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From Briefing.com: Weekly Recap - Week ending 05-Aug-16

The stock market entered Friday with a modest weekly loss, but a rally that developed in the wake of a better than expected Employment Situation Report for July (255,000; Briefing.com consensus 185,000) helped the S&P 500 log its fifth weekly gain in the past six weeks. The benchmark index added 0.4% for the week while the Nasdaq Composite (+1.1%) outperformed. Both indices marked fresh all-time highs on Friday.

Investors received another heavy dose of quarterly earnings, but the latest batch of results came from companies that had little market-moving cachet. At the end of the week, nearly 90.0% of S&P 500 components had reported earnings, showing a 3.5% decline in blended earnings, which was worse than the 3.2% contraction projected by FactSet.

In addition to earnings, investors received the latest policy statement from the Bank of England, which proved to be a dovish surprise. The central bank lowered its key rate by 25 basis points to 0.25%, increased its purchase program to GBP435 billion from GBP375 billion, and announced it will buy up to GBP10 billion of corporate debt. The news pressured the pound into the 1.31 area against the dollar, but somewhat surprisingly, the stepped up easing efforts had little impact on global equity markets.

The S&P 500 advanced to a new record high on Friday after the Employment Situation report for July (255,000; Briefing.com consensus 185,000) beat estimates, showing above-consensus average hourly earnings growth of 0.3% (Briefing.com consensus 0.2%). Over the past year, average hourly earnings have risen 2.6%, but rate hike expectations remain subdued with the fed funds futures market not pricing in a 50.0%+ chance or a rate hike until March 2017 (51.2%).
Index Started Week Ended Week Change % Change YTD %
DJIA 18432.24 18543.53 111.29 0.6 6.4
Nasdaq 5162.13 5221.12 58.99 1.1 4.3
S&P 500 2173.60 2182.87 9.27 0.4 6.8
Russell 2000 1219.94 1231.09 11.15 0.9 8.4

4:15 pm Closing Market Summary: Nasdaq & S&P Notch New Highs After Jobs Report (:WRAPX) :

The stock market ended the week on a higher note as a positive reading of the Employment Situation Report for July helped the Nasdaq Composite (+1.1%) and the S&P 500 (+0.9%) notch new all-time closing highs. The upbeat employment report elicited buying interest while diminishing on-going concerns regarding the strength of the U.S. labor market. Other factors impacting today's trade included weakness from the oil pit, continued strength in the dollar, and sector leadership from the heavily-weighted financial (+1.9%), technology (+1.2%), and consumer discretionary (+1.1%) sectors. The tech-heavy Nasdaq (+1.1%) finished ahead of the Dow Jones Industrial Average (+1.0%) and the S&P 500 (+0.9%).

Today's session began on a higher note as a better-than-expected reading of the Employment Situation Report for July helped reduce concerns regarding the hiring landscape. The report showed that nonfarm payrolls (255K; Briefing.com consensus 185K) and nonfarm private payrolls (217k; Briefing.com consensus 171k) each came in stronger-than-expected despite the impressive rebound in the June report. Furthermore, average hourly earnings (+0.3%; Briefing.com consensus +0.2%) also came in better-than-expected, which could pave the way to an increase in inflation expectations.

The positive employment report brought forward rate hike expectations, but the fed funds futures market still does not believe that a rate hike will happen before the end of 2016. The fed funds futures market currently estimates the odds of a rate hike at the December meeting at 46.5%, rising from yesterday's implied probability of 32.1%. The dollar strengthened in response while gold fell and the economically-sensitive financial sector (+1.9%) led today's rally.

Equity indices extended their advance through the session, shrugging off potential headwinds from a strengthening dollar and weakness in oil futures. The benchmark index hovered in the area of its record high for most of the session, notching a new all-time intraday high (2182.86) in the final hour. The S&P 500 (+0.9%) finished near its best level of the day as eight sectors ended in the green. The heavyweight financial (+1.9%), technology (+1.2%), and consumer discretionary (+1.1%) sectors outperformed while defensively-oriented telecom services (-0.2%) and utilities (-1.4%) ended in the red.

The financial sector (+1.9%) demonstrated broad-based strength as money center banks, investment brokerages, and life insurance names each outperformed. JPMorgan Chase (JPM 66.30, +1.74) and Citigroup (C 45.72, +1.88) finished higher by 2.7% and 4.3%, respectively. Separately, MetLife (MET 41.14, +1.60) finished the day higher by 4.1%, rebounding from yesterday's 8.7% decline. The economically-sensitive group finished the week higher by 1.4%, erasing its year-to-date loss.

The influential technology sector (+1.2%) finished ahead of the broader market as top-weighted Apple (AAPL 107.48, +1.61) gained 1.5%. The stock extended its recent rally, jumping 11.2% since reporting above-consensus bottom-line results on July 26. The high-beta chipmakers also outperformed, evidenced by the 1.3% gain in the PHLX Semiconductor Index. The price-weighted index erased a modest weekly loss to finish the week higher by 0.9%.

The Dow Jones Transportation Average (+1.9%) outperformed amid strength in rail names and airlines. The U.S. Global Jets ETF (JETS 22.32, +0.52) finished the day higher by 2.4%, trimming its weekly loss to 0.9%. Separately, railroads settled higher as Canadian Pacific (CP 144.04, +0.86) rebounded 0.6%. The name was under pressure yesterday after announcing a 9.8 million share public offering on behalf of Pershing Square.

The countercyclical health care sector (+0.3%) ended the day on a flat note as Bristol-Myers (BMY 63.28, -12.04) underperformed. The company announced that its lung-cancer treatment, Opdivo, failed to meet its primary endpoints. On the flipside, Dow component Merck (MRK 63.86, +6.02) topped the price-weighted index as investors looked to diminishing competition for its Keytruda drug.

The U.S. Dollar Index (96.24, +0.48) ended off its best level of the day, but the greenback still finished with gains against the pound, yen, and euro. Cable ended lower by 0.3% (1.3070) while the single currency declined 0.4% against the buck (1.1085). Separately, the dollar gained 0.5% against the safe-haven yen (101.76).

Treasuries ended the day on a lower note as yield rose across the curve. The yield on the 10-yr note settled higher by eight basis points, rising to 1.59%.

Participation was in-line with the recent average as more than 842 million shares changed hands at the NYSE floor.

Today's economic data included the Employment Situation Report for July, the June Trade Balance, and June Consumer Credit:

Nonfarm payrolls increased by 255,000 (Briefing.com consensus 185,000). Over the past three months, job gains have averaged 190,000 per month.
June nonfarm payrolls revised to 292,000 from 287,000
May nonfarm payrolls revised to 24,000 from 11,000
Private sector payrolls increased by 217,000 (Briefing.com consensus 171,000)
June private sector payrolls revised to 259,000 from 265,000
May private sector payrolls revised to -1,000 from-6,000
Unemployment rate was 4.9% (Briefing.com consensus 4.8%) versus 4.9% in June
Persons unemployed for 27 weeks or more accounted for 26.6% of the unemployed versus 25.8% in June
July average hourly earnings were up 0.3% (Briefing.com consensus 0.2%) after being up 0.1% in June
Over the last 12 months, average hourly earnings have risen 2.6%
The average workweek was 34.5 hours (Briefing.com consensus 34.4) versus 34.4 hours in June
July manufacturing workweek was unchanged at 40.7 hours
Factory overtime was up 0.1 to 3.3 hours
The labor force participation rate was 62.8% versus 62.7% in June
The trade deficit in June widened to $44.5 billion (Briefing.com consensus -$42.7 billion) from -$41.0 billion in May.
The widening was a byproduct of imports increasing by $4.2 billion month-over-month to $227.7 billion and exports increasing by only $0.6 billion month-over-month to $183.2 billion.
There was a $2.30 billion jump in imports of industrial supplies and materials, more than half of which was owed to imports of crude oil (+$1.43 billion), petroleum products (+$0.44 billion), and fuel oil (+$0.29 billion).
Capital goods imports, excluding automotive, were up $1.0 billion, with civilian aircraft (+$0.7 billion) accounting for much of that increase.
Imports of consumer goods increased $1.9 billion, paced by a robust $1.4 billion increase in pharmaceutical preparations and a $1.1 billion increase in cell phones and other household goods.
The export side of the equation featured a $0.6 billion increase in foods, feed, and beverages, a $0.4 billion increase in consumer goods, and a $0.3 billion increase in capital goods, excluding automotive, which was offset in part by a $0.4 billion decline in exports of autos, parts, and engines.
On a year-over-year basis, imports are down 2.4% while exports are down 3.8%.
Total outstanding consumer credit increased by $12.3 billion in June after increasing a downwardly revised $18.0 billion (from $18.6 billion) in May. The Briefing.com consensus estimate for June was $16.2 billion.
In the preceding 12-month period leading up to June, consumer credit had risen by an average of $17.7 billion.
The growth in June was driven by a $7.7 billion increase in revolving credit, which rose to $960.8 billion, and a $4.6 billion increase in nonrevolving credit to $2673.1 billion.
In June, consumer credit increased at an annual rate of 4.0%. For the second quarter, consumer credit increased at a seasonally adjusted annual rate of 5.25%.

There is no economic data of note scheduled to be released on Monday.

Today's flat performance in the broader market comes on the heels of the Bank of England's decision to lower its key interest rate to a record-low 0.25% from 0.50% and ahead of tomorrow's influential Employment Situation Report for July. Further, the BoE voted to increase its U.K. government bond purchases by GBP60 billion and to purchase up to GBP10 billion of U.K. corporate bonds. The accommodative monetary policy decision follows the surprise Brexit vote in late June.

Also, market data today came in the form of July Challenger Job Cuts which were 45,300, compared to the prior month's reading of 38,500. Additionally, initial claims increased by 3,000 to 269,000 for the week ending July 30. Continuing claims decreased by 6,000 to 2.138 million for the week ending July 23. Factory orders declined 1.5% in June on the heels of a downwardly revised 1.2% decline (from -1.0%) in May.

Thursday concluded a mixed session as morning weakness cooled into the afternoon and ultimately ended on a modestly lower tick. Leading the day higher, the Nasdaq Composite added 6.51 points (+0.13%) to 5166.25. Helping the Nasdaq outperform today, top Nasdaq 100 components TSLA +2.1%, PYPL +2.0, NVDA +1.9%, AVGO +1.8%, MAR +1.3% all finished with strong days. The S&P 500 was up less than a point (+0.02%) when the day was done to 2164.25, and the Dow Jones Industrial Average was the lone laggard, shedding 2.95 points (-0.02%) to 18352.05.

As it were, S&P sectors were also scattered as a whole with XLB +0.37%, XLP +0.24%, XLI +0.03%, XLU -0.06%, XLY -0.06%, IYZ -0.09%, XLV -0.15%, XLE -0.18%, XLF -0.30%. Technology (XLK 46.58, +0.23 +0.50%) was the best performing S&P sector, ending just off highs of the day. Component Western Union (WU 20.69, +0.77 +3.89%) posted a strong Thursday following better than expected Q2 earnings.

In the S&P 500 Information Technology (772.10, +3.79 +0.49%) sector, trading came to a close slightly off highs after tepid morning action. Component First Solar (FSLR 43.72, -5.52 -11.21%) was the worst performing component following its latest quarterly print; the company beat market expectations on the top and bottom lines for Q2 but worries about margins and commentary regarding a very competitive pricing environment held the stock lower today. Other names in the space which outperformed today included PYPL +1.97%, TDC +2.02%, NVDA +1.85%, AVGO +1.75%, STX +1.72%, FB +1.51%, YHOO +1.38%, MSI +1.36%, LRCX +1.26%, SWKS +1.20%, HPE +1.16%.
Notable news items among tech companies:

CSRA (CSRA 25.85, -0.25 -0.96%) announced it received a contract to support the Air Force Research Laboratory in conducting human-centered research and development to improve and protect mission-critical processes and tools used by airmen. The single-award contract is valued at $7.5 million over a six-year period.

RadiSys (RSYS 4.72, +0.01 +0.21%) filed for a $100 million mixed securities shelf offering.

Novatel Wireless (MIFI 2.00, +0.12 +6.38%) disclosed a restructuring plan including the reduction of the workforce by about 24%.

TerraForm Global (GLBL 3.36, -0.03 -0.88%) disclosed the receipt of a letter from SunEdison (SUNEQ 0.12, flat) purporting to terminate the Interest Payment Agreement dated as of August 5, 2015.

Elli Mae (ELLI 98.50, +5.98 +6.46%) priced a follow-on offering of 2.75 million shares of its common stock at a price to the public of $90 per share.

Guidewire Software (GWRE 61.31, +0.38 +0.62%) to acquire FirstBest. Financial terms of the deal were not disclosed.

Zynga (ZNGA 2.97, +0.01 +0.34%) appointed Matt Bromberg as COO effective August 8.

BlackBerry (BBRY 7.76, -0.02 -0.26%) commenced a normal course issuer bid to purchase up to $125 million principal amount of its 6% unsecured convertible debentures.

In reaction to quarterly results:

BCE Inc (BCE 47.94, +0.68 +1.44%) reported better than expected Q2 EPS of C$0.94 and in-line revenues of C$5.34 billion. The company also reaffirmed FY16 EPS and revenue guidance of C$3.45-3.55 and growth of 1-3%, respectively.

Nokia (NOK 5.50, -0.19 -3.34%) reported in-line Q2 EPS of EUR0.03 on worse than expected revenues which rose 91.3% versus a year ago to EUR5.58 billion.

Equinix (EQIX 371.40, +1.06 +0.29%) reported Q2 funds from operations of $3.55 per share on revenues of $900.5 million. The company also sees Q3 revenues of $915-921 million on adjusted EBITDA of $419-425 million. For FY16, the company expects revenues of $3.59-3.61 billion on adjusted EBITDA of $1.658-1.668 billion.

CenturyLink (CTL 30.25, -0.26 -0.85%) reported better than expected Q2 EPS of $0.63 on in-line revenues of $4.4 billion. For Q3, CTL sees EPS worse than market expectations at $0.52-0.57 on in-line revenues of $4.35-4.40 billion.

Western Union (WU) reported better than expected Q2 EPS of $0.42 on revenues which came in at $1.38 billion. For FY16, the company sees EPS of $1.60-1.70 compared to prior expectations of $1.58-1.70.

TripAdvisor (TRIP 63.59, -5.90 -8.49%) reported worse than expected Q2 EPS and revenues of $0.38 and $391 million, respectively.

First Solar (FSLR) reported better than expected Q2 EPS and revenues of $0.87 and $934 million, respectively. For FY16, the company sees better than expected EPS of $4.20-4.50, prior guidance was $4.10-4.50 on revenues of $3.8-4.0 billion.

GoDaddy (GDDY 31.78, +3.47 +12.26%) reported a Q2 loss per share of $0.11 on better than expected revenues which rose 15.6% compared to a year ago to $456.2 million. The company also sees Q3 revenues of $468-471 million. For FY16 revenues, GDDY sees $1.84-1.847 billion.

Companies scheduled to report quarterly results tonight/tomorrow morning: TWOU ATVI ACXM MDRX AMBR ASYS AAOI ANET TEAM ABTL RATE WIFI ECOM CPSI CSOD DMD FEIC FEYE GSAT HDP IMMR IMPV SAAS INAP KTOS LNKD MRIN MELI MSI EGOV PCLN RBCN SHOR SWIR SSNI SMCI SYMC TTWO TRMR TRUE UBNT OLED WEB ZG ZNGA/CTSH TDS USM

Analyst actions:

TXN was upgraded to Neutral from Underperform at Exane BNP Paribas,
IPAS was upgraded to Buy from Neutral at Chardan Capital Markets,
NSIT was upgraded to Mkt Perform from Underperform at Raymond James,
LMOS was upgraded to Buy from Hold at Jefferies,
IL was upgraded to Buy from Hold at Craig Hallum;
RUBI was downgraded to Neutral from Buy at Citigroup and to Hold from Buy at Needham,
INOV was downgraded to Underweight from Neutral at Piper Jaffray and to Neutral from Buy at Goldman, TNET was downgraded to Equal Weight from Overweight at Morgan Stanley,
FLTX was downgraded to Equal Weight from Overweight at Barclays