From Briefing.com: 4:26 pm Closing Market Summary: Major Averages Close the Week Mixed (:WRAPX) :
The Nasdaq (+0.1%) escaped Friday's session with a win as Apple (AAPL 156.10, +2.15) and Amazon.com (AMZN 961.35, +13.73) climbed to fresh record highs. Meanwhile, the Dow (-0.1%) and the S&P 500 (-0.2%) settled with modest losses. For the week, the S&P 500 declined 0.4%.
U.S. Treasuries finished solidly higher across the board on Friday following the release of the Retail Sales and CPI reports for April, which tempered concerns about the Fed potentially needing to walk an aggressive rate-hike path.
Dovish comments from Chicago Fed President Charles Evans (FOMC voter) also helped Treasuries. Mr. Evans said two more rate hikes this year may not be necessary if there is rising uncertainty about the inflation outlook. However, it's worth noting that Philadelphia Fed President Patrick Harker (FOMC voter) expressed his view that two additional rate hikes this year are appropriate.
The CPI report came in roughly as expected with total CPI rising 0.2% (Briefing.com consensus 0.2%) and core CPI, which excludes food and energy, increasing 0.1% (Briefing.com consensus 0.2%). Meanwhile, April retail sales missed expectations (0.4% actual vs. 0.6% Briefing.com consensus), yet that miss was mitigated somewhat by an upward revision for March (to 0.1% from -0.3%).
The 2yr-10yr spread narrowed as the back end of the curve received more buying interest than the front end. The 10-yr yield (2.33%) settled six basis points lower while the 2-yr yield (1.29%) declined by four basis points. This didn't help the financial sector (-0.5%), which settled with the industrial sector (-0.7%) at the bottom of the sector standings. General Electric (GE 28.27, -0.60) weighed on the industrial sector throughout Friday's session, losing 2.1%, after the company's shares were downgraded to 'Sell' from 'Hold' at Deutsche Bank. The loss left GE at a fresh 15-month low.
Conversely, Apple jumped 1.4% after analysts at Goldman Sachs and Bank of America/Merrill Lynch raised their target prices for the stock on Friday morning. The company's positive performance underpinned the top-weighted technology sector (+0.3%), which was one of only two sectors to close the day in positive territory. The lightly-weighted utilities group (+0.5%) was the other winner. For the week, the technology sector added 1.1%, extending its year-to-date gain to 17.8%.
The energy sector (-0.3%) was the only other group to end the week higher (+0.4%). However, the sector struggled on Friday as crude oil spent most of the day under water following a rally over the prior two sessions that was good for a 4.3% gain. WTI crude bounced back a bit in the afternoon session, settling 0.1% higher at $47.84/bbl.
After taking it to the chin on Thursday, retailers got hit again on Friday following the latest batch of earnings reports.
Nordstrom (JWN 41.20, -5.01) lost 10.8% after a 0.8% decline in same-store sales overshadowed better than expected earnings. Meanwhile, J.C. Penney (JCP 4.55, -0.74) tumbled 14.0% after missing top-line estimates and reporting a 3.5% decline in same-store sales. The SPDR S&P Retail ETF (XRT 42.13, -0.78) settled lower by 1.8%. However, Amazon's strength provided some offsetting support for the consumer discretionary sector (-0.2%), which traded in-line with the broader market.
On the data front, investors received March Business Inventories and the preliminary reading of the University of Michigan Consumer Sentiment Survey for May in addition to the April CPI and Retail Sales reports:
Total CPI rose 0.2% (Briefing.com consensus 0.2%) in April while core CPI, which excludes food and energy, increased 0.1% (Briefing.com consensus +0.2%). On a year-over-year basis, total CPI is up 2.2% and core CPI has increased 1.9%.
The key takeaway from the CPI report is that consumer inflation pressures moderated a bit in April. That won't change the thinking that the Fed will raise rates at its June meeting, yet it will temper concerns about the Fed possibly needing to be more aggressive with its rate hikes.
April retail sales increased 0.4%, which is below the Briefing.com consensus of 0.6%. The prior month's reading was revised higher to 0.1% from -0.3%. Excluding autos, retail sales rose 0.3% while the Briefing.com consensus expected an increase of 0.5%. The prior month's reading was revised higher to 0.3% from 0.2%.
The key takeaway from this report is that it puts consumer spending on a path toward being a much better contributor to second quarter real GDP growth than it was in the first quarter.
Business Inventories rose 0.2% in March while the Briefing.com consensus expected an uptick of 0.1%. The prior month's reading was revised to 0.2% from 0.3%.
The key takeaway from the report is that business inventories remain elevated relative to sales, which is standing in the way of restoring pricing power.
The preliminary reading of the University of Michigan Consumer Sentiment Index for May rose to 97.7 (Briefing.com consensus 96.5) from 97.0 in April.
The key takeaway from the report is that consumers had some of the most favorable real income expectations in a dozen years, yet their buying plans were reportedly mixed. That disconnect seems to fit with the divide that has been seen between "soft" data, like this survey, and "hard" data like the personal spending report.
On Monday, investors will receive two economic reports--May Empire Manufacturing (Briefing.com consensus 7.5) and May Net Long-Term TIC Flows. The reports will be released at 8:30 ET and 16:00 ET, respectively.
Nasdaq Composite +13.7% YTD
S&P 500 +6.8% YTD
Dow Jones Industrial Average +5.7% YTD
Russell 2000 +1.9% YTD
Week In Review: Risk On, Risk Off
After posting gains for four weeks in a row, the S&P 500 suffered a slight setback this week, ticking lower by 0.4%. However, the Nasdaq enjoyed a small victory, adding 0.3%, as it continued to ride the relative strength of Apple (AAPL), Amazon.com (AMZN), and a gaggle of semiconductor issues led by NVIDIA (NVDA).
The S&P 500 was flat through the first three sessions of the week with a slim loss on Tuesday wiping out small victories on Monday and Wednesday. The range-bound performances followed Sunday's French presidential election in which centrist candidate Emmanuel Macron handily defeated far-right candidate Marine Le Pen, as expected. Mr. Macron's victory was seen as a positive for global equity markets as it takes the possibility of France leaving the European Union off the table for the foreseeable future.
With a key risk event averted, the CBOE Volatility Index (:VIX) retreated to a historically-low level. The VIX, also known as the "investor fear gauge", settled Monday at its lowest mark since December 1993 and finished Tuesday and Wednesday below 10.00. Prior to this week, the VIX had only settled below the 10.00 mark nine times.
Crude oil became a focal point on Wednesday after the Energy Information Administration reported the largest weekly decline in U.S. crude stocks so far this year. The bullish reading prompted a two-day rally for the commodity, and the energy sector, which ultimately left WTI crude with a weekly gain of 3.5%.
Also of note, President Trump unexpectedly fired FBI Director James Comey on Wednesday. That move triggered a tidal wave of political opinions and raised some concerns about the path of progress for the Trump Administration's pro-growth plans that stymied the stock market. Overall, though, it did not cause any major selling in the stock market.
Retailers captured investors' attention on Thursday when Macy's (M) plunged 17.0% in reaction to its disappointing earnings report. Kohl's (KSS), Nordstrom (JWN), and J.C. Penney (JCP) also slipped after delivering their quarterly results, leaving the SPDR S&P Retail ETF (XRT) lower by 2.9% for the week. Disappointing Retail Sales for April (+0.4% actual vs +0.6% Briefing.com consensus) didn't help matters, but some of the sting of that headline was taken out by an upward revision for March to 0.1% from -0.3%.
April CPI came in roughly as expected on Friday with total CPI rising 0.2% (Briefing.com consensus 0.2%) and core CPI, which excludes food and energy, adding 0.1% (Briefing.com consensus 0.2%). On a year-over-year basis, total CPI is up 2.2% and core CPI has increased 1.9%. Following the data, Chicago Fed President Evans said that he expects one or two additional rate hikes this year with the actual number depending on the level of inflation.
The fed funds futures market still points to the June FOMC meeting as the most likely time for the next rate-hike announcement with an implied probability of 78.5%, down from last week's 83.1%. In the Treasury market, increased buying interest in the second half of the of week left the benchmark 10-yr yield at 2.33%, which is two basis points below last Friday's closing level.
The S&P 500 posted modest losses on Thursday and Friday, which is what ultimately tipped the week in the bears' favor.
Tech Stocks from Briefing.com
This week's action wound to a close on a split affair on Friday. By all accounts, the tech-heavy Nasdaq Composite was the best performer today, adding 5.27 points (+0.09%) at the close to 6121.23. The S&P 500, by contrast, was the worst performing major index, declining about 3.54 points (-0.15%) to 2390.90, while the Dow Jones Industrial Average shed about 22.81 points (-0.11%) to 20896.61. In all, this week's moves take the three major US indices to +13.7%, +6.8% and +5.7% YTD, respectively.
Among economic data today, the total CPI reading rose 0.2% in April while core CPI, which excludes food and energy, increased 0.1%. On a year-over-year basis, total CPI is up 2.2% and core CPI has increased 1.9%. April retail sales increased 0.4%, while the prior month's reading was revised higher to 0.1% from -0.3%. Excluding autos, retail sales rose 0.3%. The prior month's reading was revised higher to 0.3% from 0.2%. Business Inventories rose 0.2% in March while the prior month's reading was revised to 0.2% from 0.3%. Lastly, the preliminary reading of the University of Michigan Consumer Sentiment Index for May rose to 97.7 from 97.0 in April.
The Technology (XLK 55.56, +0.14 +0.25%) space was among the select few S&P sectors which managed to escape Friday with gains. Component Broadcom (AVGO 235.90, +4.81 +2.08%) was the best performer in the space today after an announcement that Brocade's (BRCD 12.66, +0.03 +0.24%) acquisition by AVGO was cleared by the EU, subject to conditions. Then, rebounding off yesterday's weak session, the US Telecom space led all other S&P sectors higher today IYZ +1.63% followed by XLU +0.49%, XLY -0.14%, XLV -0.17%, XLB -0.25%, XLP -0.29%, XLE -0.34%, XLRE -0.38%, XLF -0.42%, XLI -0.55%.
In the S&P 500 Information Technology (951.57, +3.01 +0.32%) space, trading ended the week on a high note. Component Apple (AAPL 156.10, +2.15 +1.40%) again closed at all-time highs, edging above the $155 level for the first time ever. Other names in the space which outperformed today included CRM +1.52%, STX +1.32%, QCOM +1.17%, QRVO +1.16%, NVDA +1.10%, TDC +1.05%, GLW +0.90%, ADP +0.74%, V +0.68%.
Other notable news items among sector components:
Mitel Networks (MITL 6.53, +0.16 +2.51%) signed a memorandum of understanding to transfer certain assets and support obligations, including existing inventory, from Toshiba (TOSBF 2.21, -0.02 -0.90%) to Mitel. The deal is expected to be immediately accretive.
Expedia (EXPE 139.81, -0.05 -0.04%) will acquire a majority stake in rail technology company SilverRail.
In addition to reporting quarterly results, CyberArk (CYBR 48.29, -6.86 -12.44%) acquired privately-held Conjur, Inc., a Newton, Mass.-based provider of DevOps security software for $42 million in cash.
Apple (AAPL 156.10, +2.15 +1.40%) announced Corning (GLW 29.06, +0.26 +0.90%) will receive $200 million from Apple's new Advanced Manufacturing Fund.
Gannett (GCI 7.79, -0.23 -2.87%) announced a partnership with Snapchat (SNAP 19.14, +1.09 +6.04%).
Netflix (NFLX 160.81, +2.27 +1.43%) announced 400 new jobs in Europe and two new European original series.
Universal Display's (OLED 114.20, +0.60 +0.53%) Adesis Inc., purchased its New Castle, Delaware building.
Frontier Communications (FTR 1.21, +0.01 +0.83%) announced that Chris Levendos, former head of the Network Deployment and Operations organization at Google (GOOGL 955.14, -0.75 -0.08%) Fiber, will join the company as Executive Vice President, Field Operations. FTR also announced a 1:15 reverse split; shares to begin trading ex-split on July 10, 2017.
According to Bloomberg, GlobalStar (GSAT 2.29, +0.38 +19.90%) may be exploring a sale.
Brocade (BRCD 12.66, +0.03 +0.24%) acquisition by Broadcom (AVGO 235.90, +4.81 +2.08%) was cleared by the EU, subject to conditions.
Spotify is planning a direct listing on the NYSE for either late 2017 or early 2018, according to CNBC.
In reaction to quarterly results:
CA Tech (CA 31.60, -0.43 -1.36%) reported better than expected Q4 EPS and revenues of $0.54 and $1.01 billion, respectively. For FY18, the company sees EPS between $2.35-2.40 and revenues in the range of $4.12-4.17 billion, both below market expectations.
CyberArk (CYBR) reported better than expected Q1 EPS and revenues of $0.28 and $59.04 million, respectively. For Q2, the company sees EPS and revenues below market expectations at $0.23-0.25 and $61-62 million, respectively. For FY17, the company sees EPS of $1.18-1.22 and revenues between $268.5-271.5 million.
The Trade Desk (TTD 51.90, +12.01 +30.11%) reported better than expected Q1 EPS and revenues of $0.18 and $53.4 million, respectively. For Q2, the company sees revenues ahead of market expectations at $67 million. Additionally, for FY17, TTD raised revenue guidance to at least $291 million from $270 million.
Upland Software (UPLD 21.26, +0.02 +0.09%) reported Q1 adjusted earnings of $0.16 and revenues of $20.75 million.
Uni-Pixel (UNXL 0.44, -0.09 -17.74%) reported a worse than expected Q1 loss of $0.15 per share on worse than expected revenues of $1.3 million.
Companies scheduled to report quarterly results Monday morning: DGLY, FENG, SPNS, TRVG
Analyst actions:
TTD was upgraded to Overweight from Neutral at Cantor Fitzgerald,
FLEX was upgraded to Buy from Hold at Craig Hallum,
TRIP was upgraded to Long-term Buy from Neutral at Hilliard Lyons;
CYBR was downgraded to Underperform from Buy at BofA/Merrill, to In-Line from Outperform at Imperial Capital and to Hold from Buy at Summit Redstone,
CSLT was downgraded to Underweight from Equal Weight at Morgan Stanley,
EA was downgraded to Neutral from Long-term Buy at Hilliard Lyons,
CHT was downgraded to Sell from Buy at UBS,
HIMX was downgraded to Hold from Buy at Lake Street,
INPX was downgraded to Neutral from Buy at B. Riley & Co.,
TEF was downgraded to Underweight from Equal Weight at Barclays,
UNXL was downgraded to Neutral from Buy at Roth Capital;
PAYC and ULTI were initiated with Outperform ratings at Wells Fargo,
CSOD and PCTY were initiated with Market Perform ratings at Wells Fargo
