From Briefing.com: Weekly Recap - Week ending 20-May-16The stock market ended the trading week on a modestly higher note thanks to a Friday rally that helped the S&P 500 lock in a 0.3% gain for the week. The Nasdaq Composite outperformed, climbing 1.1%, while the Dow Jones Industrial Average (-0.2%) lagged.
The S&P 500 was able to eke out a slim gain even though the week was dominated by discussions concerning rate hike expectations. Comments from several Federal Reserve officials suggested that a rate hike in June is within the realm of possibilities while the FOMC Minutes from the April meeting reinforced that idea.
According to the Minutes, "Most participants judged that if incoming data were consistent with economic growth picking up in the second quarter, labor market conditions continuing to strengthen, and inflation marking progress toward the Committee's 2.0% objective, then it would likely be appropriate for the Committee to increase the target range for the federal funds rate in June."
As for inflation, the April CPI report that was released on Tuesday showed hotter-than-expected headline inflation (+0.4%; Briefing.com consensus 0.3%) while core CPI increased an in-line 0.2%.
The commentary emanating from the Fed led to an uptick in rate hike expectations as expressed by the fed funds futures market. Last Friday, the probability of a rate hike at the June meeting was sitting at a lowly 8.0%, which increased to 30.0% by the end of the week. Furthermore, the fed funds futures market is pricing in a 55.0% likelihood of a rate hike in July.
The rate-hike discussion gave a boost to the greenback, helping the Dollar Index (95.34) register its third consecutive weekly advance after notching a fresh low for 2016 during the first week of May.
Index Started Week Ended Week Change % Change YTD %
DJIA 17539.77 17500.46 -39.31 -0.2 0.4
Nasdaq 4718.89 4769.56 50.67 1.1 -4.7
S&P 500 2047.10 2052.23 5.13 0.3 0.4
Russell 2000 1102.30 1112.06 9.76 0.9 -2.1
4:15 pm Closing Market Summary: Stocks Rebound as Technology Leads (:WRAPX) :
The stock market ended a flat week on a higher note as the S&P 500 (+0.6%; week-to-date +0.3%) broke a three-week losing streak. Today's action featured a rebound in global equity markets, a modest gain in the dollar, and the outperformance of the heavyweight technology (+1.1%), health care (+0.8%), and consumer discretionary (+0.7%) spaces. The Nasdaq Composite (+1.2%) ended its week ahead of the benchmark index (+0.6%) and the Dow Jones Industrial Average (+0.4%).
Today's session began on a higher note as investors looked to a rebound in global indices after this week's recent Fed-fueled selling. Participants recently dialed up their expectations for the speed and path of future fed funds rate hikes, responding to Fed speakers and the FOMC minutes from the April meeting.
The major averages extended their opening gains as investors looked to sector leadership from the heavily-weighted technology (+1.2%), health care (+0.8%), and financial (+0.6%) spaces. However, equity indices pulled back after the benchmark index fell short of testing its 50-day simple moving average (2060.54).
The broader market ticked lower in the final hour, but nine sectors finished above their flat lines. The influential technology (+1.2%) sector led health care (+0.8%) and consumer discretionary (+0.7%) while countercyclical consumer staples (-0.4%) ended with the only loss.
In the technology space (+1.2%), the high-beta chipmakers ended the week on a strong note as the PHLX Semiconductor Index gained 3.2%. In the sub-group, Applied Materials (AMAT 22.66, +2.75) spiked 13.8% after beating estimates for the quarter and issuing above-consensus guidance. Elsewhere, Yahoo! (YHOO 36.50, -0.52) displayed relative weakness after headlines speculated that bids for the web portal would register between $2 billion and $3 billion. The broader technology space gained 1.4% this week, trailing only energy (+0.4%; week-to-date +1.5%).
Biotechnology demonstrated relative strength as the iShares Nasdaq Biotechnology ETF (IBB 264.18, +5.28) gained 2.0%. For the week, the ETF climbed 4.1% compared to the gain of 0.6% in the broader sector. Elsewhere, Pfizer (PFE 33.74, +0.36) led the drug manufacturer sub-group while Dow component Johnson & Johnson (JNJ 112.64, +0.59) underperformed the broader market.
Retail names ended their week on a mixed note as disappointing guidance from Ross Stores (ROST 52.49, -3.03) and Foot Locker (FL 54.77, -3.78) weighed on the names. Elsewhere, Gap (GPS 18.01, +0.73) gained 4.2% after announcing that it would close 75 stores worldwide. Separately, Nordstrom (JWN 38.12, +1.01) and L Brands (LB 63.54, +2.92) rebounded 2.7% and 4.8%, respectively.
The Dow Jones Transportation Average (+1.1%) demonstrated relative strength with courier and logistics names leading. In the broader industrial sector (+0.5%), Deere (DE 77.74, -4.51) underperformed after lowering its year-over-year cash flow guidance. However, the company did beat analysts' estimates for the quarter.
Campbell Soup (CPB 59.90, -4.08) underperformed in the consumer staples space (-0.4%) after a sales metric missed its mark.
The U.S. Dollar Index (95.34, +0.05) ended its day modestly higher, but the greenback trimmed its gain against the yen and the euro. The dollar/yen pair finished higher by 0.2% (110.16) after slipping from the 110.55 level. Separately, the euro gained 0.1% against the dollar (1.1217).
The Treasury complex finished flat with the yield on the 10-yr note ending unchanged at 1.85%.
Today's volume was above the recent average with more than 953 million shares changing hands on the NYSE floor. However, this is relatively light given that today marked an option expiration date.
Today's economic data was limited to April Existing Home Sales:
Existing home sales increased 1.7% in April to a seasonally adjusted annual rate of 5.45 million (Briefing.com consensus 5.40 million) from an upwardly revised 5.36 million (from 5.33 mln) in March. The April number was better than expected and qualifies as another data point supporting a pickup in second quarter growth.
The uptick in April was fueled by a 12.1% increase in home sales in the Midwest.
That gain, and a 2.1% increase in home sales in the Northeast, offset existing home sales declines of 2.7% and 1.7%, respectively, in the South and West.On a year-over-year basis, existing home sales are up 6.0%, which incorporates a 3.7% year-over-year decline in the West that was attributed to the constraints of supply shortages and price growth.The bulk of the total existing home sales increase was led by sales of existing condominiums and co-ops, which jumped 10.3% to a seasonally adjusted annual rate of 640,000 units. Single-family home sales were up just 0.6% to 4.81 million, although they are up 6.2% year-over-year.The median existing condo price was $223,300 in April, up 6.8% year-over-year, while the median existing single-family home price was $233,700 in April, up 6.2% year-over-year. The median price for all housing types in April was $232,500, up 6.3% year-over-year.The share of first-time buyers in April was 32% versus 30% in March and the same period a year ago. The pickup in first-time buyers is good to see since they are integral to driving existing home sales activity.At the current sales pace, unsold inventory sits at a 4.7-month supply, which is up from 4.4 months in March. Still, that is well below the 6.0-month supply typically seen during normal periods of buying and selling.There is economic data of note scheduled for Monday.
Nasdaq Composite -4.8% YTD
Russell 2000 -2.1% YTD
Dow Jones +0.4% YTD
S&P 500 +0.4% YTD
Week in Review: Rate Hike Odds Rising
The stock market ended the trading week on a modestly highernote thanks to a Friday rally that helped the S&P 500 lock in a 0.3% gainfor the week. The Nasdaq Composite outperformed, climbing 1.1%, while the DowJones Industrial Average (-0.2%) lagged.
The S&P 500 was able to eke out a slim gain even though the weekwas dominated by discussions concerning rate hike expectations. Comments from severalFederal Reserve officials suggested that a rate hike in June is within therealm of possibilities while the FOMC Minutes from the April meeting reinforcedthat idea.
According to the Minutes, "Most participants judged that ifincoming data were consistent with economic growth picking up in the secondquarter, labor market conditions continuing to strengthen, and inflationmarking progress toward the Committee's 2.0% objective, then it would likely beappropriate for the Committee to increase the target range for the federalfunds rate in June."
As for inflation, the April CPI report that was released onTuesday showed hotter-than-expected headline inflation (+0.4%; Briefing.comconsensus 0.3%) while core CPI increased an in-line 0.2%.
The commentary emanating from the Fed led to an uptick inrate hike expectations as expressed by the fed funds futures market. LastFriday, the probability of a rate hike at the June meeting was sitting at alowly 8.0%, which increased to 30.0% by the end of the week. Furthermore, thefed funds futures market is pricing in a 55.0% likelihood of a rate hike inJuly.
The rate-hike discussion gave a boost to the greenback,helping the Dollar Index (95.34) register its third consecutive weekly advanceafter notching a fresh low for 2016 during the first week of May.
The major averages began the day on a higher note as rebounds in global bourses helped support an uptick in U.S. futures. Dollar strength waned ahead of the session while oil vacillated between a modest gain and loss. WTI crude established a new session low within the first hour of trading ($47.95/bbl) before ticking off those levels and ending with modest losses, -0.5%.
Yesterday's losses turned into today's gains as the back-and-forth trading bias continued on Friday as the markets rebounded off Thursday's negative action. Last Friday, the markets turned loweron Monday, we ended higherTuesday was a down sessionWednesday was split but mostly higherThursday ended with lossesand now Friday completes the cycle. The Nadsaq Composite blew out the other two indices today, advancing 57.02 points (+1.21%) to close 4769.56. The S&P 500 halfed the Nasdaq's gains, ending higher 12.28 points (+0.60%) to 2052.32. Rounding out the trio, the Dow Jones Industrial Average was higher by 65.54 points (+0.38%) to 17500.94 when the day was done. This week's action takes the three major indices -4.8%, +0.4% and +0.4% YTD, respectively.
Market data today consisted of existing home sales, which increased 1.7% in April to a seasonally adjusted annual rate of 5.45 million from an upwardly revised 5.36 million (from 5.33 million) in March. Single-family home sales were up just 0.6% to 4.81 million, although they are now up 6.2% versus a year ago. At the current sales pace, unsold inventory sits at a 4.7-month supply, up from 4.4 months in March.
Technology (XLK 42.67, +0.45 +1.07%) for its part traded lockstep with the broader market, trading days up and down while ultimately ending Friday on a high note. Component Windstream (WIN 7.99, +0.56 +7.54%) was strong today as last night after the close, Steadfast Capital disclosed a 5.1% passive stake in the company. Other sectors as measured by the S&P closed Friday IYZ +1.08%, XLV +0.93%, XLB +0.72%, XLF +0.69%, XLY +0.66%, XLE +0.59%, XLI +0.51%, XLU +0.23%, XLP -0.51% as Tech and Telecoms led, and Consumer Staples were the lone laggard.
Chip stocks (SOX 665.09, +20.35 +3.16%) were also strong today as component Applied Materials (AMAT 22.66, +2.75 +13.81%) reported a strong Q2 and guided Q3 ahead of expectations. Other names in the space that got a lift today included MU +7.25%, QRVO +4.73%, LRCX +4.58%, QCOM +3.34%, CREE +3.24%, TSM +2.84%, SWKS +2.80%, AVGO +2.80%, CAVM +2.59%.
In the S&P 500 Information Technology (707.20, +8.28 +1.18%) sector, trading wrapped up the week much like it did in other areas permeated by tech names. Component Autodesk (ADSK 56.19, -1.33 -2.31%) bucked the broader market trend today, falling as results for the Q1 period were mostly positive, but shares were hit on the Q2 guide. Other names in the space which finished higher today included MCHP +2.48%, TXN +2.27%, TDC +2.24%, LLTC +2.22%, XLNX +2.08%, AKAM +2.07%, FSLR +1.97%, HPQ +1.92%.
Other notable news items among sector components:
Microsoft (MSFT 50.62, +0.30 +0.60%), Mojang and NetEase (NTES 166.81, +5.58 +3.46%) announced a five-year exclusive agreement to license Mojang's Minecraft mobile and PC editions to a NTES affiliate in mainland China. As part of the agreement, Mojang will develop a version of Minecraft tailored for the Chinese market and release it in partnership with NetEase.
In addition to reporting quarterly results, Brocade (BRCD 7.97, flat) increased their quarterly dividend to $0.55 from $0.45 per share.
According to a Wall Street Journal article, Yahoo! (YHOO 36.50, -0.52 -1.40%) suitors are expected to make bids between $2-3 billion for YHOO unit, below prior expectations.
Harman (HAR 75.15, +3.46 +4.83%) and Alphabet's (GOOG 709.74, +9.42 +1.35%) Google announced an extended collaboration between the two companies to include modules for GOOG's new modular mobile device, Ara. In addition, HAR and Google's Advanced Technology and Projects Group (ATAP) are also working closely together on Project Soli.
Elsewhere in the tech space:
RADCOM (RDCM 11.29, -0.53 -4.48%) priced an offering of 1,818,182 ordinary shares at $11.00 per share.
Knowles (KN 4.40, +0.06 +1.45%) sold its mobile consumer electronics speaker and receiver product line to Loyal Valley Innovation Capital. Financial terms of the deal were not disclosed.
Telephone & Data (TDS 27.52, +0.19 +0.70%) filed for a mixed debt securities shelf offering.
Steadfast Capital disclosed a 5.1% passive stake in Windstream (WIN).
Indiegogo and Arrow Electronics (ARW 61.59, +0.55 +0.90%) formed a strategic alliance to create a new crowdfund-to-production platform aimed at accelerating the pace of innovation for technology and Internet of Things (IoT) entrepreneurs.
In reaction to quarterly results:
Applied Materials (AMAT) reported better than expected Q2 EPS of $0.34 on in-line revenues which rose 0.3% versus last year to $2.45 billion. The company also guided Q3 ahead of expectations on EPS of $0.46-0.50 and revenues of +14-18% quarter-over-quarter to about $2.79-2.89 billion.
Autodesk (ADSK) reported a better than expected Q1 loss per shares of $0.10 on revenues which came in in-line with Street views and fell 20.8% versus a year ago to $511.9 million. ADSK also guided Q2 worse than expected at EPS of ($0.18)-($0.11) on revenues of $500-520 million. Additionally, ADSK guided in-line FY17 EPS of ($0.95)-($0.70) on revenues of $1.95-2.050 billion.
Brocade (BRCD) reported in-line Q2 EPS and revenues of $0.22 and $523 million, respectively. For Q3, BRCD guided EPS and revenues worse than expectations at $0.19-0.21 and $510-530 million, respectively.
Mentor Graphics (MENT 20.80, +1.44 +7.44%) reported better than expected Q1 EPS and revenues of $0.02 and $227.6 million. MENT also guided Q2 EPS and revenues ahead of expectations at $0.09 and about $245 million, respectively. The company also reaffirmed FY17 EPS and revenue guidance of $1.68 and $1.215 billion, respectively.
8x8 (EGHT 12.60, +0.86 +7.33%) reported in-line Q4 EPS of $0.03 on better than expected revenues which rose 31.7% versus last year to $57.3 million. The company also guided FY17 revenues ahead of expectations at $249-253 million.
Scheduled to report quarterly results ahead of the open on Monday: SOL
Analyst actions:
CMCM was downgraded to Underperform at Credit Suisse and to Neutral at Macquarie
(Disclosure: Briefing.com has a business relationship with Yahoo! and Microsoft)
4:33 pm Action Semi receives prelim non-binding going private proposal from its former CEO to purchase Co for $2.00 per ADS (ACTS) :
Co announced that its Board of Directors has received a preliminary non-binding proposal letter, dated May 19, 2016, from Mr. Hsuan-Wen Chen, former CEO of the Company, and certain of his affiliates and affiliated entities, that proposes a "going-private" transaction involving the acquisition of all of the outstanding equity interest of the Company not already owned by the Consortium Members at price of $2.00 per American depositary share. According to the proposal letter, the Consortium Members beneficially owned, in the aggregate, approximately 34.61% of the Company's outstanding share capital.
The Company's Board of Directors has formed a special committee of independent directors to consider the proposal.
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