From Briefing.com: Weekly Recap - Week ending 03-Feb-17
After enjoying a solid 1.0% gain two weeks ago, the stock market returned to its range-bound ways. The S&P 500 spent the week inside a 31-point range, ending the week higher by 0.1%.
The past week was rife with earnings, economic data, and commentary from two major central banks, but the market shrugged off the busy event calendar, remaining near record levels.
Most notably, the Federal Open Market Committee concluded its latest two-day meeting on Wednesday. The central bank maintained its policy stance and gave little indication that a rate hike could be announced at the next policy meeting in May.
Wednesday's FOMC announcement followed the release of a stronger than expected ADP Employment Report for January (246,000; Briefing.com consensus 165,000). Friday's release of the Employment Situation report also showed above-consensus headline growth (227,000; Briefing.com consensus 170,000), but average hourly earnings increased just 0.1% (Briefing.com consensus 0.3%) and last month's growth was revised down to 0.2% from 0.4%. As a result, the year-over-year average hourly earnings growth rate slowed to 2.5% from 2.8% in December.
The combination of solid job growth and lackluster wage growth was welcomed by the stock market, considering it did not foreshadow an inflationary spike that would prompt a hawkish response from the Fed.
Rate hike expectations saw a moderate downtick. On Friday afternoon, the fed funds futures market pointed to a 63.5% implied likelihood of a June hike, down from last week's 69.2%.
On the earnings front, investors received a set of results from heavyweights like Amazon (AMZN), Apple (AAPL), Facebook (FB), Visa (V), UPS (UPS), and others. Amazon and UPS missed estimates while Apple, Facebook, and Visa surpassed expectations. However, it is worth noting that while Apple reported above-consensus results, the company faced reduced competition during the quarter after the recall of Samsung's Note 7 in early October.
Index Started Week Ended Week Change % Change YTD %
DJIA 20093.78 20071.46 -22.32 -0.1 1.6
Nasdaq 5660.78 5666.77 5.99 0.1 5.3
S&P 500 2294.69 2297.42 2.73 0.1 2.6
Russell 2000 1370.15 1377.83 7.68 0.6 1.5
4:28 pm Closing Market Summary: Stock Market Finishes the Week Strong (:WRAPX) :
Friday's economic data gave investors the confidence to finally break the week's sideways trend and push the stock market higher. The major averages hit their session highs within an hour of the opening bell and maintained said levels into the close. The S&P 500 finished with a gain of 0.7%, while the Dow (+0.9%) did modestly better and the Nasdaq (+0.5%) did slightly worse.
The Employment Situation Report for January came in just right; strong enough to keep participants thinking good things about the economy, but not strong enough to convince the market that the Fed is now going to be in a hurry to raise the fed funds rate. The above-consensus 227,000 nonfarm payroll additions (Briefing.com consensus 170,000) and the lower than expected 0.1% increase in average hourly earnings (Briefing.com consensus +0.3%) were the two main metrics driving the optimistic sentiment.
U.S. Treasuries ticked up following the report's release, but squandered all of those gains in the afternoon following comments from the Federal Reserve Bank of San Francisco President John Williams. Mr. Williams reiterated the Fed's expectation of three rate hikes in 2017, but more notably, he expressed his belief that a rate hike in March is on the table. His comments were consistent with remarks made by Chicago Fed President Charles Evans, who said he would be comfortable with three hikes in 2017. Mr. Evans is a voting FOMC member this year while Mr. Williams is an alternate FOMC member.
Treasuries fell back to their flat lines in the wake of the comments from the two policymakers. The 2-yr yield, which is most susceptible to FOMC rate decisions, closed the day one basis point lower at 1.20% after posting a session low at 1.17%. The benchmark 10-yr yield ended flat at 2.48%.
Financials (+2.0%) provided strong sector leadership, leading Friday's session from the open to the close. The sector's tenacity took root before the market even opened after The Wall Street Journal reported that President Trump would reduce regulatory burdens on the financial sector through an executive order aimed at scaling back the Dodd-Frank Act and reversing the Fiduciary Rule. Mr. Trump did just that following a White House meeting with business executives led by Blackstone's (BX 30.74, -0.05) Steve Schwarzman.
At the opposite end of the day's leaderboard, consumer discretionary (-0.1%) was the only sector to finish the day lower. The space took several shots from the likes of Chipotle (CMG 404.08, -19.22), Hanesbrands (HBI 18.98, -3.73), and AutoNation (AN 49.77, -2.00) after investors reacted negatively to the latest earnings reports from the three companies.
The discretionary sector could not climb out of the red as top component Amazon (AMZN 810.20, -29.75) weighed. The internet retail giant retreated 3.5% after reporting worse than expected revenues, coupled with disappointing guidance on Thursday evening.
Technology (+0.7%) finished the day in line with the benchmark index. Visa (V 86.08, +3.78) was the sector's top performer thanks to better than expected earnings and revenue. However, lackluster performances from large-cap components like Apple (AAPL 129.08, +0.55), Facebook (FB 130.98, +0.14), and Alphabet (GOOGL 820.13, +1.87) held the sector's gains in check.
On the countercyclical side, the health care, consumer staples, telecom services, and real estate sectors gained between 0.4% and 0.6%, while utilities (+0.1%) closed just a step behind.
Defensive spaces dominated the week with four of the five logging weekly gains. Comparatively, the financial (+0.2%) and technology (unch) sectors were the only cyclical groups to close the week higher.
Today's economic data included January Employment Situation Report, January ISM Services, and December Factory Orders:
January Employment Situation Report
January nonfarm payrolls came in at 227,000 while the Briefing.com consensus expected a reading of 170,000. The prior month's reading was revised to 157,000 from 156,000. Nonfarm private payrolls added 237,000 while the Briefing.com consensus expected an increase of 175,000. The unemployment rate increased to 4.8% (Briefing.com consensus 4.7%).
Average hourly earnings increased 0.1% (Briefing.com consensus +0.3%), while the previous month's reading was revised to 0.2% (from 0.4%). The average workweek was reported at 34.4 while the Briefing.com consensus expected a reading of 34.3. The previous month's reading was revised to 34.4 (from 34.3).
The key takeaway is that this is one of those so-called "Goldilocks" reports since it is strong enough to keep participants thinking good things about the economy, but not strong enough to convince the market to think it means the Fed is now going to be in a hurry to raise the fed funds rate. The tempered growth in average hourly earnings, which dialed back year-over-year growth to 2.5% from 2.8% in December, is the focal point as it relates to the market's perspective on the Fed.
The ISM Services Index for January decreased to 56.5 while the Briefing.com consensus expected a downtick to 57.0. The prior month's reading was revised down to 56.6 from 57.2.
The key takeaway from the report is that growth in the services sector, which accounts for a much bigger slice of economic activity than the manufacturing sector does, persisted for the 85th straight month.
The Factory Orders Report for December showed an increase of 1.3% while the Briefing.com consensus expected a increase of 1.4%. The November reading was revised up to -2.3% from -2.4%.
The key takeaway from the report is that the December increase was led entirely by orders for nondurable goods (+3.1%). Paced by a 2.5% decline in transportation equipment orders, durable goods orders fell 0.5% in December.
Investors will not receive any economic data on Monday.
Nasdaq Composite +5.3% YTD
S&P 500 +2.6% YTD
Dow Jones Industrial Average +1.6% YTD
Russell 2000 +1.5% YTD
Week in Review: Holding Steady
After enjoying a solid 1.0% gain two weeks ago, the stockmarket returned to its range-bound ways. The S&P 500 spent the week insidea 31-point range, ending the week higher by 0.1%.
The past week was rife with earnings, economic data, andcommentary from two major central banks, but the market shrugged off the busyevent calendar, remaining near record levels.
Most notably, the Federal Open Market Committee concludedits latest two-day meeting on Wednesday. The central bank maintained its policystance and gave little indication that a rate hike could be announced at the nextpolicy meeting in May.
Wednesday's FOMC announcement followed the release of astronger than expected ADP Employment Report for January (246,000; Briefing.comconsensus 165,000). Friday's release of the Employment Situation report alsoshowed above-consensus headline growth (227,000; Briefing.com consensus170,000), but average hourly earnings increased just 0.1% (Briefing.comconsensus 0.3%) and last month's growth was revised down to 0.2% from 0.4%. Asa result, the year-over-year average hourly earnings growth rate slowed to 2.5%from 2.8% in December.
The combination of solid job growth and lackluster wagegrowth was welcomed by the stock market, considering it did not foreshadow aninflationary spike that would prompt a hawkish response from the Fed.
Rate hike expectations saw a moderate downtick. On Friday afternoon, thefed funds futures market pointed to a 63.5% implied likelihood of a June hike,down from last week's 69.2%.
On the earnings front, investors received a set of resultsfrom heavyweights like Amazon (AMZN), Apple (AAPL), Facebook (FB), Visa (V),UPS (UPS), and others. Amazon and UPS missed estimates while Apple, Facebook,and Visa surpassed expectations. However, it is worth noting that while Applereported above-consensus results, the company faced reduced competition duringthe quarter after the recall of Samsung's Note 7 in early October.
Ending the week on a higher note, the broader market finished barely off highs. Action in the Dow Jones Industrial Average led all, up 186.55 points (+0.94%) to 20071.46. The S&P 500 added 16.57 points (+0.73%) to 2297.42, and the Nasdaq Composite gained 30.57 points (+0.54%) to 5666.77. This week's moves take the three major US indices +1.5%, +2.6% and +5.3% YTD, respectively.
Today's data included the January Employment Situation Report: January nonfarm payrolls came in at 227,000 compared to the prior month's reading which was revised to 157,000 from 156,000. Nonfarm private payrolls added 237,000 and the unemployment rate increased to 4.8%. Also, average hourly earnings increased 0.1%, while the previous month's reading was revised to 0.2% (from 0.4%). The average workweek was reported at 34.4 compared to the previous month's reading was revised to 34.4 (from 34.3). Further, the ISM Services Index for January decreased to 56.5 and the prior month's reading was revised down to 56.6 from 57.2. Lastly, the Factory Orders Report for December showed an increase of 1.3% and the November reading was revised up to -2.3% from -2.4%.
Also ending higher today, the Technology (XLK 50.69, +0.33 +0.66%) space closed near highs. Component Visa (V 86.08, +3.78 +4.59%) was the best performing name today after a better than expected Q1 report. Other sectors as measured by the S&P closed XLF +2.02%, IYZ +0.91%, XLE +0.88%, XLI +0.74%, XLRE +0.65%, XLP +0.59%, XLV +0.46%, XLB +0.15%, XLU +0.12%, XLY -0.13% as only Consumer Discretionary finished in the red.
In the S&P 500 Information Technology (855.35, +5.79 +0.68%) space, trading sped higher at the open and never looked back. Component Motorola Solutions (MSI 81.58, +0.58 +0.72%) was another stock which outperformed after its quarterly report. Other names in the space which ended Friday higher included TSS +3.67%, HPE +3.57%, GPN +2.45%, SYMC +2.34%, CTXS +2.33%, STX +2.25%, ADSK +1.99%, ADBE +1.78%, FSLR +1.77%, CSRA +1.73%, FLIR +1.62%, CTSH +1.59%, TDC +1.44%.
Other notable news items among sector components:
Snap Inc., owner of the Snapchat messaging service, filed its Form S-1 prospectus to trade on the NYSE under the symbol 'SNAP.'
Imation's (IMN 0.81, +0.00 +0.01%) interim CEO Robert Fernander resigned.
Support.com's (SPRT 2.28, -0.04 -1.72%) CFO Roop Lakkaraju announced his resignation from the company to pursue another opportunity.
Wells Fargo (WFC 57.26, +1.51 +2.71%) has entered into an agreement with Intuit (INTU 118.37, +0.54 +0.46%), which allows Wells Fargo customers who use financial management tools such as QuickBooks Online, Mint, and TurboTax Online to use an innovative application-programming interface when importing their bank account information.
Qualcomm (QCOM 52.98, +0.32 +0.61%) and TDK Corporation (TTDKF) announced the completion of the previously announced joint venture under the name RF360 Holdings Singapore PTE. Ltd.
magicJack VocalTec (CALL 7.65, +0.35 +4.79%) reached an agreement with David Kanen and Kanen Wealth Management LLC in connection with the company's 2016 Annual Meeting of Shareholders. Pursuant to the agreement, Kanen has withdrawn its proposed slate of director nominees for election.
Viavi (VIAV 9.23, -0.05 -0.54%) was awarded about $26.4 million Defense Logistics Agency contracts.
In reaction to quarterly results:
Amazon (AMZN 810.20, -29.75 -3.54%) reported better than expected Q4 EPS and worse than expected revenues of $1.54 and $43.74 billion, respectively. For Q1, the company sees worse than expected revenues of $33.25-35.75 billion.
Visa (V) reported better than expected Q1 EPS and revenues of $0.86 and $4.46 billion, respectively.
Motorola Solutions (MSI) reported better than expected Q4 EPS and revenues of $2.03 and $1.88 billion, respectively. For Q1, the company sees EPS and revenues below market expectations at $0.52-0.57 and growth of 3-5% year-over-year to about $1.23-1.25 billion, respectively.
Mettler-Toledo (MTD 462.67, +29.03 +6.69%) reported better than expected Q4 EPS of $5.28 on in-line revenues of $709.7 million. For Q1, the company sees better than expected EPS of $3.05-3.10. For FY17, MTD also sees better than expected EPS of $16.55-16.75.
Computer Sciences (CSC 69.95, +7.00 +11.12%) reported better than expected Q3 EPS and revenues of $0.81 and $1.92 billion, respectively. For FY17, the company reaffirmed its prior outlook for EPS from continuing operations of $2.75-3.00 billion.
FireEye (FEYE 10.93, -2.04 -15.73%) reported a better than expected Q4 loss per share of $0.03 on revenues which came in below market expectations at $184.7 million. FEYE also guided Q1 EPS and revenues below market expectations at ($0.28)-($-0.26) and $160-166 million, respectively.
GoPro (GPRO 9.58, -1.39 -12.67%) reported better than expected Q4 EPS of $0.29 on revenues which missed expectations at $540.62 million. Also, GPRO guided Q1 revenues below expectations at $190-210 million.
Analyst actions:
FEYE was upgraded to Equal Weight from Underweight at First Analysis Sec,
AMTD was upgraded to Outperform from Neutral at Credit Suisse,
CDK was upgraded to Equal Weight from Underweight at Morgan Stanley,
FTNT was upgraded to Overweight from Neutral at Piper Jaffray,
PCTY was upgraded to Buy from Underperform at BofA/Merrill,
VECO was upgraded to Buy from Hold at Needham,
PXLW was upgraded to Buy from Hold at Lake Street;
GPRO was downgraded to Underperform from Neutral at Robert W. Baird and to Underperform from Mkt Perform at Raymond James,
FEYE was downgraded to Neutral from Overweight at Piper Jaffray,
TERP was downgraded to Neutral from Outperform at Macquarie,
UTEK was downgraded to Hold from Buy at The Benchmark Company,
BCE was downgraded to Hold from Buy at Canaccord Genuity;
NVDA was initiated with an Underperform at CLSA
