From Briefing.com: 4:29 pm Closing Market Summary: Stocks Sell Off Following NY Times Article (:WRAPX) :
Equities sold off on Wednesday following a New York Times article that claims President Trump asked former FBI Director James Comey in February to shut down the bureau's investigation of former National Security Advisor Michael Flynn. The S&P 500 posted its worst one-day performance in nearly a year, losing 1.8%. The Dow (-1.8%) finished in line with the benchmark index while the Nasdaq and the Russell 2000 took the biggest hits, losing 2.6% and 2.8%, respectively. The major indices all closed at their session lows.
The NY Times cited a memo that James Comey wrote following a February 14 meeting with President Trump in the Oval Office. The White House has denied that Mr. Trump asked Mr. Comey to end the investigation with White House Press Secretary Sean Spicer saying the account relayed in the NY Times is "not accurate." Nonetheless, some lawmakers and legal experts believe this alleged incident may qualify as an obstruction of justice, which is considered an impeachable offense.
For investors, the concern at hand is that an investigation into the matter could derail tax reform efforts, which have already been slow to get on track. The stock market has risen sharply since the election, bolstered to a large degree by the belief that tax reform, deregulation, and infrastructure spending will fuel stronger economic and earnings growth.
That view has manifested itself in stretched equity valuations; therefore, the assumption today that the Trump Administration's pro-growth policy agenda could be at risk of not coming to fruition drove a broad-based selling effort as valuations got called into question.
The financial sector (-3.0%), which led the stock market's post-election rally, suffered the biggest loss today among the economic sectors. A flattening of the yield curve didn't help matters for the financial sector as it triggered worries about a compression of net interest margins and banks' earnings prospects.
U.S. Treasuries finished solidly higher across the board with the back end of the yield curve leading the way. The 10-yr yield dropped eleven basis points to 2.22% while the 2-yr yield fell six basis points to 1.24%.
The top-weighted technology sector settled just behind the financial group with a loss of 2.8%. Mega-cap technology stocks like Apple (AAPL 150.25, -5.22), Microsoft (MSFT 67.48, -1.93), Facebook (FB 144.85, -4.93), Alphabet (GOOGL 942.17, -22.44), and Amazon (AMZN 944.76, -21.31) were all on the defensive, posting losses between 2.2% and 3.4%.
The PHLX Semiconductor Index fared even worse, dropping 4.4% as profit-taking hit hard in the semiconductor industry. Including today's decline, the PHLX Semiconductor Index is still up 61.2% over the last 12 months.
Outside of financials and technology, the industrials (-2.1%) and materials (-2.1%) groups exhibited relative weakness, but most of the remaining laggards finished roughly in line with the broader market. The energy sector was an exception, losing only 1.1% thanks to crude oil's positive performance ($49.04/bbl, +0.8%).
The energy component jumped from its flat line to a solid gain following the weekly crude inventory report from the Energy Information Administration (EIA), which showed that U.S. crude stocks declined by 1.8 million barrels for the week ended May 12. While that's less of a decline than the consensus expected (-2.3 million barrels), it was seen as a positive in light of Tuesday's disappointing API reading, which showed a build of 0.9 million barrels.
In addition to energy, three sectors --real estate (+0.6%), utilities (+0.3%), and consumer staples (-0.2%)-- settled notably ahead of the broader market, benefiting from the drop in interest rates and a defensive rotation.
The CBOE Volatility Index (VIX 14.41, +3.76) spiked a whopping 35.3% amid a heightened expectation for near-term volatility in the wake of the NY Times article. The U.S. Dollar Index (97.39, -0.71, -0.7%), meanwhile, slipped to its lowest level since before the U.S. presidential election. The greenback lost 0.7% and 1.9%, respectively, against the euro (1.1157) and the Japanese yen (110.93).
On the data front, the weekly MBA Mortgage Applications Index decreased 4.1% to follow last week's 2.4% increase.
On Thursday, investors will receive several economic reports, including Initial Claims (Briefing.com consensus 240,000) at 8:30 ET, the Philadelphia Fed Index for May (Briefing.com consensus 18.5) at 8:30 ET, and April Leading Indicators (Briefing.com consensus 0.4%) at 10:00 ET. In addition, Walmart (WMT 75.12, +0.01, +0.01%) will report its quarterly earnings results before the open.
Nasdaq Composite +11.7% YTD
S&P 500 +5.3% YTD
Dow Jones Industrial Average +4.3% YTD
Russell 2000 -0.1% YTD
4:10 pm Cisco Systems beats by $0.02, reports revs in-line; guides Q4 EPS in-line, revs below consensus (CSCO) :
Reports Q3 (Apr) earnings of $0.60 per share, excluding non-recurring items, $0.02 better than the Capital IQ Consensus of $0.58; revenues fell 0.5% year/year to $11.94 bln vs the $11.9 bln Capital IQ Consensus, with product revenue flat and service revenue down 2%. 31% of total revenue was from recurring offers, up from 29% for the third quarter of fiscal 2016.
Revenue by geographic segment was: Americas flat, EMEA flat, and APJC down 2%.
Product revenue performance was led by Wireless and Security, which increased by 13% and 9%, respectively. Switching revenue increased by 2%. NGN Routing, Collaboration, Data Center, and Service Provider Video revenue decreased by 2%, 4%, 5%, and 30%, respectively.
Non-GAAP total gross margin and product gross margin were 64.4% (guidance 63-64%) and 63.2%, respectively. The decrease in non-GAAP product gross margin compared with 64.5% in the third quarter of fiscal 2016 was primarily due to pricing and product mix, partially offset by continued productivity improvements.
Co issues guidance for Q4, sees EPS of $0.60-0.62, excluding non-recurring items, vs. $0.62 Capital IQ Consensus Estimate; sees Q4 revs down 4-6% to $11.88-12.13 bln vs. $12.53 bln Capital IQ Consensus Estimate.
Tech Stocks from Briefing.com
On a generally abysmal showing on Wednesday, the broader market sank better than 1.5% among all three major US indices after reports that President Trump asked then-FBI Director James Comey to end the FBI investigation into former National Security Advisor Michael Flynn. The concern at hand is that an investigation into the matter could derail tax reform efforts, which have already been slow to get on track. As such, the tech-heavy Nasdaq Composite was the worst impacted today by the reports, with the index shedding 158.63 points (-2.57%) to 6011.24 in the worst single-day point loss since mid-March. Following suit, the S&P 500 lost about 43.64 points today (-1.82%) to 2357.03, while the Dow Jones Industrial Average declined 372.82 points (-1.78%) to 20606.93.
Following a run up to all-time highs yesterday, the Technology (XLK 54.60, -1.53 -2.73%) space has seemingly come back down to earth as the space was the second worst component of the S&P only to the Financial space. Component NVIDIA (NVDA 127.72, -9.09 -6.64%) performed poorly today after search-engine giant Alphabet (GOOG 919.62, -23.38 -2.48%) announced a cloud TPU chip. As mentioned, the remaining S&P sectors were led lower by the Financials space XLF -3.15% and followed by IYZ -2.12%, XLB -2.11%, XLI -2.00%, XLY -1.58%, XLV -1.31%, XLE -0.99%, XLP -0.16%, XLU +0.25%, XLRE +0.64%.
In the S&P 500 Information Technology (934.74, -26.88 -2.80%) space, trading turned in some depressing losses following yesterday's run higher. Component Apple (AAPL 150.25, -5.22 -3.36%) was among the worst performers today after it was announced that Qualcomm (QCOM 55.36, -0.59 -1.05%) had filed a complaint against four of AAPL's iPhone and iPad manufacturers. Other names in the space which trudged lower today included MU -6.96%, EA -5.83%, AMAT -5.13%, FSLR -4.89%, SWKS -4.69%, RHT -4.51%, ATVI -4.46%, TXN -4.36%, WDC -4.20%, STX -4.18%, ADSK -4.14%, MCHP -4.03%.
Other notable news items among sector components:
Qualcomm (QCOM) filed a complaint in the US District Court against four Apple (AAPL) iPhone and iPad manufacturers for breaching their license agreements and other commitments with Qualcomm and refusing to pay for use of Qualcomm's licensed technologies.
Alphabet (GOOG) announced a new cloud TPU chip, possibly competition to NVIDIA (NVDA).
ePlus'(PLUS 73.45, -1.15 -1.54%) ePlus Technology, inc., is acquiring OneCloud Consulting, Inc. Based in Milpitas, CA, OneCloud Consulting is a versatile team of highly trained technology consultants, architects, developers and instructors.
NPD Group reported that the Nintendo (NTDOY 33.44, +0.41 +1.24%) Switch system was the best-selling video game hardware in the month of April with more than 280,000 units sold.
ServiceNow (NOW 98.56, -1.62 -1.62%) to acquire Qlue; terms not disclosed.
In addition to reporting earnings, Photronics (PLAB 10.25, -1.30 -11.26%) extended its joint venture with Dai Nippon Printing and will focus on serving semiconductor manufacturers in China.
NeoPhotonics (NPTN 8.19, -1.02 -11.07%) has appointed Sandra Waechter as Interim CFO.
In reaction to quarterly results:
Photronics (PLAB) reported worse than expected Q2 earnings and revenues of $0.03 and $108.3 million, respectively. For Q3, the company sees EPS and revenues lower than expected at $0.05-0.12 and $110-120 million, respectively.
Acxiom (ACXM 26.18, -2.03 -7.20%) reported in-line Q4 EPS of $0.15 on revenues which beat market expectations at $224.87 million. The company also guided FY18 EPS below expectations at $0.80 and sees revenues in-line for the full year at $945 million.
Companies scheduled to report quarterly results tonight/tomorrow morning: CSCO, SNPS/MBLY
Analyst actions:
WIN was upgraded to Outperform from Underperform at Raymond James;
SQ was downgraded to Neutral from Buy at BTIG Research,
AMD was downgraded to Hold from Buy at Loop Capital,
SSYS was downgraded to Hold from Buy at Needham;
OCLR was initiated with a Buy at Rosenblatt
