSign's (VRSN 83.14, +0.62 +0.75%) Board of Directors announced the approval of an additional share repurchase authorization of about $641 million.
Volkswagen (VLKAY 31.15, +0.48 +1.59%) selected Sierra Wireless (SWIR 24.45, +5.80 +31.10%) AirPrime AR Series modules and the Legato platform for its next generation of connected cars.
ChannelAdvisor's (ECOM 10.85, -3.40 -23.86%) Chief Technology Officer, Aris Buinevicius, resigned effective March 17.
In reaction to quarterly results:
NVIDIA (NVDA 113.62, -2.76 -2.37%) reported better than expected Q4 EPS and revenues of $1.13 and $2.17 billion, respectively. For Q1, the company sees revenues ahead of expectations at $1.90 billion, plus or minus 2%.
Activision Blizzard (ATVI) reported Q4 earnings of $0.65 per share on revenues which beat market expectations at $2.45 billion. For Q1, the company sees EPS of $0.51 on revenues of $1.55 billion. For FY17, ATVI expects EPS of $1.70 and revenues of $6 billion.
Expedia (EXPE 122.65, -0.60 -0.49%) reported worse than expected Q4 EPS of $1.17 on better than expected revenues of $2.09 billion.
Western Union (WU) reported better than expected Q4 EPS of $0.47 on in-line revenues of $1.37 billion. For FY17, WU sees EPS and revenues in-line at $1.63-1.75 and revenue growth of flat to low single digits.
VeriSign (VRSN) reported better than expected Q4 EPS and revenues of $0.92 and $286.27 million, respectively.
A10 Networks (ATEN) reported better than expected Q4 EPS and revenues of $0.03 and $64.0 million.
Pandora Media (P 12.85, +0.23 +1.82%) reported a better than expected Q4 loss per share of $0.13 on revenues which also beat expectations at $392.6 million. For Q1, the company sees revenues below market expectations at $310-320 million. For FY17, the company sees in-line revenues of $1.55-1.70 billion.
Yelp (YELP 35.83, -5.66 -13.64%) reported better than expected Q4 EPS of $0.27 on in-line revenues of $194.8 million. The company also guided Q1 revenues worse than expected at $195-199 million, and guided FY17 revenues in-line at $880-900 million.
Infinera (INFN 11.96, +2.56 +27.23%) reported a better than expected Q4 loss per share of $0.12 on revenues which also beat expectations at $181.04 million. For Q1, the company guided a non-GAAP EPS loss of ($0.18)-($0.14) with revenues in the range of $167-177 million.
Sierra Wireless (SWIR) reported better than expected Q4 adjusted earnings of $0.27 on revenues which also beat expectations at $163 million. For Q1, the company sees EPS above market expectations at $0.13-0.20 on in-line revenues of $152-161 million.
Companies scheduled to report quarterly results Monday morning: FDC LIOX TSEM VSM WEX
Analyst actions:
INFN was upgraded to Buy from Neutral at Instinet,
SWIR was upgraded to Overweight from Equal Weight at First Analysis Sec,
VECO was upgraded to Buy at BofA/Merrill;
TWTR was downgraded at UBS, Citigroup, Deutsche Bank, Atlantic Equities and Loop Capital,
INTC was downgraded to Hold from Buy at Canaccord Genuity,
UBNT was downgraded to Underperform from Neutral at Credit Suisse,
MTSC was downgraded to Neutral from Overweight at JP Morgan,
ZAYO was downgraded to Underperform from Mkt Perform at FBR & Co.,
BLKB was downgraded to Hold from Buy at Wunderlich;
SYMC was initiated with an Equal weight at Barclays,
ENTG and VRNT were initiated with a Buy at Goldman,
NICE and VSM were initiated with Neutral ratings at Goldman
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