From Briefing.com: Weekly Recap - Week ending 15-Apr-16
The stock market continued its recent show of strength over the past week as the S&P 500 climbed 1.6% since Friday to extend its 2016 gain to 1.8%. The Nasdaq outperformed slightly, climbing 1.8% for the week, but the tech-heavy index remains down 1.4% for the year.
Equity indices started the week on a quiet note, but buyers were not hard to find as the S&P 500 extended to a fresh high for the year on Wednesday. The index powered along even though economic data released during the week disappointed. For instance, the March Retail Sales report showed a 0.3% decline (Briefing.com consensus 0.1%) while March Core PPI (-0.1%; Briefing.com consensus 0.2%) and March Core CPI (0.1%; Briefing.com consensus 0.2%) also missed estimates. To be fair, cooler than expected inflation data can be viewed as something that may keep the Fed on hold for longer.
Interestingly, the disappointing Retail Sales report prompted the Atlanta Fed to raise its GDPNow forecast for the first quarter to 0.3% from 0.1% on April 8. The Atlanta Fed noted that March retail sales boosted the first-quarter real consumer spending growth forecast to 1.8% from 1.6%.
The past week marked the start of the first-quarter earnings season, which was largely unassuming. Alcoa (AA) kicked things off with a bottom-line beat on light revenue while major financials like JPMorgan Chase (JPM), Bank of America (BAC), Wells Fargo (WFC), and Citigroup (C) followed later in the week. Overall, bottom-line beats were not hard to come by, but Bank of America, Citigroup, and JPMorgan Chase reported respective revenue declines of 8.0%, 11.1%, and 3.7%.
Index Started Week Ended Week Change % Change YTD %
DJIA 17576.96 17897.25 320.29 1.8 2.7
Nasdaq 4850.69 4938.22 87.53 1.8 -1.4
S&P 500 2047.60 2080.63 33.03 1.6 1.8
Russell 2000 1094.00 1128.20 34.20 3.1 -0.7
Broader market trading closed Friday with modest losses. Action was led to the downside today by the Dow Jones Industrial Average which lost 28.97 points (-0.16%) to end 17897.46. The Nasdaq Composite was also down (-0.16%), shedding 7.67 points to 4938.22. The S&P 500 ended down 2.05 points (-0.10%) to 2080.73. This week's action took the three major US indices +2.7%, -1.4% and +1.8% YTD, respectively. Today's move was predicated on mostly average volume as 1,015 million shares were traded on the NYSE floor versus an average of around 1,033 million. This, compared to about 1,538 million shares being exchanged on the NASDAQ floor versus an average of about 1,754 million leaves little to the imagination as to the sentiment of investors midway through April.
Market data today came in the form of the Empire Manufacturing Survey which jumped 9.6 for April from 0.6 for March. The Industrial Production and Capacity Utilization report for March disappointed with total production down 0.6% and total industry capacity utilization at just 74.8%. The manufacturing capacity utilization rate of 75.1% is 3.4 percentage points below its long-run average; meanwhile, the utilization rate of 73.7% for both mining and utilities is the lowest over the histories for each of those series. Also, the preliminary reading for the University of Michigan Consumer Sentiment Survey for April dropped to 89.7 from 91.0 in March and 95.9 in the same period last year.
The session ended with trading in the Technology (XLK 44.34, -0.15 -0.35%) sector modestly in the red. Component Apple (AAPL 109.85, -2.25 -2.01%) was under pressure today as the stock saw a negative reaction to a report out intraday highlighting a possible iPhone production slowdown. Other sectors as measured by the S&P closed the day XLP +0.62%, IYZ +0.58%, XLU +0.56%, XLB +0.46%, XLY +0.28%, XLI +0.14%, XLV -0.07%, XLF -0.35%, XLE -1.35% as Materials and Telecoms outperformed and Energy and Tech were among the worst performers.
In the S&P 500 Information Technology (737.77, -3.44 -0.46%) sector, trading was also modestly lower. Component Micron (MU 10.69, +0.29 +2.79%) displayed relative strength today on the heels of the company's upsized and priced offering of $1.25 billion of its 7.500% senior secured noted due 2023. Other components in the sector that were modestly lower included STX -5.61%, QRVO -3.81%, WDC -3.18%, SWKS -2.23%, AVGO -2.10%, NTAP -2.03%, TDC -1.98%, QCOM -1.47%.
Other notable news items among sector components:
Micron (MU) upsized and priced $1.25 billion of its 7.500% senior secured notes due 2023.
Harris (HRS 77.39, -0.26 -0.33%) was awarded a $20 million in orders from the U.S. Army Communications-Electronics Command to modernize defense force communications for several Middle East and North African Nations. The orders were received under the Foreign Military Sales (FMS) program.
Apple (AAPL) shares were under pressure at midday as the company was the subject of a Nikkei Asian Review report which suggested an extended iPhone production cut during Q2.
SanDisk (SNDK 75.76, -0.13 -0.17%) introduced the 128GB SanDisk Extreme PLUS microSDXC card, one of the first microSD cards to carry the Works with GoPro (GPRO 13.77, -0.03 -0.22%) verification.
Yahoo! (YHOO 36.51, -0.66 -1.78%) amended its change in control employee severance plans that, together, cover all full time employees of YHOO, including YHOO's Amended and Restated Change in Control Employee Severance Plan for Level I and Level II Employees.
Elsewhere in the tech space:
Mitel (MITL 7.12, -0.76 -9.64%) announced the acquisition of Polycom (PLCM 12.02, -0.25 -2.04%) in a cash and stock transaction valued at about $1.96 billion or $13.68 per share. MITL also updated its 1Q16 guidance following the deal, and transaction expected to be accretive to earnings in FY17.
Ixia (XXIA 10.19, -2.01 -16.48%) shares were weighed down by the company's guidance cut and now expects Q1 revenues in the range of $108-111 million versus prior guidance in the range of $121-126 million. Further, XXIA now expects non-GAAP EPS in the range of $0.05-0.08 versus prior expectations in the range of $0.10-0.14. The company noted the guidance change was due in part to the marked slowdown in network test spending from the company's North America network equipment manufacturer customers in March.
SunEdison (SUNE 0.37, -0.21 -36.76%) released a presentation to principles for the 2nd lien lenders with business plan scenarios. Detailed, SUNE noted negotiations with respect to such potential financing transactions are still ongoing.
Bats Global Markets (BATS 23.00, +4.00 +20.3%), a US equity security and options exchange, opened for trading today at $22.88, up from the IPO pricing level of $19 per share.
Analyst actions:
MU upgraded to Strong Buy from Outperform at Raymond James,
INFN upgraded to Neutral from Sell at Goldman;
SSYS and DDD downgraded at Citigroup,
MIME downgraded to Neutral from Buy at Goldman,
LPL downgraded to Underperform from Neutral at Macquarie
4:12 pm Closing Market Summary: Energy Lags as Financials Break Winning Streak (:WRAPX) :
The major averages ended an upbeat week on a lower note as a week-long rally in the heavily-weighted financial sector (-0.3%) came to an end. Other focal points for today's trade included some below-consensus domestic economic data, a slide in crude oil, and the underperformance of the heavily-weighted technology (-0.5%) space. The Nasdaq Composite (-0.2%) ended its day in-line with the Dow Jones Industrial Average (-0.2%) and behind the S&P 500 (-0.1%).
Equities stumbled at the start of the session as implications from some above-consensus economic data out of China weighed on expectations for continued easing from the People's Bank of China. Meanwhile, economic readings at home did little to bolster investors' risk appetite as Industrial Production (-0.6%; Briefing.com consensus +0.0%) for March, Capacity Utilization (74.8%; Briefing.com consensus 75.5%) for March, and the preliminary University of Michigan Consumer Sentiment Survey (89.7; Briefing.com consensus 92.0) for April all missed expectations.
A downturn in crude oil also pressured the broader market as the energy component pared gains ahead of this weekend's summit between oil producers in Doha, Qatar. OPEC and non-OPEC members will meet to discuss a possible production cap agreement meant to combat the ongoing supply glut. To be fair though, expectations for an agreement are mixed and the impact of such an agreement is difficult to gauge. WTI crude ended its day lower by 2.5% at $40.40/bbl, but gained 1.6% since last Friday.
The major averages carved out fresh lows in the afternoon after heavily-weighted technology (-0.5%) joined energy (-1.3%), financials (-0.3%), and health care (UNCHF) on the bottom of the leaderboard.
The economically-sensitive financial sector (-0.3%) spent its day pulling back from larger weekly gains. On that note, money center banks broke their recent winning streak as Bank of America (BAC 14.00, -0.14) and JPMorgan Chase (JPM 61.87, -0.72) ended the day with losses of 1.0% and 1.2%, respectively. Elsewhere, Citigroup (C 44.92, -0.06) reported a bottom-line beat in the first quarter, but surrendered a 3.5% gain to end beneath its flat line. However, Citigroup ended the week higher by 11.0%, compared to a 4.0% gain in the broader sector.
In the heavily-weighted financial sector (-0.5%), large cap constituent Apple (AAPL 109.85, -2.25) slipped 2.0% after Nikkei reported that the company will extend its iPhone production cut into the second quarter. Elsewhere, the PHLX Semiconductor Index (-0.9%) finished lower as suppliers for the smartphone underperformed.
Six sectors ended the day above their flat lines with utilities (+0.7%), consumer staples (+0.6%), materials (+0.4%), and consumer discretionary (+0.3%) outperforming.
Retailers outperformed in the consumer discretionary space (+0.3%), evidenced by the 0.8% gain in the SPDR S&P Retail ETF (XRT 45.34, +0.35). The sub-group was rebounding from larger losses in the prior week. To that point, the ETF gained 3.4% on a week to date basis, after sliding 4.7% following last week's disappointing same-store sales readings.
The Treasury complex ended its day off its high as the safe haven group pulled back when equities trimmed their loss in the final hour. The yield on the 10-yr note finished at 1.75% (-4 bps). This represents a decline of three basis points from last Friday's settlement.
Today's participation was above the recent average as more than one billion shares have changed hands on the NYSE floor. The increased participation was due to April options expiration.
Today's economic data included Empire Manufacturing for April, Industrial Production and Capacity Utilization for March, and the preliminary University of Michigan Consumer Sentiment Survey for April:
The Empire Manufacturing Survey jumped to 9.6 for April from 0.6 for March. The dividing line between expansion and contraction is 0.0.
The April reading is the highest in more than a year and was led by increases in the new orders, prices paid, and prices received indexes. Notably, the six-month outlook improved for the third month in a row.
The Industrial Production and Capacity Utilization report for March disappointed with total production down 0.6% (Briefing.com consensus 0.0%) and total industry capacity utilization at just 74.8% (Briefing.com consensus 75.5%). One can glean from this report that first quarter GDP isn't going to be anything special.
March was the second straight month that industrial production declined 0.6% after February was revised down from an originally reported 0.5% decline. On a year-over-year basis, industrial production is down 2.0%.
A significant portion of the decrease in March can be traced to the indexes for mining and utilities, which fell 2.9% and 1.2%, respectively. The drop in mining output was the largest since September 2008.
Manufacturing output was down 0.3% following a downwardly revised 0.1% decline (from +0.1%) in February. The production of durables was down 0.4% in March while the output of nondurable manufacturing edged lower following a 0.5% decrease in February.
The Federal Reserve released its annual revision to the index of industrial production and capacity utilization on April 1. With the revision, the February reading for capacity utilization, which was previously reported to be 76.7%, was revised to 75.4%. It was marked down again to 75.3% with the March report.
The manufacturing capacity utilization rate of 75.1% is 3.4 percentage points below its long-run average; meanwhile, the utilization rate of 73.7% for both mining and utilities is the lowest over the histories for each of those series.
The preliminary reading for the University of Michigan Consumer Sentiment Survey for April dropped to 89.7 (Briefing.com consensus 92.0) from 91.0 in March and 95.9 in the same period a year ago.
The lower reading for April marks the fourth straight monthly decline. Notably, the downturn was driven more by the Index of Consumer Expectations, which fell to 79.6 from 81.5, than it was by the Current Economic Conditions Index, which dipped to 105.4 from 105.6.
The report summary indicates that consumers reported a slowdown in expected wage gains, weakening inflation adjusted income expectations, and growing concerns that slowing economic growth would reduce the pace of job creation.
Based on the indication from the data, it was said that inflation-adjusted personal consumption expenditures will increase 2.5% in 2016.
Monday's economic data will be limited to the NAHB Housing Market Index for April (Briefing.com consensus 59).
Nasdaq Composite -1.4%
Russell 2000 -0.4% YTD
S&P 500: +1.8% YTD
Dow Jones +2.7%
Week in Review: Back to Winning Ways
The stock market continued its recent show of strength overthe past week as the S&P 500 climbed 1.6% since Friday to extend its 2016gain to 1.8%. The Nasdaq outperformed slightly, climbing 1.8% for the week, butthe tech-heavy index remains down 1.4% for the year.
Equity indices started the week on a quiet note, but buyerswere not hard to find as the S&P 500 extended to a fresh high for the yearon Wednesday. The index powered along even though economic data released duringthe week disappointed. For instance, the March Retail Sales report showed a0.3% decline (Briefing.com consensus 0.1%) while March Core PPI (-0.1%;Briefing.com consensus 0.2%) and March Core CPI (0.1%; Briefing.com consensus0.2%) also missed estimates. To be fair, cooler than expected inflation datacan be viewed as something that may keep the Fed on hold for longer.
Interestingly, the disappointing Retail Sales report promptedthe Atlanta Fed to raise its GDPNow forecast for the first quarter to 0.3% from0.1% on April 8. The Atlanta Fed noted that March retail sales boosted thefirst-quarter real consumer spending growth forecast to 1.8% from 1.6%.
The past week marked the start of the first-quarter earningsseason, which was largely unassuming. Alcoa (AA) kicked things off with a bottom-line beat on light revenue while majorfinancials like JPMorgan Chase (JPM), Bank of America (BAC), Wells Fargo (WFC), and Citigroup (C) followed later in theweek. Overall, bottom-line beats were not hard to come by, but Bank of America,Citigroup, and JPMorgan Chase reported respective revenue declines of 8.0%,11.1%, and 3.7%.
3:14 pm Seagate Tech (-5.7%) extends yesterday's weakness to 3+ year low after warning late Wednesday; Western Digital (WDC) -3% (STX) :
STX dividend seemingly at risk with stock sporting a 9.8% yield.
Peer Western Digital (WDC) testing support at $40 near February lows.
1:22 pm Benchmark Electronics: 4.9% shareholder Engaged Capital releases presentation to shareholders with plan to improve BHE's valuation by over 50% (BHE) :
The presentation is in connection with Engaged Capital's campaign to elect three directors at the upcoming May 11, 2016 Annual Meeting of Shareholders.
Engaged Capital has a credible plan to correct underperformance at BHE: Install a rigorous, disciplined approach to capital allocation; Work with outside consultants to increase and accelerate the pursuit of working capital efficiencies; Align executive compensation with shareholders; Increase transparency, align financial reporting with peers, and increase analyst coverage; Add new, highly qualified board members aligned with shareholders: Robert K. Gifford, Jeffrey S. McCreary, and Brendan B. Springstubb.
1:11 pm Apple suppliers seeing weakness following report of extended iPhone production cut during Q2 (see 13:05) (AAPL) :
Related supplier stocks showing weakness: QRVO -1.6%, AVGO -1.5%, NXPI -1.2%, SWKS -0.5%, CRUS -0.5%, TXN -0.4%, QCOM -0.3%
Other possible related stocks: INVN, SHCAY, SSNLF, SNE
Briefing Note: Apple made a similar production cut last quarter. The iPhone 7 is scheduled to be released this Fall. It is normal for sales for fall off ahead of major product introductions.
10:29 am SemiLEDs announces 1:10 reverse split; to trade ex-split at open on Apr 18, 2016 (LEDS) :
SanDisk (SNDK) introduced the 128GB SanDisk Extreme PLUS microSDXC card, one of the first microSD cards to carry the Works with GoPro (GPRO) verification. The new, higher capacity SanDisk Extreme PLUS microSDXC card is verified to deliver optimal performance and reliability when used with GoPro cameras, even under extreme conditions.
2:55 am Super Micro Computer sees Q3 EPS and revs below consensus (SMCI) :
Co issues downside guidance for Q3 (Mar), sees EPS of $0.33-0.35 vs. $0.49 Capital IQ Consensus Estimate and compares to the Company's previous guidance of $0.43-0.53; sees Q3 (Mar) revs of $530-533 mln vs. $557.27 mln Capital IQ Consensus Estimate and compares to the Company's previous guidance range of $530-580 mln.
Non-GAAP gross margin is expected to be approximately 14.8% to 14.9% primarily due to lower demand with some large customers and the channel which led to lower cost absorption based on lower utilization as well as product mix.
2:49 am Micron upsizes and prices $1.25 bln of its 7.500% senior secured notes due 2023 (MU) :
The size of the offering was increased from the previously announced $1.0 bln in aggregate principal amount.
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