From Briefing.com: 4:30 pm Closing Market Summary: Investors Take Earnings in Stride (:WRAPX) :The stock market cruised to a victory on Tuesday with the S&P 500 (+0.3%), the Nasdaq (unch), and the small-cap Russell 2000 (+0.9%) all settling at fresh record highs. The Dow (+0.5%) outperformed the benchmark index, but finished just 30 points shy of its record mark. The Nasdaq lagged as a handful of influential tech stocks underperformed.
Investors were drowning in earnings reports on Tuesday, but took the news in stride as the results largely came in better than expected. For instance, out of the five Dow components that reported their quarterly results on Tuesday morning, four of them--Caterpillar (CAT 114.54, +6.36, +5.9%), McDonald's (MCD 159.07, +7.22, +4.8%), DuPont (DD 85.49, +1.14, +1.4%), and United Technologies (UTX 120.42, -2.71, -2.2%)--beat earnings per share estimates. 3M (MMM 199.39, -10.61, -5.1%) was the only Dow component to miss bottom-line estimates.
However, stock movement didn't necessarily reflect earnings performance, at least on the surface, with Alphabet (GOOGL 969.03, -29.28) serving as a prime example. The tech giant reported better than expected earnings and revenues, but slipped 2.9% nonetheless. There were some concerns surrounding a 28.0% year-over-year increase in the company's traffic acquisition costs (TAC), but the sell off was more likely a signal that the good earnings news was priced in during a three-week rally leading up to the report; GOOGL shares jumped 8.6% from July 3 to July 24.
Alphabet weighed on the top-weighted technology sector, which finished with a loss of 0.2%. The industrial (-0.1%) sector also settled with a modest decline while the health care and utilities spaces suffered more substantial losses, losing 0.7% and 0.5%, respectively. Biotechnology names struggled, sending the iShares Nasdaq Biotechnology ETF (IBB 323.81, -3.53) lower by 1.1%. However, pharmaceutical giant Eli Lilly (LLY 82.19, -2.55) did even worse, dropping 3.0%, despite beating top and bottom line estimates.
On a related note, the Senate voted to move forward with a debate on health-care reform on Tuesday afternoon with Vice President Mike Pence breaking a 50-50 tie.
Seven of eleven sectors advanced on Tuesday with the financials (+1.3%), energy (+1.3%), and materials (+1.2%) groups leading the charge. The financial space benefited from Citigroup's (C 68.03, +1.93) upbeat long-term profitability projections, which were provided at its first investor day since the Great Recession. In addition, a curve-steepening trade in the Treasury market also underpinned financials' positive performance.
Treasuries settled lower across the curve with the heaviest selling taking place at the back end; the 10-yr yield climbed eight basis points to 2.33% while the 2-yr yield climbed three basis points to 1.39%.
Meanwhile, the energy space benefited from a rally in the crude oil market. The commodity advanced for the second day in a row, underpinned by yesterday's news that Saudi Arabia will curb its exports next month. Technical trading also played a factor as WTI crude managed to break above its 50-day simple moving average ($46.52/bbl), which acted as a level of resistance on Monday. WTI crude settled higher by 3.3% at a price of $47.89/bbl.
As for the materials sector, Freeport-McMoRan (FCX 14.87, +1.91) was the top performer, surging 14.7%, after saying on its post-earnings conference call that copper demand from China has been better than expected. FCX beat revenue estimates, but came up a little short on earnings. Meanwhile, copper jumped 3.9% to $2.84/lb.
Out of the remaining advancers--consumer discretionary (+0.7%), consumer staples (+0.7%), telecom services (+0.3%), and real estate (+0.1%)--the consumer discretionary and consumer staples groups were the top performers as retailers outperformed. The SPDR S&P Retail ETF (XRT 40.81, +1.05) climbed 2.6% amid broad strength.
Reviewing Tuesday's economic data, which included the Conference Board's Consumer Confidence Index for July, the May FHFA Housing Price Index, and the May S&P 500 Case-Shiller Home Price Index:
The consumer confidence reading for July rose to 121.1 from the prior month's revised reading of 117.3 (from 118.9). The Briefing.com consensus expected the survey to hit 116.8.
The key takeaway from the report is that the uptick in July was forged by a pickup in sentiment for current conditions as well as the short-term outlook.
The FHFA Housing Price Index for May rose 0.4%, while the Briefing.com consensus expected an increase of 0.7%. The prior month's reading was revised to 0.6% (from 0.7%). The May Case-Shiller 20-city Index hit 5.7%, which is in line with the Briefing.com consensus. The prior month's reading was left unrevised at 5.7%.On Wednesday, investors will receive just two pieces of economic data--the weekly MBA Mortgage Applications Index and the June New Home Sales Report (Briefing.com consensus 610K). The two reports will cross the wires at 7:00 ET and 10:00 ET, respectively.
Also of note, the Fed's latest policy directive will be released on Wednesday afternoon at 14:00 ET.
Nasdaq Composite +19.1% YTD
S&P 500 +10.6% YTD
Dow Jones Industrial Average +9.4% YTD
Russell 2000 +6.9% YTD
Tech Stocks from Briefing.com
After a split start, the broader market finished higher as the Dow Jones Industrial Average peeled ahead. The Dow gained 100.26 points (+0.47%) today to end 21613.43. The S&P 500 was up 7.17 points (+0.29%) to 2477.08, and the Nasdaq Composite added 1.37 points (+0.02%) to 6412.17.
Market data today included the consumer confidence reading for July which rose to 121.1 from the prior month's revised reading of 117.3 (from 118.9). Also, the FHFA Housing Price Index for May rose 0.4%, while the prior month's reading was revised to 0.6% (from 0.7%). Lastly, the May Case-Shiller 20-city Index hit 5.7%, while the prior month's reading was left unrevised at 5.7%.
The Technology (XLK 57.50 -0.11 -0.19%) space retreated modestly off yesterday's gains. Component Seagate Tech (STX 33.20, -6.56 -16.50%) was the worst performer today after missing Q4 earnings and revenue expectations and announcing job cuts. When Tuesday came to a close, the Energy XLE +1.26% space led the pack, followed by XLF +1.24%, IYZ +1.08%, XLB +1.07%, XLY +0.70%, XLP +0.69%, XLRE +0.00%, XLI -0.13%, XLU -0.57%, XLV -0.72%.
In the S&P 500 Information Technology (992.74, -1.74 -0.17%) space, trading ended off lows and modestly in the red. Component Alphabet (GOOG 950.70, -29.64 -3.02%) was another underperformer today as the company reported an earnings beat yet ended lower. Some remaining names which underperformed today included MU -5.59%, KLAC -1.09%, WDC -0.92%, ADBE -0.88%, AMAT -0.81%, ATVI -0.80%, PYPL -0.55%, NVDA -0.48%, FIS -0.47%, FB -0.43%.
Other notable news items among sector components:
In addition to reporting earnings, Seagate Tech (STX) committed to additional restructuring plan to reduce cost structure, intends to reduce global headcount by about 600 employees.
HubSpot (HUBS 74.80, -0.65 -0.86%) acquired Kemvi; terms not disclosed.
Agilent (A 60.54, -0.96 -1.56%) acquired molecular and sample barcoding patent portfolios of Population Genetics Technologies; terms not disclosed.
IBM (IBM 146.19, +0.20 +0.14%) was granted patent on approach for utilizing the inherent structure of a printed circuit board to protect cryptographic keys and codes in a manner that is designed to be highly tamper-resistant.
LG Display (LPL 14.49, -0.59 -3.91%) reported Q2 results; will invest in a new 8.5th generation large-size organic light emitting diodes production line in Guangzhou, China.
Nuance Communications (NUAN 17.39, -0.06 -0.34%) and Seiko Epson (SEKEY 11.76, +0.01 +0.13%) form worldwide strategic partnership.
Telefonica S.A. (TEF 10.88, flat) named Angel Vil Boix as Chief Operating Officer.
In reaction to quarterly results:
Alphabet (GOOG) reported better than expected Q2 EPS and revenues of $5.01 and $26.01 billion, respectively. Google Properties revenue $18.42 billion, +19.6% y/y; Paid Click on Google Properties +61%; Paid Clicks on Google Network Member +9%
Cadence Design (CDNS 36.64, +1.57 +4.48%) reported better than expected Q2 EPS of $0.34 on revenues which were in-line at $479 million. For Q3, the company sees EPS and revenues in-line at $0.33-0.35 and $475-485 million, respectively. For FY17 the company sees EPS of $1.36-1.42 (from $1.32-1.42) on revenues of $1.91-1.95 billion (from $1.90-1.95 billion).
Seagate Tech (STX) reported worse than expected Q4 EPS and revenues of $0.65 and $2.41 billion, respectively.
Logitech Intl SA (LOGI 36.55, -4.20 -10.31%) reported better than expected Q1 EPS and revenues of $0.24 and $530 million, respectively. For FY18, the company sees revenue growth of 10-12% y/y to $2.43-2.47 billion.
Siliconware Precision (SPIL 8.15, -0.01 -0.18%) reported worse than expected Q2 EPS and revenues of NT$0.69 and NT$20.42 billion, respectively.
Analyst actions:
TEAM was upgraded to Overweight from Equal Weight at Morgan Stanley,
TKC was upgraded to Buy from Neutral at Citigroup;
SNAP was downgraded to Neutral from Buy at Cleveland Research,
POWI was downgraded to Hold from Buy at Deutsche Bank,
WBMD was downgraded at SunTrust and Raymond James;
TNTR was initiated at Piper Jaffray, KeyBanc Capital Mkts, BofA/Merrill and Morgan Stanley among others,
AAPL, LOGI, STX, XRX, EFII and WDC were all initiated with Buy ratings at Loop Capital,
SSYS was initiated with a Hold at Loop Capital,
HDP and MIME were initiated with Buy ratings at Needham
Expect quarterly earnings tonight/tomorrow from the following companies: AMD, AKAM, AABA, T, CLS, CLGX, DLB, EEFT, JNPR, MKSI, TXN, TSS/APH, ANGI, AUO, AUDC, AVX, GLW, FLIR, LN, SLAB, STM, TEL, UMC
4:33 pm Qualcomm and Nichicon enter into a Wireless Electric Vehicle Charging license agreement (QCOM) : By this agreement Qualcomm has granted Nichicon a royalty bearing license to develop, make and supply WEVC systems based on Qualcomm Halo technology. Qualcomm will also provide a comprehensive technology transfer package to help Nichicon to develop commercially and technically viable WEVC systems and support the future design of improved WEVC systems.
4:23 pm Advanced Micro beats by $0.02, beats on revs; guides Q3 revs above consensus; raises FY17 sales growth (AMD) :
Reports Q2 (Jun) earnings of $0.02 per share, $0.02 better than the Capital IQ Consensus of ($0.00); revenues rose 19.0% year/year to $1.22 bln vs the $1.16 bln Capital IQ Consensus, driven by higher revenue in the Computing and Graphics segment. Revenue was up 24 percent sequentially, driven by increased sales in both business segments. Gross margin was 33 %, up 2 percentage points year-over-year due to a richer product mix and a higher percentage of revenue from the Computing and Graphics segment, driven by the first full quarter of Ryzen processor sales.
Computing and Graphics segment revenue was $659 million, up 51 percent year-over-year, driven by demand for graphics and Ryzen desktop processors. Operating income was $7 million, compared to an operating loss of $81 million in Q2 2016. The year-over-year improvement was driven primarily by higher revenue and improved product mix. Client average selling price (:ASP) increased significantly year-over-year, as desktop processor ASP increased due to the first full quarter of Ryzen processor shipments. GPU ASP increased year-over-year. Enterprise, Embedded and Semi-Custom segment revenue was $563 million, down 5 percent year-over-year primarily due to lower semi-custom SoC sales. In the quarter, AMD reached an important milestone by recognizing initial revenue from EPYC datacenter processor shipments.
Co issues upside guidance for Q3, sees Q3 revs of +20-26% Q/Q to ~$1.47-1.54 bln vs. $1.39 bln Capital IQ Consensus Estimate; adj. gross margin ~34%.
Raises FY17 rev growth to mid to high teens % from low double digits; semi-custom revenue to be down year-over-year based on the maturity of the current game console cycle, non-GAAP gross margin to be ~34%, achieve non-GAAP net income.
4:22 pm Juniper Networks beats by $0.03, beats on revs; guides Q3 EPS in-line, revs in-line (JNPR) :
Reports Q2 (Jun) earnings of $0.57 per share, excluding non-recurring items, $0.03 better than the Capital IQ Consensus of $0.54 and at the high end of prior guidance of $0.51-0.57; revenues rose 7.2% year/year to $1.31 bln vs the $1.29 bln Capital IQ Consensus and vs prior guidance of $1.25-1.31 bln.
Non-GAAP operating margin in Q2 was 24.2%, an increase from 22.5% in 2Q16 and an increase from 20.8% in 1Q17.
Co issues in-line guidance for Q3, sees EPS of $0.55-0.61, excluding non-recurring items, vs. $0.58 Capital IQ Consensus Estimate; sees Q3 revs of $1.29-1.35 bln vs. $1.33 bln Capital IQ Consensus
Estimate. Co guides to Q3 non-GAAP operating margin of approximately 24.1% at the midpoint of revenue guidance.
"We had good revenue growth and earnings expansion in [Q2]...We are executing on our strategy to lead the transformation to the cloud...We believe our innovative product portfolio has us well positioned to expand our business opportunities as customers look for high-performance network solutions that deliver scale, performance and automation."
4:17 pm Celestica reports EPS in-line, revs in-line; guides Q3 EPS in-line, revs in-line (CLS) :
Reports Q2 (Jun) earnings of $0.32 per share, excluding non-recurring items, in-line with the Capital IQ Consensus of $0.32; revenues rose 4.9% year/year to $1.56 bln vs the $1.55 bln Capital IQ Consensus.
Co issues in-line guidance for Q3, sees EPS of $0.28-0.34, excluding non-recurring items, vs. $0.33 Capital IQ Consensus Estimate; sees Q3 revs of $1.5-1.6 bln vs. $1.59 bln Capital IQ Consensus Estimate.
Revenue dollars from our Communications end market increased 14% compared to the second quarter of 2016, and represented 44% of total revenue, compared to 41% of total revenue for the second quarter of 2016
4:05 pm Texas Instruments beats by $0.07, beats on revs; guides Q3 in-line (TXN) :
Reports Q2 (Jun) earnings of $1.03 per share, $0.07 better than the Capital IQ Consensus of $0.96; revenues rose 12.8% year/year to $3.69 bln vs the $3.57 bln Capital IQ Consensus.
Co issues in-line guidance for Q3, sees EPS of $1.04-1.18 vs. $1.05 Capital IQ Consensus Estimate; sees Q3 revs of $3.74-4.06 bln vs. $3.8 bln Capital IQ Consensus Estimate.
"Revenue increased 13 percent from the same quarter a year ago. Demand for our products continued to be strong in the automotive market and continued to strengthen in the industrial market. "In our core businesses, Analog revenue grew 18 percent and Embedded Processing revenue grew 15 percent from the same quarter a year ago. Operating margin increased in both businesses. "Gross margin of 64.3 percent reflected the quality of our product portfolio, as well as the efficiency of our manufacturing strategy, including the benefit of 300-millimeter Analog production.
