From Briefing.com: Weekly Recap - Week ending 27-May-16To little surprise, the week leading into Memorial Day weekend saw below-average trading volume, but the reduced activity did not prevent the stock market from registering its second consecutive weekly advance. The rally lifted the S&P 500 into the neighborhood of this year's high as the benchmark index gained 2.3% for the week while the Nasdaq Composite (+3.4%) outperformed thanks to relative strength in technology and biotechnology.
The trading week was pretty quiet on the economic front, but a handful of reports that did cross the wires pointed to a potential rebound from the weakness at the end of the first quarter. April New Home Sales (619K, Briefing.com consensus 521K), April Pending Home Sales (+5.1%; Briefing.com consensus 0.6%), and April Durable Orders (+3.4%; Briefing.com consensus 0.6%) beat expectations while the second estimate of first-quarter GDP (+0.8%; Briefing.com consensus 0.9%) and the final reading of the Michigan Sentiment Index for May (94.7; Briefing.com consensus 95.5) were close to expectations, but missed.
Altogether, the economic data released during the past week kept the possibility of a summer rate hike alive. As a result, Fed officials that spoke since last Friday reminded investors that the FOMC is ready to raise rates if economic data does not take a turn for the worse. This message was consistent with remarks from two weeks ago that boosted the probability of a June hike from 8.0% to 30.0%.
Rate hike expectations, as indicated by the fed funds futures market, essentially held their ground throughout the week with the likelihood of a June hike remaining at 30.0%. However, expectations for a hike in July inched up to 62.0% from 55.0% at the end of last week.
The Dollar Index (95.75) enjoyed its fourth consecutive weekly rise, but the 0.4% increase represented the slowest weekly advance during the past month, which saw the index notch a fresh low for the year and climb 4.2% from that low point.
Index Started Week Ended Week Change % Change YTD %
DJIA 17500.46 17873.22 372.76 2.1 2.6
Nasdaq 4769.56 4933.50 163.94 3.4 -1.5
S&P 500 2052.23 2099.06 46.83 2.3 2.7
Russell 2000 1112.06 1149.46 37.40 3.4 1.2
The trading day began on a flat note amid a muted response to a modest revision to the second estimate of first quarter GDP (0.8%). Futures also tracked overseas bourses as the group looked to lock in their weekly gains. For its part, crude oil ticked lower, slipping further from the $50.00/bbl price level.
Following yesterday's mixed finish, the markets wrapped up the week with modest gains. Trading was relatively flat to start the session, but quickly picked up, ultimately ending higher led by the Nasdaq Composite which added 31.74 points (+0.65%) today to close 4933.50. The S&P 500 ended up 8.96 points (+0.43%) to 2099.06, and the Dow Jones Industrial Average was higher by 44.93 points (+0.25%) to 17873.22. Action YTD in the three major US indices stands at -1.5%, +2.7% and +2.5% YTD, respectively.
Market data today included the aforementioned GDP number for Q1. Additionally, the final reading for the University of Michigan Consumer Sentiment survey for May was revised to 94.7 from the preliminary 95.8 reading.
After yesterday's modestly higher session, Technology (XLK 44.16, +0.27 +0.62%) closed the week higher, as Friday action ended near HoDs. Component Applied Materials (AMAT 24.44, +0.71 +2.99%) was an out-performer as the stock was mentioned positively this morning at Barron's. Other sectors as measured by the S&P closed Friday XLF +0.68%, IYZ +0.51%, XLY +0.47%, XLV +0.45%, XLI +0.38%, XLU +0.17%, XLP +0.11%, XLE +0.06%, XLB -0.04% as Materials lagged and Financials out-performed.
In the S&P 500 Information Technology (732.64, +4.10 +0.56%) sector, trading wrapped up the session near highs as the broader market surge took the sector higher. Component Apple (AAPL 100.35, -0.06 -0.06%) closed the session with modest losses as the stock was downgraded this morning to a Negative rating from a Mixed rating at OTR Global. Other names in the space that closed modestly higher included YHOO +2.88%, LRCX +2.41%, XRX +2.29%, CSC +2.18%, ADSK +2.12%, GLW +1.89%, NTAP +1.65%, KLAC +1.49%, GOOGL +1.45%, ADS +1.42%.
Other notable news items among sector components:
A judge ruled for Alphabet's (GOOG 732.66, +8.54 +1.18%) Google over Oracle (ORCL 40.07, +0.11 +0.29%) in a fair use patent fight.
Western Digital (WDC 44.99, +0.61 +1.37%) updated certain guidance following the completion of the SanDisk (SNDK) acquisition. Reflecting the ownership of SanDisk as of May 12, 2016, WDC now expects its Q4 revenue in the range of $3.35 billion to $3.45 billion compared to its earlier forecast of $2.6 billion to $2.7 billion. Further, WDC now expects its Q4 quarter EPS on a non-GAAP basis to be between $0.65 to $0.70, compared with its earlier forecast of $1.00 to $1.10 per share.
Xerox (XRX 9.83, +0.22 +2.29%) announced Ursula Burns will serve as the Chairman of the Board of the Document Technology company following completion of the separation of Xerox into two independent, publicly-traded companies -- a Document Technology company and a Business Process Outsourcing company.
According to Reuters, Verizon (VZ 50.62, +0.46 +0.92%) is working with former Yahoo! (YHOO 37.82, +1.06 +2.88%) investment banks to bid for YHOO unit.
Elsewhere in the tech space:
TerraForm Power (TERP 8.56, +0.02 +0.23%) announced the resignation of Ahmad Chatila as a Director. The company also announce the receipt of an extension to regain compliance with Nasdaq listing requirements.
Applied Materials (AMAT) was an out-performer as the stock was mentioned positively at Barron's this morning.
According to the Department of Labor's Thomas Perez, Verizon (VZ) and workers on strike have reached an agreement in principle. Perez noted VZ expects workers to be back on the job by next week.
FEI (FEIC 108.13, +13.55 +14.33%) to be acquired by Thermo Fisher Scientific (TMO 152.13, +0.93 +0.62%) for $107.50 per share in cash, or about $4.2 billion. TMO expects the transaction is expected to be accretive to its adjusted EPS by $0.30 in the first full year after close. Additionally, TMO expects to realize total synergies of about $80 million by year three following the close, consisting of about $55 million of cost synergies and about $25 million of adjusted operating income benefit from revenue-related synergies.
In reaction to quarterly results:
Palo Alto Networks (PANW 129.86, -18.32 -12.36%) reported in-line Q3 EPS of $0.42 on better than expected revenues which rose 47.7% versus last year to $345.8 million. PANW also guided Q4 EPS in-line at $0.48-0.50 on in-line revenues of $386-390 million.
Splunk (SPLK 56.34, +1.41 +2.57%) reported an in-line Q1 loss per share of $0.02 on revenues which were better than anticipated and rose 48.0% versus last year to $186 million. For Q2, SPLK sees revenues in-line at $198-200 million. For FY17, the company expects revenues ahead of Street views at $892-896 million.
Veeva Systems (VEEV 32.18, +2.42 +8.13%) reported better than expected Q1 EPS and revenues of $0.15 and $119.8 million, respectively. VEEV guided Q2 EPS in-line at $0.13 on better than expected revenues of $125.5-127.0 million. For the FY17 period, VEEV sees EPS of $0.55-0.57 on better than expected revenues of $516-520 million.
21Vianet (VNET 13.67, -0.10 -0.73%) reported worse than expected Q1 EPS and revenues at a loss per share of $0.13 and $133.7 million, respectively.
JinkoSolar Holding (JKS 22.71, -0.69 -2.95%) reported better than expected Q1 EPS and revenues of $1.72 and $847.8 million, respectively. For FY16, the company reaffirmed shipment guidance of 6 GW and 6.5 GW which includes 5.4 GW to 5.7 GW module shipments to third parties.
Analyst actions:
VSLR was upgraded to Buy from Hold at Barclays,
GIB was upgraded to Buy from Hold at Desjardins,
MIXT was upgraded to Overweight from Equal Weight at First Analysis Sec;
AAPL was downgraded to Negative from Mixed at OTR Global,
PANW was downgraded to Hold from Buy at Deutsche Bank and Needham,
TSL was downgraded to Hold from Buy at Deutsche Bank,
WDAY was downgraded to Underperform from Neutral at Wedbush,
EMC was downgraded to Neutral from Buy at Longbow,
LNVGY was downgraded to Neutral from Overweight at JP Morgan;
PYPL was initiated with a Hold at Needham
(Disclosure: Briefing.com has a business relationship with Yahoo!)
4:19 pm Verizon confirms it has reached an 'agreement in principal' with the Co's wireline employees and a small number of wireless employees in the Northeast (VZ) : 'Verizon is very pleased with this 'agreement in principle.' The agreement is consistent with our objective of creating high quality American jobs and achieving meaningful changes and enhancements to the contracts that will better enable our wireline business unit to compete and succeed in the digital world. We also reached an 'agreement in principle' on contracts for about 165 Verizon Wireless employees. In the meantime, we look forward to having all of our employees soon back at work in their regular positions and doing what they do best -- serving our customers.'
4:16 pm Closing Market Summary: Averages Climb as Heavyweights Lead (:WRAPX) :
The stock market ended the week on a higher note as the S&P 500 (+0.4%) navigated a ten-point range. Focal points for today's trade included commentary from Fed Chair Janet Yellen and key sector leadership from the heavily-weighted financial (+0.7%), technology (+0.6%), health care (+0.5%), and consumer discretionary (+0.5%) sectors. The Nasdaq Composite (+0.7%) ended ahead of the benchmark index (+0.4%) and the Dow Jones Industrial Average (+0.3%).
Global bourses traded on a flat note as investors adopted a wait-and-see stance ahead of scheduled remarks from Fed Chair Janet Yellen. For the most part, U.S. equities followed suit, as participants eyed potential policy rate implications ahead of the upcoming three-day holiday weekend. The benchmark index mounted a modest advance in the first half of trading as heavily-weighted financials (+0.7%), consumer discretionary (+0.5%), and technology (+0.6%) led.
Equity indices pulled back in the afternoon as participants ruminated over commentary from Chair Yellen, which fell largely in-line with what was conveyed in the FOMC Minutes from April. Ms. Yellen acknowledged a recent uptick in economic conditions, indicating that a rate hike is probably appropriate in the coming months.
The broader market climbed into the afternoon, lifting the major indices to new session highs. All ten sectors finished in the green with financials (+0.7%), technology (+0.6%), telecom services (+0.6%), consumer discretionary (+0.5%), and health care (+0.5%) leading the advance. Conversely, commodity-sensitive energy (+0.1%) and materials (UNCHF) ended with the slimmest gains.
The economically-sensitive financial sector (+0.7%) outperformed as market participants continue to come to terms with the increasing probability that the market will see more rate hikes in the short term. On that note, the odds of a rate hike at the June meeting rose to 30.0% from yesterday's reading of 26.0%. For the week, the broader sector has gained 2.6%, compared to a gain of 2.3% in the benchmark index.
In the telecom services group (+0.6%), Verizon (VZ 50.62, +0.46) outperformed after headlines indicated that the company reached an agreement with striking workers. CWA and IBEW union members will vote whether to ratify the agreement and workers could potentially return to work next week.
The high-beta chipmakers demonstrated relative strength, evidenced by the 0.6% gain in the PHLX Semiconductor Index. In the broader technology group (+0.6%), Yahoo! (YHOO 37.82, +1.06) gained 2.9% as rumors circulated regarding potential bids for the web portal. Separately, Alphabet (GOOG 732.66, +8.54) outperformed after a judge ruled in the company's favor in a licensing dispute with Oracle (ORCL 40.07, +0.12).
Retail names gained in the consumer discretionary space (+0.5%) as Ulta Salon (ULTA 233.15, +19.46) and Big Lots (BIG 50.95, +6.29) rallied following better that expected quarterly reports.
The U.S. Dollar Index (95.75, +0.58) ended near its best level as the dollar extended gains against commodity currencies and the euro. The dollar gained 0.5% against the Canadian dollar (1.3040) while the single currency lost 0.7% against the dollar (1.1113).
The Treasury complex finished on a lower note as the yield on the 10-yr note rose two basis points to 1.85%.
Today's volume fell below the recent average as fewer than 816 million shares changed hands on the NYSE floor.
Today's economic data included the second estimate of Q1 GDP, Q1 GDP Deflator, and the final reading of the May University of Michigan Sentiment Index:
The second estimate for first quarter real GDP produced an upward revision to 0.8% growth on an annualized basis (from 0.5%).
That was slightly below the Briefing.com consensus estimate of 0.9% and it isn't going to generate a lot of applause for several reasons.
First, 0.8% growth is still weak. Secondly, personal consumption expenditures growth was left unchanged at 1.9%.
The third drawback was that the upward revision had a good bit to do with the change in private inventories, which was smaller than previously estimated.
With the second estimate, the change in private inventories subtracted 0.2 percentage points from growth versus 0.33 percentage points with the advance estimate.
The other driver behind the upward revision was gross private domestic investment, which subtracted 0.45 percentage points from growth in the second estimate versus 0.60 percentage points with the advance estimate.
Real final sales of domestic product, which exclude the change in inventories, were up 1.0% versus the prior 10-quarter average of 2.4%.The final reading for the University of Michigan Consumer Sentiment survey for May was revised to 94.7 from the preliminary reading of 95.8. The revised figure was below the Briefing.com consensus estimate of 95.5, yet it was still up nicely from the final reading of 89.0 for April and the 90.7 reading registered for May 2015.The downward revision is owed entirely to the Index of Consumer Expectations, which was lowered to 84.9 from the preliminary reading of 87.5. The Current Economic Conditions Index was revised up to 109.9 from the preliminary reading of 108.6.
It was noted in the report that there were only four prior months since the peak in January 2007 that the Sentiment Index was higher than in May 2016.
Interestingly, it was said the biggest uncertainty for consumers is not whether the Fed will hike rates in the next few months, but rather what government economic policies will look like under a new president; hence, consumers have placed an added emphasis on maintaining precautionary savings.Bond and equity markets will be closed on Monday in observance of Memorial Day.
On Tuesday, Personal Income (Briefing.com consensus 0.4%), Person Spending (Briefing.com consensus 0.7%), and core PCE Prices (Briefing.com consensus 0.2%) for April will each cross the wires at 8:30 ET. Separately, the Case-Shiller 20-city Index for May (Briefing.com consensus 5.1%), May Chicago PMI (Briefing.com consensus 50.9), and May Consumer Confidence (Briefing.com consensus 96.2) will be released at 9:00 ET, 9:45 ET, and 10:00 ET, respectively.
S&P 500 +2.7% YTD
Dow Jones +2.6% YTD
Russell 2000 +1.7% YTD
Nasdaq Composite -1.5 YTD
Week in Review: Stocks Climb Ahead of Holiday Weekend
To little surprise, the week leading into Memorial Dayweekend saw below-average trading volume, but the reduced activity did notprevent the stock market from registering its second consecutive weekly advance.The rally lifted the S&P 500 into the neighborhood of this year's high as thebenchmark index gained 2.3% for the week while the Nasdaq Composite (+3.4%)outperformed thanks to relative strength in technology and biotechnology.
The trading week was pretty quiet on the economic front, buta handful of reports that did cross the wires pointed to a potential rebound fromthe weakness at the end of the first quarter. April New Home Sales (619K,Briefing.com consensus 521K), April Pending Home Sales (+5.1%; Briefing.comconsensus 0.6%), and April Durable Orders (+3.4%; Briefing.com consensus 0.6%)beat expectations while the second estimate of first-quarter GDP (+0.8%;Briefing.com consensus 0.9%) and the final reading of the Michigan SentimentIndex for May (94.7; Briefing.com consensus 95.5) were close to expectations,but missed.
Altogether, the economic data released during the past weekkept the possibility of a summer rate hike alive. As a result, Fed officialsthat spoke since last Friday reminded investors that the FOMC is ready to raiserates if economic data does not take a turn for the worse. This message wasconsistent with remarks from two weeks ago that boosted the probability of aJune hike from 8.0% to 30.0%.
Rate hike expectations, as indicated by the fed fundsfutures market, essentially held their ground throughout the week with thelikelihood of a June hike remaining at 30.0%. However, expectations for a hikein July inched up to 62.0% from 55.0% at the end of last week.
The Dollar Index (95.75) enjoyed its fourth consecutive weekly rise,but the 0.4% increase represented the slowest weekly advance during the pastmonth, which saw the index notch a fresh low for the year and climb 4.2% fromthat low point.
4:10 pm KVH Industries announces Peter Rendall is leaving to pursue other opportunities, John McCarthy appointed interim CFO, effective immediately (KVHI) : Rendall will remain with the co for thirty days to support the transition of his responsibilities. John McCarthy most recently served as a partner at Ernst & Young.
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