From Briefing.com: 4:07 pm Micron beats by $0.02, misses on revs (MU) : Reports Q3 (May) loss of $0.08 per share, excluding non-recurring items, $0.02 better than the Capital IQ Consensus of ($0.10); revenues fell 24.8% year/year to $2.9 bln vs the $2.96 bln Capital IQ Consensus.
Revenues for the third quarter of fiscal 2016 were slightly lower compared to the second quarter of fiscal 2016 as increases in sales of DRAM products were offset by decreases in sales of trade Non-Volatile products. DRAM revenues increased in the third quarter of fiscal 2016 as a result of a 22 percent increase in unit sales partially offset by an 11 percent decline in average selling prices.
Sales of trade Non-Volatile products decreased due to a 10 percent decrease in units sales and a six percent decline in average selling prices. The company's overall consolidated gross margin of 17 percent for the third quarter of fiscal 2016 was three percent lower compared to the second quarter primarily due to lower average selling prices partially offset by manufacturing cost reductions.
Restructuring Plan
On June 30, 2016, the Company announced a restructure plan in response to the current business environment and the need to accelerate focus on the Company's key priorities. The Company plans to implement a cost savings program in which it expects to save approximately $80 million per quarter in fiscal 2017.
The savings are expected to result from a combination of a more focused set of projects and programs, the permanent closure of a number of open headcount requisitions, a workforce reduction in certain areas of the business, and other non-headcount related spending reductions.
In connection with the plan, the Company expects to incur charges of $70 million, substantially all in cash expenditures, the majority of which is expected to be incurred in the fourth quarter of fiscal 2016, with the remainder in the early part of fiscal 2017.
4:15 pm : The stock market capped off the second quarter with the S&P 500 (+1.4%) clawing its way back to a 2.7% gain on the year. The three-day rebound resulted in the benchmark index trimming its post-Brexit loss to a paltry 0.7%. Today's leg of the rebound can be attributed to rising expectations regarding further easing measures from the Bank of England and European Central Bank, the reclaiming of the 200-day simple moving average in the S&P 500, month-end/quarter-end re-positioning, and the outperformance of the heavily-weighted industrial (+2.0%) and financial (+1.6%) sectors. The S&P 500 (+1.4%) finished ahead of the Dow Jones Industrial Average (+1.3%) and the Nasdaq Composite (+1.3%).
Global equity markets sputtered at the start of the U.S. session as European bourses spun their wheels near their flat lines. The restrained action overseas followed two days of recouping steep Brexit-related losses. On that note, the Euro Stoxx 50 Index (+1.1%) recovered 5.0% of its 11.2% decline by the end of yesterday's session. A downturn in crude oil also added to the restrained tenor.
U.S. equity indices ticked higher after the first hour of trade as the consumer staples sector (+2.2%) climbed the leaderboard. The move in the space was prompted by Mondelez International (MDLZ 45.48, +2.51) offering to buy Hershey Foods (HSY 113.49, +16.35) for $107 per share in cash and stock. Hersey has since rejected the offer, but remains in talks with Mondelez. The ensuing rally in the broader market enabled the benchmark index to reclaim its 50-day simple moving average (2076.42).
The benchmark index extended its rally through the afternoon, spurred on by promises of continued easing from central banks. Bank of England Governor Mark Carney pledged that the bank was ready to provide further stimulus in the wake of Thursday's surprise Brexit vote. Additionally, reports indicated that the ECB may loosen its regulations regarding quantitative easing purchases. The commentary was enough to fuel risk appetite through the end of the session. All ten sectors finished in the green with consumer staples (+2.2%), utilities (+2.2%), and industrials (+2.0%) leading the pack.
In the industrial sector (+2.0%), Dow component General Electric (GE 31.48, +0.93) finished at the top of the price-weighted index as participants ruminated over yesterday's decision to remove the company's nonbank Systemically Important Financial Institution designation. On the flipside, Deere (DE 81.04, -0.47) was pressured after the USDA released its quarterly grain stock report and acreage report.
The financial space (+1.6%) paced the advance as investors digested results from the Federal Reserve's supervisory stress test. The response was mixed as each institution's capital return program was weighed against recent expectations. Morgan Stanley (MS 25.98, +0.75) gained 3.0% after announcing an additional $3.5 billion in share repurchases and a dividend increase to $0.20 per share.
The U.S. Dollar Index (95.90, +0.13) ended modestly higher as the buck gained against the yen, euro, and pound. The dollar/yen pair finished higher by 0.4% (103.25) while the single currency lost 0.2% against the buck (1.1100). Separately, the pound fell 0.7% against the dollar (1.3337) as participants eyed potential stimulus from the Bank of England.
The Treasury complex finished modestly higher despite the rally in equities. The yield on the 10-yr note slipped three basis points to 1.49%.
Today's participation was above the recent average as more than 1.3 billion shares changed hands on the NYSE floor.
Today's economic data included weekly initial claims and Chicago PMI for June:
The encouraging trend for initial jobless claims persists with claims for the week ending June 25 increasing by 10,000 to 268,000 (Briefing.com consensus 265,000).
Weekly initial claims have been running below 300,000 for 69 consecutive weeks.
This is the longest streak below 300,000 for initial claims since 1973!
The latest initial claims reading left the four-week moving average for initial claims unchanged at 266,750.
Continuing claims for the week ending June 18, meanwhile, decreased by 20,000 to 2.120 million.
The four-week moving average for this series fell by 13,000 to 2.134 million, which is the lowest since November 11, 2000.
The Chicago Purchasing Managers Index (PMI) sprung out of its contraction, surging to 56.8 in June from 49.3 in May.
The June reading is the highest reading since January 2015 and was well above the Briefing.com consensus estimate of 50.8.
The headline strength in June was nice to see, yet it most likely reflects inventory rebuilding after an extended period of destocking in an environment of sluggish demand.
One month here does not a trend make and the providers of the report implied as much, pointing out that the business barometer needs to be viewed in the context of the weakness seen in April and May.
On that note, it is worth pointing out that the three-month average of 52.2 for the second quarter is roughly flat with the three-month average for the first quarter. The line between contraction and expansion is 50.0.
There was a huge surge in new orders, which drove the strength in June. The New Orders Index spiked from 48.8 to 63.2.
Similarly, there was a big jump in the Production Index from 47.4 to 56.3, which also proved to be a driving factor behind the headline surprise.
Order backlogs reportedly rose to their highest level since March 2011, breaking a 16-month streak of below 50 readings.
The Inventory Index ended a seven month run in contraction and saw a double-digit increase from the 6 1/2 year low recorded in May
Strikingly, despite the big jump in new orders and order backlogs, there wasn't a pickup in employment.
That could be seen in the Employment Index, which fell from 48.3 to 45.0. The Prices Paid Index was little changed at 55.7 versus 56.5 in May.
Tomorrow's economic data will include the ISM Index for June (Briefing.com consensus 51.4) and Construction Spending for May (Briefing.com consensus +0.5%), which will cross the wires at 10:00 ET. Separately, Auto and Truck Sales figures for June will be released throughout the session.
Nasdaq Composite -3.3% YTD
Russell 2000 +1.1% YTD
S&P 500 +2.7% YTD
Dow Jones +2.9% YTD
DJ30 +235.31 NASDAQ +63.43 SP500 +28.09 NASDAQ Adv/Vol/Dec 2193/1.972 bln/867 NYSE Adv/Vol/Dec 2436/1.337 bln/629 3:30 pm :
The dollar index is up +0.3% trading near the 96.03 level, weighing on commodities
Commodities, as measured by the Bloomberg Commodity Index, are down -0.5% at 88.84
Crude oil plummets to close at fresh lows of the session after finding resistance near the $50/barrel handle as the long July 4th weekend approaches
August crude oil futures fell $1.58 (-3.2%) to $48.26/barrel
Monthly IEA data is scheduled to be released on July 13th
Baker Hughes rig count data will be released tomorrow at 1 pm ET
Natural gas surges near highs of the year after EIA natural gas inventory data released this morning showed a smaller-than-expected build compared to Consensus
August natural gas closed $0.06 higher (+2.1%) at $2.92/MMBtu
Natural gas inventory showed a build of +37 bcf vs expectations for inventory to be a build of approximately +48 bcf.
Working gas in storage was 3,140 Bcf as of Friday, June 24, 2016, according to EIA estimates.
Stocks were 582 Bcf higher than last year at this time and 637 Bcf above the five-year average of 2,503 Bcf.
At 3,140 Bcf, total working gas is above the five-year historical range.
In precious metals, gold consolidates in the afternoon, seeing little movement from session lows hit this morning
August gold ended today's session down $6.40 (-0.5%) to $1320.20/oz
Silver extends this morning's rally, closing higher on the day even as the dollar index gains momentum
September silver closed today's session $0.19 higher (+1.0%) at $18.60/oz
Base metal copper ends afternoon pit trading unchanged for the day
September copper closed flat at $2.19/lb
Grains futures show notable movement after the release of the USDA's Annual Acreage Report & the quarterly grain stocks report:
December corn closed $0.10 lower (-2.6%) at $3.74/bushel
September wheat closed $0.01 higher (+0.2) at $4.45/bushel
November soybeans closed $0.41 higher (+3.7%) at $11.55/bushel
October sugar closed $0.01 lower (-4.8%) at $0.20/lb
Acreage report shows:
Corn Planted Acreage Up 7% from 2015
Soybean Acreage Up 1%
All Wheat Acreage Down 7%
All Cotton Acreage Up 17%
Quarterly grain stocks report shows:
Corn Stocks Up 6 % from June 2015
Soybean Stocks Up 39%
All Wheat Stocks Up 30%
Equity indices began their day on a flat note as investors considered the breadth of the recent rebound in equity markets. They then extended their gains late in the morning when BoE Governor Mark Carney stated that the bank was ready to provide further stimulus in the wake of Thursday's surprise Brexit vote. Not to be outdone, the ECB also helped rouse markets when it was reported that the central bank may loosen its QE purchasing rules. A shrinking pool of eligible debt is the likely reason for the move.
The final trading day of June, and incidentally the final trading day of the quarter came to a close near highs of the session. Trading was led higher by the S&P 500 which added 28.09 points (+1.36%) to 2098.86. The Dow Jones Industrial Average advanced 235.31 points (+1.33%) to 17929.99, and the Nasdaq Composite was higher by 63.43 points (+1.33%) to 4842.67. Today's action took the three major indices +1.7%, +1.2% and -0.6% quarter-to-date and +2.7%, +2.9% and -3.3% YTD, respectively.
Market data flowed through today in the form of the initial jobless claims which for the week ending June 25 increasing by 10,000 to 268,000. Continuing claims for the week ending June 18, meanwhile, decreased by 20,000 to 2.120 million. Lastly, the Chicago Purchasing Managers Index (PMI) sprung out of its contraction, surging to 56.8 in June from 49.3 in May.
Action was also modestly higher in Technology (XLK 43.36, +0.46 +1.07%) with component Paychex (PAYX 59.50, +3.36 +5.99%) reporting its latest quarter results; the stock was strong today as the company reported in-line Q4 EPS and revenues. Other sectors as measured by the S&P ended the day XLP +2.24%, XLU +2.16%, XLI +1.91%, XLB +1.60%, XLF +1.58%, XLV +0.94%, XLE +0.80%, XLY +0.74% with Consumer Staples and Utilities leading the action higher.
In the S&P 500 Information Technology (713.04, +7.45 +1.06%) sector, the session ended near highs with component Seagate Tech (STX 24.36, +0.41 +1.71%) performing well despite announcing details of a restructuring plan which would eliminate about 1,600 positions. Other names in the space that outperformed included MU +4.32%, ATVI +4.26%, WDC +3.64%, TSS +3.49%, GLW +3.38%, CSRA +3.35%, XRX +3.15%, HPQ +3.04%, ADP +3.03%, INTC +2.76%, HPE +2.76%, EA +2.67%.
Other notable news items among sector components:
Seagate Technology (STX) committed to a restructuring plan as part of the company's previously announced efforts to reduce its cost structure including the reduction of STX's global headcount by about 1,600 employees or 3% of its global headcount. The Plan, which the company expects to essentially complete by the end of the September 2016 quarter, is expected to result in total pretax charges of $62 million recorded primarily in the fiscal fourth quarter of 2016. These charges will consist primarily of employee termination costs generating cash outlays in the September 2016 quarter. The savings generated from these restructuring activities are expected to be recognized beginning in the September 2016 quarter and will represent about $100 million in savings on an annual run rate basis, impacting cost of revenue and operating expenses favorably by about $48 million and $52 million, respectively.
Care.com (CRCM 11.68, +3.21 +37.90%) announced that Alphabet's growth equity fund, (GOOGL 702.67, +7.48 +1.08%) Google Capital, has made a $46.35 million investment in CRCM, which makes Google Capital the largest shareholder in Care.com. Additionally, Laela Sturdy, a Partner at Google Capital, will join CRCM's Board of Directors.
Oracle (ORCL 40.93, +0.38 +0.94%) announced the pricing of its sale of $4.25 billion of 1.900% Notes due 2021, $2.5 billion of 2.400% Notes due 2023, $3.0 billion of 2.650% Notes due 2026, $1.25 billion of 3.850% Notes due 2036 and $3.0 billion of 4.000% Notes due 2046. The offering is expected to settle on July 7, 2016, subject to customary closing conditions.
Fiserv (FISV 108.76, +2.32 +2.18%) announced that Panin Bank launched comprehensive new digital banking products and services using Mobiliti and Corillian Online from Fiserv.
Mitsubishi Electric (MIELY 23.57, -0.41 -1.71%) announced that a factory automation platform as a service (FA PaaS) testbed, which is under joint development by MIELY, Hitachi (HTHIY 41.56, -0.35 -0.84%) and Intel (INTC 32.80, +0.87 +2.72%), has been approved by the Industrial Internet Consortium (IIC) in the United States.
Qualcomm (QCOM 53.57, 0.02 +0.04%) filed a patent infringement complaint against Meizu for infringing its patents covering a broad range of features and technologies used in smartphones, including those relating to 3G (WCDMA and CDMA2000) and 4G (LTE) wireless communications standards.
Elsewhere in the tech space:
Starz (STRZA 29.92, +1.67 +5.91%) to be acquired by Lionsgate (LGF 20.23, -0.71 -3.39%) for $4.4 billion in a cash and stock, or about $32.73 per share.
21Vianet (VNET 10.21, +0.52 +5.37%) announced the receipt of withdrawal from Buyer group's 'going private' proposal. Separately, the company announced a $200 million share repurchase program.
Rambus (RMBS 12.08, +0.45 +3.87%) to buy memory product business from Inphi (IPHI 32.03, +3.62 +12.74%) for $90 million in cash.
Advanced Semi (ASX 5.58, +0.14 +2.57%) and Siliconware Precision (SPIL 7.66, +0.11 +1.46%) adopted a resolution to approve the entering into and execution of a joint share exchange agreement.
In reaction to quarterly results:
Paychex (PAYX) reported in-line Q4 EPS of $0.49 on revenues which also came in in-line and rose 8.9% versus last year to $753.9 million. The company also guided net income for FY17 -- expected to increase about 8%; Operating income, net of certain items, as a percent of total service revenue is expected to be about 38%. Further, PAYX announced expectations for the total service revenue to increase in the range of 7% to 8%.
Progress Software (PRGS 27.46, +2.27 +9.01%) reported better than expected Q2 EPS and revenues of $0.33 and $96.1 million, respectively. PRGS also guided Q3 EPS of $0.43-0.46 and revenues of $103-106 million. For FY16, the company sees EPS of $1.57-1.63 on revenues of $412-418 million.
Analyst actions:
PCLN was upgraded to Overweight from Equal Weight at Barclays,
YELP was upgraded to Buy from Neutral at MKM Partners,
NOK was upgraded to Buy from Neutral at Goldman,
SSNI was upgraded to Strong Buy from Outperform at Raymond James;
QCOM was downgraded to Mkt Perform from Outperform at Bernstein,
MESG was downgraded to Hold from Buy at Craig Hallum
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