Sector Investing

[ReturntoSender]

From Briefing.com: 4:15 pm : The stock market ended the Tuesday affair on a lower note as investors favored risk-off trade ahead of key central bank decisions and next week's "Brexit" referendum. Additional factors contributing towards today's decline included strengthening in the dollar, a leg lower in oil, the violation of technical support at the S&P 500's (-0.2%) 50-day simple moving average (2076), and weakness in the heavily-weighted financial (-1.5%) and consumer discretionary (-0.3%) sectors. The Dow Jones Industrial Average (-0.3%) finished behind the benchmark index (-0.2%) and behind the Nasdaq Composite (-0.1%).

U.S. equity indices opened on a choppy note as investors weighed on-going developments in "Brexit" polling. Overnight, European indices trended lower as polling showed building momentum around the U.K.'s "Leave" camp. In response, risk assets continued to fall out of favor in Europe while sovereign bonds saw increased demand. On that note, the yield on the 10-yr Bund fell into negative territory, marking an all-time low (-0.034%).

The benchmark index surrendered a modest early gain before breaching technical support at its 50-day simple moving average (2076). The major averages slipped through the morning as pressure from the oil pit and the heavyweight financial (-1.5%) and consumer discretionary (-0.3%) groups weighed on the broader market. The S&P 500 (-0.2%) notched a new session low in the final hour of trade (2064.04) before settling below its 50-day simple moving average.

Four sectors ended beneath their flat lines as financials (-1.5%), materials (-0.8%), and consumer discretionary (-0.3%) rounded out the leaderboard. Conversely, telecom services (+0.5%), utilities (+0.5%), and consumer staples (+0.3%) ended with the largest gains.

In the economically-sensitive financial sector (-1.5%), money center banks underperformed as the group responded to a downturn in European banks. Credit Suisse (CS 11.80, -0.29) and Deutsche Bank (DB 14.73, -0.45) ended lower by 2.4% and 3.0%, respectively. It is worth noting that Deutsche Bank notched a fresh all-time low during today's session (14.59). Meanwhile, credit service names underperformed after Synchrony Financial (SYF 26.45, -3.99) raised its net charge-off estimates for the year. The stock fell 13.1% following the news. Dow component American Express (AXP 61.07, -2.60) rounded out the price-weighted index as it traded lower in sympathy with Synchrony.

Home Depot (HD 125.24, -2.59) and Lowe's (LOW 76.08, -1.42) also struggled today after the Retail Sales Report for May (+0.5%; Briefing.com consensus +0.4%) revealed that building materials, garden equipment, and supplies dealers saw sales decline 1.8% on a month-over-month basis. Nevertheless, the SPDR S&P Retail ETF (XRT 41.08, -0.12) ended its day in-line with the broader consumer discretionary sector (-0.3%).

The countercyclical sectors outperformed today with telecom services (+0.5%), utilities (+0.5%) and consumer staples (+0.3%) each seeing a modest bid from safe haven inflows. On that note, the three groups top the monthly leaderboard, gaining between 1.9% and 3.2%. This compares to a loss of 1.0% in the benchmark index over that time. Elsewhere, the CBOE Volatility Index (VIX 20.54, -0.43) ended lower by 2.1% while gold ended its pit session higher by 0.1% ($1,288.40/ozt; +$1.50).

The U.S. Dollar Index (94.94, +0.57) finished off its best level of the day, but the greenback ended with sizable gains against the euro and the pound. The euro/dollar pair ended lower by 0.8% (1.1206) while the pound lost 1.1% against the dollar (1.4108). Persistent strength in the dollar pressured dollar-denominated commodities as oil ended its day lower by 0.8% ($48.49/bbl; -$0.39).

The Treasury complex ended lower with the yield on the 10-yr note rising one basis point to 1.62%.

Today's participation was above the recent average as more than 881 million shares changed hands on the NYSE floor.

Today's economic data included Import and Export Prices for May, May Retail Sales, and Business Inventories for April:

Import prices increased 1.4% in May due primarily to higher fuel prices. Excluding fuel, they were up 0.3%.
May marked the second straight month of increases for nonfuel import prices, which are still down 1.7% year-over-year.
Export prices were up 1.1% in May. Excluding agriculture, they advanced 1.0%.
It was the third straight month of increases for nonagricultural export prices, which are down 4.4% year-over-year.
These price trends are starting to move in the Fed's preferred direction, yet they won't change anything with respect to this week's meeting, which is widely expected to result in a decision to leave the target range for the fed funds rate unchanged.
Retail sales increased 0.5% in May (Briefing.com consensus +0.3%) while retail sales excluding autos increased 0.4% (Briefing.com consensus +0.4%).
Notably, there were no revisions to the prior month, which saw the strongest monthly sales gain since Mach 2015.
Core retail sales, which exclude auto, gasoline station, building equipment, and food services sales, were up 0.4% after a 1.0% increase in April.
That is a favorable development for second quarter GDP since these sales factor into the computation of the goods component for personal consumption expenditures.
The main pockets of weakness in May were sales at building material, garden equipment and supplies dealers (-1.8%), miscellaneous store retailers (-1.2%), and department stores (-0.9%).
Conversely, the strongest increases were logged by gasoline stations (+2.1%), nonstore retailers (+1.3%), and sporting goods, hobby, book and music stores (+1.3%).
Total business inventories increased 0.1% in April (Briefing.com consensus +0.2%) after a downwardly revised 0.3% increase (from +0.4%) in March.
Manufacturers' inventories (-0.1%) and wholesaler inventories (+0.6%) were already known. Retailer inventories were the only unknown and they declined 0.1% on the heels of a 0.9% increase in March.
The biggest drivers of the decline in retailer inventories were general merchandise store (-0.5%) and furniture, home furnishings, electronics and appliance store (-0.5%) inventories.
Motor vehicle dealer inventories rose 0.1% while food and beverage stores and clothing and clothing accessories stores inventories increased 0.3% and 0.2%, respectively.
The total business inventory-to-sales ratio was 1.40 in April versus 1.41 in March. In the April period a year ago, it was 1.37.

Tomorrow's economic calendar includes the 7:00 ET release of the weekly MBA Mortgage Index. Meanwhile, May Core PPI (Briefing.com consensus +0.1%) and Empire Manufacturing for June (Briefing.com consensus -1.6) will cross the wires at 8:30 ET. At 9:15 ET, Industrial Production (Briefing.com consensus -0.1%) and Capacity Utilization (Briefing.com consensus 75.2%) will each be released. Finally, the day's data will be capped off with the June FOMC Rate Decision and April Net Long-Term TIC Flows, which will be reported at 14:00 ET and 16:00 ET, respectively.

Nasdaq Composite -3.3% YTD
S&P 500 +1.5% YTD
Dow Jones +1.4% YTD
Russell 2000 +1.1% YTD

DJ30 -57.66 NASDAQ -4.89 SP500 -3.74 NASDAQ Adv/Vol/Dec 1172/1.772 bln/1908 NYSE Adv/Vol/Dec 1046/881.1 mln/1994

3:35 pm :

Energy futures end the day mostly lower today with everything closing in negative territory except for natural gas
WTI crude finished the day -0.8% at $48.49/barrel, while natural gas rose 0.8% to $2.61/MMBtu
Heating oil slipped, falling -0.7% to $1.50/gallon, while RBOB fell -0.7% to $1.52/gallon
All are on July contracts
Moving over to metals, Aug gold rose $1.50 to $1288.40/oz, while July silver fell two cents to $17.43/oz
July copper fell one cent to $2.04/lb

The major U.S. averages opened under pressure as investors weighed the potential macroeconomic implications of upcoming policy statements from the Fed and Bank of Japan, as well as the increased likelihood of a potential Brexit. Additionally, during the session investors received a few pieces of economic data:

Import prices increased 1.4% in May due primarily to higher fuel prices. Excluding fuel, they were up 0.3%
Export prices were up 1.1% in May. Excluding agriculture, they advanced 1.0%
Retail sales were up 0.5% in May while retail sales excluding autos increased 0.4%
Core retail sales, which exclude auto, gasoline station, building equipment, and food services sales, were up 0.4% after a 1.0% increase in April
Total business inventories gained 0.1% in April after a downwardly revised 0.3% increase (from +0.4%) in March

Broader market trading ended Tuesday with a modestly lower finish, albeit higher off lows of the day. Action was led to the downside by the Dow Jones Industrial Average which lost 57.66 points (-0.33%) today to end 17674.82. The S&P 500 closed lower by 3.74 points (-0.18%) to 2075.32, and the tech-heavy Nasdaq Composite shed 4.89 points (-0.10%) today, ending 4843.55.

The negative bias from Monday persisted in the Technology (XLK 43.57, +0.10 +0.23%) sector following yesterday's blockbuster deal between Microsoft (MSFT 49.83, -0.31 -0.62%) and LinkedIn (LNKD 191.63, -0.58 -0.30%). However, generally negative trading in the sector turned higher in the final hour of action, and the sector turned in a modestly positive finish. Component Symantec (SYMC 18.77, +0.56) continued yesterday's strength which stemmed from the acquisition of Blue Coat, as the stock turned in a +3.08% day. On the flip side of the coin, component Xerox (XRX 9.73, -0.13 -1.32%) was notably weaker today as the company announced that Ashok Vemuri is set to become the CEO of the Business Process Outsourcing (BPO) company upon the completion of the separation of Xerox into two publicly-traded companies. Other sectors as measured by the S&P closed the session XLU +0.53%, XLP +0.39%, XLV +0.15%, XLI +0.02%, XLE -0.06%, XLY -0.26%, XLB -0.74%, XLF -1.48% with Utilities leading the way higher and Financials posting some significant losses.

In the S&P 500 Information Technology (718.17, +0.93 +0.13%) sector, Tuesday began with some modest gains but action quickly turned lower and ultimately ended higher as the broader market eased off lows as the bell rang. Component Apple (AAPL 97.46, +0.12 +0.12%) was slightly higher today following yesterday's WWDC and the announcement that came across in the overnight session that the company would be offering Apple Pay in France later this year through a partnership with Orange (ORAN 15.98, -0.46 -2.80%). Other names in the space which ended the day in the green included YHOO +2.55%, ATVI +2.07%, PYPL +1.70%, QRVO +1.38%, CTSH +0.92%.
Other notable news items among sector components:

Orange (ORAN) confirmed its commitment to mobile payment in France by offering Orange Cash customers Apple (AAPL) Pay, which is transforming mobile payments with an easy, secure and private way to pay that's fast and convenient later this year.

Xerox (XRX) announced Ashok Vemuri will become the CEO of the Business Process Outsourcing (BPO) company upon the completion of the separation of Xerox into two publicly-traded companies. Vemuri will join Xerox effective July 1, 2016 and serve as CEO of Xerox Business Services, LLC and an executive vice president of Xerox Corporation until the separation is complete.

Eurobank Ergasias S.A. will streamline its technology operations and pursue a digital transformation using a new infrastructure-as-a-service (IaaS) technology platform provided by Accenture (ACN 118.09, +1.01 +0.86%) under a ten-year agreement that involves the bank's subsidiaries in Romania, Bulgaria, Serbia and Ukraine. Accenture will provide technology transformation and delivery services for an "intelligent infrastructure" based on an advanced IaaS platform that will support the bank's core functions, including deposits and loans, online banking, transaction processing, and credit card and debit services.

IBM (IBM 151.06, -0.22 -0.15%) and VMware (VMW 61.52, -1.27 -2.02%) announced they are continuing to expand their strategic partnership by enabling VMware Horizon Air customers to take advantage of cloud-hosted desktop and application services via the IBM Cloud.

Mentor Graphics (MENT 21.60, -0.09 -0.41%) announced it will support the Xilinx (XLNX 46.96, +0.64 +1.38%) Zynq UltraScale+ MPSoC devices with its broad embedded tools and software portfolio, including the Mentor Embedded Linux and Android OS, Nucleus real-time operating system (RTOS), Mentor Embedded Hypervisor, and Mentor Embedded Multicore Framework products.
XLNX also announced Android 5.1 (Lollipop) support for the Zynq UltraScale+ Multi-Processor SoC (MPSoC).

Brocade (BRCD 8.86, +0.02 +0.23%) and Harris (HRS 80.98, +0.37 +0.46%) announced the formation of a strategic partnership designed to deliver cybersecurity solutions for advanced protection of an organization's critical assets.

Western Digital (WDC 46.40. +0.12 +0.26%) and CTERA Networks announced a certified solution for IT organizations to build private clouds that combine enterprise-grade file sharing, data protection, and branch office file storage capabilities with cost-effective object storage and cloud orchestration.

On the company's blog, Facebook (FB 114.94, +0.99 +0.87%) confirmed the Oculus Touch will launch with more than 30 full, made-for-VR games later this year, including 20 new titles designed for Touch.

Elsewhere in the tech space:

NXP Semi (NXPI 87.37, -0.03 -0.03%) to sell its Standard Products business to Beijing Jianguang Asset Management for about $2.75 billion.

DST Systems (DST 117.03, +1.16 +1.00%) to sell its North American Customer Communications business to Broadridge Financial (BR 64.28, +1.13 +1.79%) for $410 million in cash. The company expects the deal to result in a $1.15 reduction to annual EPS. DST also announced a new $300 million share repurchase plan.

CenturyLink (CTL 26.68, -0.21 -0.78%) acquired ElasticBox. Financial terms of the deal were not disclosed.

Web.com's (WEB 17.71, -0.08 -0.45%) COO Jason Teichman announced his resignation effective July 5 to pursue other opportunities.

Wins Finance (WINS 11.40, -0.98 -7.92%) entered into a sale-leaseback arrangement with LiaoningSG Automotive Group valued at RMB 200 million.

Pegasystems (PEGA 27.69, +0.46 +1.69%) appointed Ken Stillwell as CFO and CAO effective July 7, 2016.

Sonus Networks (SONS 8.49, -0.34 -3.85%) announced Mark Greenquist has resigned as CFO effective June 15, 2016 to take a similar role at a leading e-commerce platform company. Susan Villare, VP of Financial Planning and Analysis, will fulfill the duties as interim CFO while SONS considers both internal and external candidates. Further, the company reaffirmed guidance for Q2 total revenues of $59-60 million and non-GAAP diluted EPS of $0.03-0.04. Also, SONS reaffirmed guidance for FY16 total revenues $255-265 million and non-GAAP diluted EPS of $0.27-0.34.

ManTech (MANT 35.72, -0.24 -0.67%) announced the acquisition of Oceans Edge's cyber business. Financial terms of the deal were not disclosed.

Nuance Communications (NUAN 16.27, -0.58 -3.44%) commenced an offering to qualified institutional buyers of $300 million aggregate principal amount of senior notes due 2024.

In reaction to quarterly results:

pdvWireless (PDVW 19.25, -0.02 -0.10%) reported a worse than expected Q4 loss per share of $0.47 and better than expected revenues of $0.95 million.

Yingli Green Energy (YGE 4.04, -0.21 -4.94%) reported Q1 EPS of $0.60 on revenues which came in ahead of expectations yet fell 22.2% versus last year to $364.6 million.

Digital Turbine (APPS 1.04, -0.03 -2.80%) reported a worse than expected loss per share for Q4 of $0.09 on in-line revenues which rose 125.5% versus last year to $23 million.

Analyst actions:

VG was upgraded to Buy from Neutral at Citigroup;
LNKD was downgraded at Needham, Goldman, Cantor Fitzgerald, Jefferies, Piper Jaffray, Axiom Capital, and First Analysis Sec,
CGNX was downgraded to Hold from Buy at Canaccord Genuity,
CDNS was downgraded to Hold from Buy at Needham,
APPS was downgraded to Neutral from Buy at Ladenburg Thalmann;
GPRO was initiated with a Neutral at Longbow,
TRMB and GDDY were initiated with an Outperform at Raymond James,
GIG was initiated with a Buy at Needham,
OSIS was initiated with a Market Outperform at CJS Securities