From Briefing.com: Weekly Recap - Week ending 28-Oct-16The past week was packed with earnings releases and the economic calendar also featured a few noteworthy reports, but all things considered, the S&P 500 respected a fairly narrow range. The index surrendered 0.7% for the week while the Dow Jones Industrial Average added 0.1% and the tech-heavy Nasdaq underperformed, falling 1.3%.
The underperformance in the Nasdaq was mostly due to relative weakness in biotechnology. The iShares Nasdaq Biotechnology ETF (IBB) lost 2.7% for the week with Amgen (AMGN) falling 9.6% on Friday despite beating quarterly expectations. The Friday weakness in biotechnology was exacerbated by a poor quarterly showing from drug distributor McKesson (MCK -22.4%). The company's report and guidance reminded that the pharmaceutical industry continues wrestling with pricing concerns that may become a regulatory issue once again, especially if Hillary Clinton wins the presidency.
However, Mrs. Clinton's chances were called into question on Friday afternoon after Congressman Jason Chaffetz tweeted that the FBI is once again looking at the presidential candidate after new pertinent information came to the forefront. The news introduced uncertainty ahead of the upcoming election, knocking the stock market from its high. Interestingly, biotech names climbed off their lows after the news began making the rounds.
Biotechnology's woes were in focus as the week drew to its close, but a couple other heavily-weighted Nasdaq components also contributed to the relative weakness in the composite. Specifically, Apple (AAPL) ended the week lower by 2.5% after releasing an underwhelming quarterly report. Similarly, Amazon (AMZN) surrendered 5.3% for the week after missing expectations.
Rate hike expectations for December firmed up after New Home Sales (593K; Briefing.com consensus 610K) and Pending Home Sales (+1.5%; Briefing.com consensus 0.6%) for September beat expectations. Third-quarter advance GDP also surprised to the upside (2.9%; Briefing.com consensus 2.5%) while September Durable Orders (-0.1%; Briefing.com consensus 0.0%) and October Consumer Confidence (98.6; Briefing.com consensus 100.8) fell short of estimates. The implied probability of a December hike increased to 74.2% from last Friday's 69.9%, as indicated by the fed funds futures market.
Index Started Week Ended Week Change % Change YTD %
DJIA 18145.71 18161.19 15.48 0.1 4.2
Nasdaq 5257.40 5190.10 -67.30 -1.3 3.6
S&P 500 2141.16 2126.41 -14.75 -0.7 4.0
Russell 2000 1218.11 1187.61 -30.50 -2.5 4.6
4:24 pm Closing Market Summary: Stocks End Lower as Political Uncertainty Rises (:WRAPX) :
The stock market ended the Friday affair on a mixed note as political uncertainty ambushed participants at the end of another earnings-packed week. The Nasdaq Composite (-0.5%) extended its weekly loss to 1.3% while the S&P 500 (-0.3%; week-to-date: -0.7%) and the Dow Jones Industrial Average (-0.1%; week-to-date: +0.1%) finished closer to their flat lines.
Equity indices saw some slight selling in the opening minutes of the session, but climbed shortly thereafter as investors assessed some upbeat economic data and the latest raft of quarterly earnings reports.
The third quarter advance reading of U.S. GDP registered at 2.9%, exceeding the Briefing.com consensus of 2.5%. The data showed that real GDP accelerated in the third quarter, surpassing the 1.4% increase in the second quarter and the 0.8% increase in the first quarter. The average growth rate for the first three quarters of 2016 remains anemic, checking in at 1.7%.
On the earnings front, bellwether reports from Amazon (AMZN 776.32, -42.04, -5.1%) and Alphabet (GOOG 795.37, +0.02, 0.0%) came in on a mixed note. However, it was cautious commentary and disappointing results from the health care sector (-2.2%) that stole the show. McKesson (MCK 124.11, -36.39) plunged 22.7% after warning that price trends from pharmaceutical and biotechnology companies have resulted in lower profit contributions. The remarks took hold as investors continue to ruminate over the impact of this election cycle on the pharmaceutical industry's pricing practices.
The major averages tumbled to session lows in the afternoon, responding to reports that FBI director James Comey may re-open a probe into Democratic Presidential nominee Hillary Clinton's emails. The reports were sparked by a tweet from Republican Congressman Jason Chaffetz, indicating that the FBI has "learned of the existence of emails that appear to be pertinent" to the previously completed investigation. Reports later indicated that the newly discovered e-mails were found on a new device and were not withheld from the previous investigation.
The benchmark index ebbed towards its low in the final hour as five sectors ended in the red. Health care (-2.2%), energy (-0.5%), and financials (-0.4%) rounded out the leaderboard while industrials (+0.6%), consumer staples (+0.5%), and real estate (+0.3%) outperformed.
The health care sector (-2.2%) led the retreat as results and guidance from McKesson (MCK 124.11, -36.39, -22.7%) and Amgen (AMGN 145.18, -15.39, -9.6%) pressured the group. Dow component Merck (MRK 58.84, -2.45) finished at the bottom the price-weighted average, falling 4.0%. Meanwhile, the iShares Nasdaq Biotechnology ETF (IBB 260.49, -4.98) declined 1.9%, extending its October loss to 10.0%.
In the industrial space (+0.7%), Dow component General Electric (GE 29.22, +0.59, +2.1%) outperformed after announcing that it is exploring partnership opportunities with Baker Hughes (BHI 59.12, +4.57, +8.4%). The defense and aerospace sub-group was also able to extend its winning streak as United Technologies (UTX 101.84, +1.77, +1.8%) gained 3.2% this week. The broader sector moved higher by 0.2% over that period.
The influential technology group (UNCHF) finished flat as top- and bottom-line beats from Alphabet (GOOG 795.37, +0.02, 0.0%) failed to rally the group. Facebook (FB 131.29, +1.60) managed a 1.2% gain ahead of next Wednesday's earnings report. Separately, the PHLX Semiconductor Index fell 0.6%, narrowing its weekly gain to 0.5%.
The Treasury complex settled on a mixed note with the short end of the curve outperforming. The yield on the 2-yr note slipped three basis points to 0.86% while the yield on the benchmark 10-yr note ended down one basis point (1.85%). The 30-yr bond ended little changed with its yield at 2.62%.
Today's trading volume was above the average of 850 million as 941 million shares changed hands at the NYSE floor.
Today's economic data included the advance estimate of Q3 GDP, the Q3 Employment Cost Index, and Michigan Sentiment:
Real GDP increased at a seasonally adjusted annual rate of 2.9% in the third quarter (Briefing.com consensus +2.5%), up from 1.4% in the second quarter and the highest rate since the third quarter of 2014.
The GDP Deflator rose 1.5% (Briefing.com consensus +1.4%) after a 2.3% increase in the second quarter.
On a seasonally adjusted basis, compensation costs for civilian workers increased 0.6% in the third quarter.
That was in-line with the Briefing.com consensus estimate and the third straight quarter the employment cost index has increased 0.6%.
The final reading for the University of Michigan Consumer Sentiment Index for October dipped to 87.2 in October from the preliminary reading of 87.9.
The final October reading also marked a downturn from the final reading of 91.2 for September and was the lowest reading since October 2014.
For more on these economic releases, be sure to visit Briefing.com's Economic Calendar page.
Monday's economic data will include the 8:30 ET release of Personal Income (Briefing.com consensus +0.4%), Personal Spending (Briefing.com consensus +0.5%), and Core PCE Prices (Briefing.com consensus +0.1%) for September. The day's data will be capped off with the release of Chicago PMI for October (Briefing.com consensus 54.0), which will be released at 9:45 ET.
Russell 2000: +4.5% YTD
Dow Jones: +4.2% YTD
S&P 500: +4.0% YTD
Nasdaq: +3.7% YTD
Week in Review: Market Maintains Narrow Range Despite Earnings Barrage
The past week was packed with earnings releases and the economic calendar also featured a few noteworthy reports, but all thingsconsidered, the S&P 500 respected a fairly narrow range. The index surrendered 0.7%for the week while the Dow Jones Industrial Average added 0.1% and the tech-heavyNasdaq underperformed, falling 1.3%.
The underperformance in the Nasdaq was mostly due to relativeweakness in biotechnology. The iShares Nasdaq Biotechnology ETF lost 2.7% for the week with Amgen falling 9.6% on Friday despite beating quarterly expectations. TheFriday weakness in biotechnology was exacerbated by a poor quarterlyshowing from drug distributor McKesson (-22.4%). The company's report and guidance reminded that the pharmaceutical industry continues wrestling with pricing concerns that may become a regulatory issue once again, especially if Hillary Clinton wins thepresidency.
However, Mrs. Clinton's chances were called into question onFriday afternoon after Congressman Jason Chaffetz tweeted that the FBI is onceagain looking at the presidential candidate after new pertinent informationcame to the forefront. The news introduced uncertainty ahead of the upcomingelection, knocking the stock market from its high. Interestingly, biotech namesclimbed off their lows after the news began making the rounds.
Biotechnology's woes were in focus as the week drew to itsclose, but a couple other heavily-weighted Nasdaq components also contributedto the relative weakness in the composite. Specifically, Apple (AAPL) ended the week lower by 2.5% after releasing anunderwhelming quarterly report. Similarly, Amazon (AMZN) surrendered 5.3% for the week after missing expectations.
Rate hike expectations for December firmed upafter New Home Sales (593K; Briefing.com consensus 610K) and Pending Home Sales(+1.5%; Briefing.com consensus 0.6%) for September beat expectations.Third-quarter advance GDP also surprised to the upside (2.9%; Briefing.comconsensus 2.5%) while September Durable Orders (-0.1%; Briefing.com consensus0.0%) and October Consumer Confidence (98.6; Briefing.com consensus 100.8) fellshort of estimates. The implied probability of a December hike increased to 74.2%from last Friday's 69.9%, as indicated by the fed funds futures market.
3:15 pm Treasury Market Summary (BONDX) :
Yield Curve Steepens as Dollar Declines
The U.S. Treasury yield curve steepened today and yields edged lower as a slightly positive surprise from the first estimate of Q3 U.S. GDP growth was overshadowed by a report that the FBI will reopen an investigation into Hillary Clinton's e-mails. The 2-year/10-year yield spread is back to 100 basis points for the first time in months. While stocks have recovered from their session lows (S&P 500: -0.19% to 2,128.9), they remain close to key support levels and the technical situation is precarious. High yield debt also performed poorly today with JNK ETF falling 0.33% to 36.41 as credit spreads widened. Part of the driver there was a sharp drop in oil prices after Iraq and Iran were rumored to say that they will not participate in output reductions. The FOMC will release its rate decision next Wednesday and is widely expected to keep monetary policy on hold. The U.S. Dollar Index now trades down 0.53% to 98.37
Yield Check:
2-yr: -4 bps to 0.85%
5-yr: -2 bps to 1.33%
10-yr: -1 bp to 1.85%
30-yr:unch at 2.62%News:
The first official estimate of Q3 U.S. GDP growth came out at a 2.9% SAAR. The Briefing.com consensus was 2.5% and Q2's rate was a disappointing 1.4%. This was the first positive surprise for the first official estimate of GDP in two years
The chain deflator was 1.5% for Q3 versus the Briefing.com consensus of 1.4% and the Q2 reading of 2.3%
The Employment Cost Index grew by 0.6%, in line with the Briefing.com consensus and Q2's readingMichigan Sentiment for October was revised down to 87.2 in the final reading from the second estimate of 87.9. The Briefing.com consensus was 88.2Commodities:
WTI crude: -2.09% to $48.68/bbl.
Gold: +0.76% to $1,279.2/troy oz.
Copper: +1.53% to $2.1965/lb.Currencies:
EUR/USD: +0.78% to 1.0981
USD/JPY: -0.50% to 104.75Week Ahead:
Monday: September Personal Income, Spending, and Core PCE Prices (08:30 ET); October Chicago PMI (09:45 ET)
Tuesday: October ISM Index (10:00 ET); September Construction Spending (10:00 ET); October Auto and Truck Sales (14:00 ET)
Wednesday: MBA Mortgage Index for the week ending 10/29 (07:00 ET); October ADP Employment Change (08:15 ET); Crude Inventories for the week ending 10/29 (10:30 ET); November FOMC Rate Decision (14:00 ET)
Thursday: October Challenger Job Cuts (07:30 ET); Initial Jobless Claims for the week ending 10/29 and Continuing Jobless Claims for the week ending 10/22 (08:30 ET); Q3 Productivity -- Preliminary (08:30 ET); September Factory Orders (10:00 ET); October ISM Services (10:00 ET); Natural Gas Inventories for the week ending 10/29 (10:30 ET)
Friday: October Employment Situation Report (08:30 ET); September Trade Balance (08:30 ET); Fed Governor Brainard (FOMC voter) (09:00 ET); Atlanta Fed President Lockhart (will retire in early-2017) (09:40 ET); (Dallas Fed President Kaplan (will vote in 2017) (12:00 ET)Stocks closed out the Friday affair lower as afternoon gains quickly turned lower following headlines that the FBI would re-open its previously closed investigation related to Hillary Clinton's email scandal. Reportedly, 11 days ahead of the election the FBI has re-opened the Clinton email probe after new emails have surfaced and FBI Director James Comey issued a letter to Congress suggesting the FBI should take appropriate investigative steps to review the material. Limited information was out ahead of the close, yet markets reacted negatively to the news.
To that end, the broader market edged lower today, led to the downside by the Nasdaq Composite which shed 25.87 points (-0.50%) to 5190.10. The S&P 500 lost 6.63 points (-0.31%) to 2126.41, and the Dow Jones Industrial Average was lower by 8.49 points (-0.05%) to 18161.19. Nasdaq 100 components AMGN -9.6%, ESRX -6.0%, REGN -2.6%, GILD -2.6% and BIIB -2.5% all pressured the Healthcare sector following the Clinton news.
Market data today included the Real GDP reading which showed an increase at a seasonally adjusted annual rate of 2.9% in the third quarter, up from 1.4% in the second quarter and the highest rate since the third quarter of 2014. Also, on a seasonally adjusted basis, compensation costs for civilian workers increased 0.6% in the third quarter. Lastly, the final reading for the University of Michigan Consumer Sentiment Index for October dipped to 87.2 in October from the preliminary reading of 87.9.
At the end of the session, the Technology (XLK 47.44, -0.05 -0.11%) sector was lower today despite spending the majority of the session in positive territory. Components CA Tech (CA 30.74, -1.33 -4.15%) was the worst performer today on the back of its latest quarterly results. Other sectors as measured by the S&P closed out the day XLI +0.60%, XLP +0.57%, XLRE +0.36%, XLU +0.31%, XLB +0.26%, XLY -0.23%, XLE -0.27%, XLF -0.40%, XLFS -0.41%, XLV -2.17%.
In the S&P 500 Information Technology (800.66, -0.29 -0.04%) sector, trading ended lower again yet still managed to hold the $800-level. Component Electronic Arts (EA 79.45, -3.27 -3.95%) saw some negative trading action following a premarket downgrade at Cowen; the firm cut their sales expectations for EA's latest game, Titanfall 2. The firm further pointed the launch timing (shortly after Activision's (ATVI 43.32, -0.40 -0.91%) Call of Duty release and ahead of the upcoming Battlefield 1 release). Other components in the space which underperformed today included TDC -2.57%, QRVO -2.54%, SWKS -1.99%, MU -1.88%, AVGO -1.68%, GLW -1.05%, FSLR -1.00%, MSI -0.88%, EBAY -0.73%, AMAT -0.69%, AAPL -0.66%.
Other notable news items among sector components:
In addition to reporting quarterly results, Alphabet's (GOOG) Board authorized the company to repurchase up to $7,019,340,976.83 of its Class C capital stock.
G-Technology, a Western Digital (WDC 59.21, -0.37 -0.62%) brand, announced the expansion of its G-DRIVE portfolio, with its first solid state portable drive, the G-DRIVE slim SSD USB-C.
Qualcomm (QCOM 68.40, -1.69 -2.41%) and Lumen Australia announced they have entered into a Wireless Electric Vehicle Charging (WEVC) license agreement. Lumen will include Qualcomm Halo WEVC technology in its product portfolio and will commercialize WEVC systems for Plug in Hybrid (PHEV) and Electric Vehicles (EV) manufacturers, as well as wireless charging infrastructure companies.
NetSuite (N 95.02, +0.65 +0.69%) disclosed in regulatory filing that T Rowe Price had indicated it was willing to support a transaction in which Oracle (ORCL 38.17, -0.05 -0.13%) offers $133 per share. ORCL affirmed $109 is best and final offer.
Respawn Entertainment and Electronic Arts (EA) announced that Titanfall 2 is now available in stores worldwide on Xbox One, the all-in-one games and entertainment system from Microsoft, Origin for PC, and for the first time in the franchise, the PlayStation 4 computer entertainment system.
Elsewhere in the tech space:
Aspen Tech (AZPN 49.25, +2.46 +5.26%) acquired Mtelligence Corporation for $37 million.
Last night, Violin Memory (VMEM 0.25, -0.12 -32.43%) announced the common stock will be delisted by the NYSE.
PFSWeb (PFSW 7.22, -0.26 -3.48%) lowered its Q3 total revenue guidance to a range of $222-228 million from $220-230 million. Expects Q3 EPS between ($-0.05)-($0.07).
In addition to reporting quarterly results, Gigamon (GIMO 55.01, +7.63 +16.10%) announced that Rex Jackson is joining the company as CFO effective today.
Infoblox (BLOX 26.45, +0.05 +0.19%) and Vista Equity Partners announced that Vista's affiliates, Delta Holdco, LLC and India Merger Sub, Inc., have waived the "Financing Proceeds Condition" and the condition to the Offer relating to the marketing period for the Debt Financing, as described in the Offer to Purchase in connection with Vista's previously-announced tender offer to acquire all of the outstanding shares of common stock of Infoblox at a price of $26.50 per share in cash.
In addition to reporting quarterly results, Elli Mae (ELLI 107.15, +9.56 +9.80%) announced a CFO succession plan by which Ed Luce has announced his intention to retire. As such, current SVP of Finance, Matt LaVay, will become CFO effective April 1, 2017.
Following his arrest, Booz Allen Hamilton (BAH 30.50, +0.07 +0.23%) has decided to conduct an external review related to Harold Martin's dealings at the company.
In addition to reporting quarterly results, LogMeIn (LOGM 94.59, +7.41 +8.50%) has announced a special cash dividend in the amount of $0.50 per share which will be paid on November 22, 2016 to shareholders of record on November 7, 2016.
According to a statement from Tachyon, Samsung (SSNLF 1250.00, flat) has acquired the company. Financial terms of the deal were not disclosed.
In reaction to quarterly results:
Amazon (AMZN) reported worse than expected Q3 EPS of $0.52 on revenues which rose 29.0% compared to last year to $32.71 billion. Also, management guided Q4 revenues in-line at $42.0-45.5 billion.
Alphabet (GOOG) reported better than expected Q3 EPS and revenues of $9.06 and $22.45 billion, respectively.
MasterCard (MA 106.90, +3.30 +3.19%) reported better than expected Q3 EPS and revenues of $1.08 and $2.9 billion, respectively.
Baidu.com (BIDU 179.59, +4.49 +2.56%) reported better than expected Q3 EPS of $1.49 on in-line revenues of $2.74 billion. BIDU also guided Q4 revenues worse than expectations at $2.675-2.756 billion.
LinkedIn (LNKD 189.50, +0.87 +0.46%) reported better than expected Q3 EPS of $1.18 on in-line revenues of $960 million.
CA Tech (CA) reported better than expected Q2 EPS and revenues of $0.67 and $1.02 billion, respectively. For FY17, the company reaffirmed EPS and revenue guidance of $2.49-2.54 and $4.03-4.07 billion.
Xerox (XRX 9.84, +0.27 +2.82%) reported in-line Q3 EPS on worse than expected revenues of $4.21 billion. For Q4, the company sees in-line EPS of $0.32-0.35.
Synaptics (SYNA 52.57, -15.13 -22.35%) reported better than expected Q1 EPS and revenues of $1.03 and $386.2 million. For Q2, the company sees revenues ahead of expectations at $430-470 million.
Elli Mae (ELLI) reported better than expected Q3 EPS and revenues of $0.72 and $100.38 million, respectively. For Q4, EPS and revenues are expected to come in ahead of expectations at $0.48-0.49 and $87-89 million. For FY16, the company sees EPS and revenues ahead of expectations at $2.17-2.18, from $2.00-2.06 and $351-353 million, from $338-341 million, respectively.
LogMeIn (LOGM) reported better than expected Q3 EPS of $0.56 on revenues which rose 22.3% compared to a year ago to $85.1 million. For Q4, LOGM sees better than expected EPS of $0.58-0.59 on in-line revenues of $87.0-87.5 million.
Gigamon (GIMO) reported better than expected Q3 EPS and revenues of $0.36 and $83.5 million, respectively.
Companies scheduled to report Monday morning: BSFT, CHKP, DSPG
Analyst actions:
TWTR was upgraded to Perform from Underperform at Oppenheimer,
QCOM was upgraded to Market Perform from Underperform at BMO Capital,
FISV was upgraded to Outperform from Neutral at Robert W. Baird,
LVLT was upgraded to Outperform from Perform at Oppenheimer,
AMX was upgraded to Neutral from Sell at Citigroup;
NXPI was downgraded at Robert W. Baird, Morgan Stanley, SunTrust, CLSA and Oppenheimer,
QSII was downgraded to Underweight from Neutral at JP Morgan,
ATEN was downgrade to Perform from Outperform at Oppenheimer,
BIDU was downgraded to Neutral from Outperform at Credit Suisse,
SYNA was downgraded to Hold from Buy at Craig Hallum and to Hold from Buy at Needham,
EA was downgraded to Market Perform from Outperform at Cowen,
CTL was downgraded to Mkt Perform from Outperform at Raymond James,
NOK was downgraded to Neutral from Outperform at Exane BNP Paribas,
AUO was downgraded to Neutral from Buy at Nomura,
FLEX was downgraded to Hold from Buy at Craig Hallum,
N was downgraded to Underperform from Neutral at DA Davidson;
ASUR was initiated with a Buy at Wunderlich,
TWLO was initiated with a Neutral at Mitsubishi UFJ
