From Briefing.com: 4:30 pm Closing Market Summary: Financials Tumble On Wednesday (:WRAPX) :The S&P 500 (-0.1%) registered its second-consecutive decline on Wednesday as the financial sector (-0.8%) weighed on the broader market. However, a late-afternoon rally left the major averages at the upper end of the day's trading range. The Nasdaq (-0.1%) and the Dow (-0.1%) finished in line with the benchmark index.
Financials were under pressure from the jump after several industry leaders offered cautious commentary on market trends and conditions at the Deutsche Bank Financial Services Conference. Some of the most notable concerns surrounding the industry include slowing loan growth, rising delinquencies for sub-prime auto loans, and a flattening of the yield curve. However, the financial sector doesn't deserve all of the blame for today's downtick as the top-weighted technology sector (-0.3%) played an important supporting role.
The tech group suffered as mega-cap names like Apple (AAPL 152.76, -0.91) Microsoft (MSFT 69.84, -0.57), Facebook (FB 151.46, -0.92), and Alphabet (GOOGL 987.09, -9.08) settled with losses between 0.6% and 0.9%. Chipmakers outperformed the broader market after Analog Devices (ADI 85.76, +0.96) reported better than expected earnings and upbeat guidance. However, the PHLX Semiconductor Index (unch) still failed to reach its flat line.
While the energy sector (-0.4%) doesn't have as much influence as the aforementioned groups, it did contribute to today's slip as crude oil weighed on investor sentiment. The commodity dropped 2.9% to $48.23/bbl amid concerns over heightened production in Libya. Reports indicate that Libya's oil production has risen to 827,000 barrels per day (bpd), which is significantly more than country's 2017 and 2016 averages of 500,000 bpd and 300,000 bpd, respectively. The lightly-weighted real estate group (-0.1%) also finished in negative territory.
The seven remaining sectors settled in the green with gains between 0.2% and 0.5%. Countercyclical spaces like utilities (+0.5%), telecom services (+0.4%), and health care (+0.4%) led the charge. Large-cap names like Pfizer (PFE 32.65, +0.52) and Johnson & Johnson (JNJ 128.25, +1.14) underpinned the health care sector, adding 1.6% and 0.9%, respectively. Biotech names also contributed to the sector's positive performance, evidenced by the 0.5% increase in the iShares Nasdaq Biotechnology ETF (IBB 285.75, +1.45).
In earnings news, retailers produced a mixed batch of earnings reports. Michael Kors (KORS 33.18, -3.09) tumbled 8.5% to a fresh, five-year low after disappointing guidance overshadowed better than expected earnings and revenues. Conversely, Vera Bradley (VRA 9.41, +0.91) spiked 10.7% after better than expected earnings outweighed disappointing earnings guidance. The SPDR S&P Retail ETF (XRT 40.74, -0.01) finished flat.
On the data front, investors received several economic reports on Wednesday, including May Chicago PMI, April Pending Home Sales, the Fed's Beige Book for May, and the weekly MBA Mortgage Applications Index:
Chicago PMI for May increased to 59.4 from 58.3 in April while the Briefing.com consensus expected a reading of 57.3. Pending Home Sales for April declined 1.3%. Today's reading follows a revised 0.9% decrease in March (from -0.8%).The Fed's Beige Book indicated modest to moderate economic growth from early April through late May for most of the 12 Federal Reserve Districts.The weekly MBA Mortgage Applications Index decreased 3.4% to follow last week's 4.4% increase.Tomorrow, investors will receive a slew of economic reports, including ADP Employment Change for May (Briefing.com consensus 180,000) at 8:15 ET, Initial Claims (Briefing.com consensus 239,000) at 8:30 ET, first quarter Productivity (Briefing.com consensus -0.6%) at 8:30 ET, April Construction Spending (Briefing.com consensus 0.5%), and the May ISM Index (Briefing.com consensus 54.7) at 10:00 ET.
May auto and truck sales will also be released throughout the day.
Nasdaq Composite +15.2% YTD
S&P 500 +7.7% YTD
Dow Jones Industrial Average +6.3% YTD
Russell 2000 +1.0% YTD
4:46 pm Semtech --CORRECTION-- Co beat on top line revenue expectations as Non-GAAP was $149.1 mln; We had used a GAAP number which was $143 mln; We have corrected the original 16:32 comment (SMTC) :
4:32 pm Semtech beats by $0.03, beats on revs; guides Q2 EPS in-line, revs in-line (SMTC) :
Reports Q1 (Apr) earnings of $0.44 per share, excluding non-recurring items, $0.03 better than the Capital IQ Consensus of $0.41; revenues rose 9.7% year/year to $149.1 mln vs the $145.6 mln Capital IQ Consensus.
Co issues in-line guidance for Q2, sees EPS of $0.43-0.49, excluding non-recurring items, vs. $0.44 Capital IQ Consensus Estimate; sees Q2 revs of $150-160 mln vs. $152.26 mln Capital IQ Consensus Estimate.
4:09 pm Hewlett Packard Enterprise reports EPS in-line, beats on revs; guides Q3 EPS below consensus; reaffirms FY17 EPS guidance (HPE) :
Reports Q2 (Apr) earnings of $0.35 per share, excluding non-recurring items, in-line with the Capital IQ Consensus of $0.35; revenues fell 22.1% year/year to $9.9 bln vs the $9.75 bln Capital IQ Consensus.
Co issues downside guidance for Q3, sees EPS of $0.24-0.28, excluding non-recurring items, vs. $0.31 Capital IQ Consensus Estimate.
Co reaffirms guidance for FY17, sees EPS of $1.46-1.56, excluding non-recurring items, vs. $1.47 Capital IQ Consensus Estimate.
Fiscal 2017 non-GAAP diluted net EPS estimates exclude after-tax costs of approximately $1.49 per diluted share, related primarily to valuation allowances and divestiture taxes, separation costs, restructuring charges, amortization of intangible assets, tax indemnification adjustments, defined benefit plan settlement charges and remeasurement benefit, and an adjustment to earnings from equity interests.
"While we faced margin pressure in Q2, we expect improvement through the remainder of the year as we mitigate commodities cost pressure and eliminate costs associated with spin-mergers and acquisitions...The completion of the spin-merger of our Enterprise Services business gives us the opportunity to further optimize the cost structure of the future HPE. We are now focused on driving an incremental $200-300 million in cost savings in just the second half of this year. We maintain our FY17 EPS outlook."
Tech Stocks from Briefing.com
The final trading day of May ended modestly lower among broader US stocks. Despite the flat finish, the major averages ended well off session lows as the Dow Jones Industrial Average, losing 20.82 points (-0.10%), was the worst offender, ending Wednesday at 21008.65. The tech-heavy Nasdaq Composite closed 4.67 points lower (-0.08%) to 6198.52, while the S&P 500 dipped 1.11 (-0.05%) today to 2411.80.
Today's market data included the Chicago PMI for May increased to 59.4 from 58.3 in April. Pending Home Sales for April declined 1.3%. Today's reading follows a revised 0.9% decrease in March (from -0.8%). The weekly MBA Mortgage Applications Index decreased 3.4% to follow last week's 4.4% increase. Additionally, the Fed's Beige Book was released and showed modest to moderate growth in most regions as well as tight labor markets. It also showed that consumer spending growth softened, with many districts seeing little to no change in retail sales ex-autos while most districts saw labor shortages across a broadening range of jobs but wage growth remained modest to moderate.
Among the sectors which underperformed today, the Technology (XLK 56.53, -0.09 -0.16%) space finished just below flat lines. Component Hewlett Packard Enterprise (HPE 18.81, -0.04 -0.21%) was pressured today ahead of its Q2 report after the bell. The majority of the remaining S&P sectors were in the green today, led higher for the second day in a row by the Utility space XLU +0.50% and followed by XLV +0.40%, XLB +0.30%, XLY +0.28%, XLP +0.27%, XLI +0.19%, IYZ +0.15%, XLRE -0.16%, XLE -0.43%, XLF -0.85%.
In the S&P 500 Information Technology (966.84, -2.93 -0.30%) space, trading began the day in the green but quickly turned south. Component Analog Devices (ADI 85.76, +0.96 +1.13%), one of the remaining quarterly reports, saw relative outperformance today behind the company's Q2 earnings. Other select names which slumped lower with the broader sector included TDC -3.16%, FSLR -2.51%, WDC -1.35%, CRM -1.34%, ADSK -1.23%, GOOG -1.13%, LRCX -1.08%, HPQ -0.95%, EBAY -0.92%.
Other notable news items among sector components:
Twitter (TWTR 18.32, -0.11 -0.60%) partnered with Riot Games Oceania to live stream the inaugural League of Legends: League of Origin tournament globally on Twitter and connected devices; financial details not disclosed.
ChannelAdvisor (ECOM 11.40, -0.05 -0.44%) acquired HubLogix Commerce Corp; terms not disclosed.
eBay (EBAY 34.30, -0.32 -0.92%) priced $2.5 billion underwritten public offering of senior unsecured notes.
Qualcomm (QCOM 57.27, -0.07 -0.12%) extended its cash tender offer for NXP Semi (NXPI 109.90, +1.76 +1.63%) through June 28.
Take-Two (TTWO 76.74, +0.67 +0.88%) acquired Kerbal Space Program, a physics-based space simulation game.
In reaction to quarterly results:
Analog Devices (ADI) reported better than expected Q2 EPS of $1.03 on revenues which were in-line with market expectations at $1.1 billion. The company also guided Q3 EPS and revenues ahead of market expectations at $1.07-1.21 and $1.37-1.45 billion, respectively.
Daktronics (DAKT 9.93, +0.65 +7.00%) reported worse than expected Q4 EPS of $0.02 and revenues which were better than expected at $143.7 million.
Companies scheduled to report quarterly results tonight/tomorrow morning: BOX, HPE, PANW, SMTC/CIEN, MBLY, SOL, TECD
Analyst actions:
VMW was upgraded to Outperform from Neutral at Robert W. Baird,
LN was upgraded to Buy from Neutral at Nomura;
ZBRA was downgraded to Equal Weight from Overweight at Morgan Stanley,
XTLY was downgraded at Lake Street, Needham, Deutsche Bank, First Analysis Sec and Dougherty; GOGO was initiated with an Outperform at Raymond James
