From Briefing.com: 4:20 pm : The stock market began the week on a fitful note as rising interest rates at home and falling equity markets abroad conspired to keep the major averages in negative territory throughout today's trading. The focal points on those fronts were the 10-yr note yield, which spiked to 2.66% in early action, and China's Shanghai Composite, which plummeted 5.3% overnight.
The drop in China was attributed to a growing sense of angst that a liquidity crisis and credit crunch are brewing there. That notion is predicated on the understanding that the People's Bank of China (PBOC) is purposely backing away from injecting liquidity in an effort to curtail speculative excesses through the lending channel. The PBOC fed this notion by acknowledging today that there is sufficient liquidity in the system and by admonishing Chinese banks to do a better job of cash and risk management.
Whether the PBOC sticks to its guns remains to be seen, but the hardline stance it took today got the week started off on the wrong foot for global markets.
It didn't help matters either that follow-through selling efforts persisted in the Treasury market. The 10-yr note fell more than a point at its worst levels of the morning, sending its yield up to 2.66% or nearly 50 basis points above its cash settlement last Tuesday. Contributing to that selling effort was a warning from the Bank for International Settlements that central banks should end their bond purchases and focus on inflation while letting governments spearhead the economic recovery effort.
Traders wasted little time getting the US stock market on track with its foreign counterparts. Things never got as bad as they did in China, but the Dow, Nasdaq, and S&P 500 were down as many as 248, 62, and 32 points, respectively, at their lows in the morning session. That equated to a 2.0% decline for the S&P 500.
The stock market, however, did show some fight when the Treasury market got off the mat. Remarkably, the 10-year note recouped everything it lost early and traded with modest gains in the afternoon before getting some pushback late in the day. That rebound effort saw the 10-yr yield drop back to 2.53% before it faded into the cash close and settled at 2.55%.
The recovery effort in the stock market seemed to mirror that move. The S&P 500 cuts its losses to single digits and the Dow reclaimed more than 200 points of its early losses by mid-afternoon; however, the market rolled over in the final hour as bonds faded and sellers renewed their profit-taking efforts.
The global growth concerns linked to China and rising interest rates weighed heavily on the cyclical sectors throughout the day. Financials (-1.8%) led the losses and were joined by materials (-1.7%), industrials (-1.7%), energy (-1.5%), and technology (-1.4%) as the worst-perfroming areas. Every sector ended lower today, although the countercyclical sectors were not impacted as much by the selling interest. The utilities sector, for instance, ended with only a negligible loss.
Industrial metals also fared poorly. Copper prices fell 1.8% to $3.04/lb. Crude prices were a notable standout in the commodity complex, rising 1.3% to $94.93/bbl.
The roller-coaster action today left the CBOE Volatility Index on its own roller-coaster ride. It was up 10% at one point, gave that entire gain back, and then finished up 5.6% at 19.96 with the late selloff in stocks.
There wasn't any economic data to trade off today, but that will change tomorrow with a full lineup that includes the April Case-Shiller Home Price Index, May Durable Goods, May New Home Sales, and June Consumer Confidence reports.
Volume was heavy today with 968 mln shares traded at the NYSE. The A/D line reflected the market's negative disposition. Declining issues at the NYSE outnumbered advancing issues by a 7-to-1 margin while at the Nasdaq they led by a 3-to-1 margin. DJ30 -139.84 NASDAQ -36.49 SP500 -19.34 NASDAQ Adv/Vol/Dec 594/1.95 bln/1951 NYSE Adv/Vol/Dec 393/968 mln/2711
3:30 pm : Commodities mostly remained lower in today's session. Crude oil, however, was the outperformer as the energy component rallied back into positive territory and as high as $95.59/barrel. At the end of today's floor trading session, Aug crude oil ended $1.43 higher (or +1.5%) at $95.15/barrel.
Natural gas futures slid lower in today's afternoon session, pulling off its HoD, ending the session one penny lower at $3.76/MMBtu.
Precious metals remained in negative territory for the day with gold falling as low as $1275.10 and silver hitting a LoD of $19.38. Aug gold ended the day $15.30 lower at $1276.90/oz, July silver finished the day $0.45 lower at $19.50/oz. July copper lost eight cents at $3.02/lb.DJ30 -65.08 NASDAQ -22.66 SP500 -11.54 NASDAQ Adv/Vol/Dec 672/1639.8 mln/1861 NYSE Adv/Vol/Dec 561/665 mln/2536
Atmel (ATML) announced the expansion of its CryptoAuthentication portfolio to include the ATECC108 solution with elliptical curve asymmetric key algorithm.
Microsoft (MSFT) announced the release of third-party qualification guidelines for Microsoft's cloud solutions Windows Azure and Microsoft Office 365. Co also announced a new collection of 34 K-12 schools and school districts that have signed on to use Windows 8.
AAPL -1.1% (Wal-Mart has lowered price of AAPL iPhone 5 to $129 from $189, according to reports
8:08AM STEC to be acquired by WDC for $6.85 per share (STEC) 3.59 :
WDC and STEC announced that they have entered into a definitive merger agreement under which STEC will be acquired by HGST, a wholly-owned subsidiary of Western Digital.
STEC will be acquired for approximately $340 million in cash, which equates to $6.85 per share.
Integrated Device Technology (IDTI) announced that it has developed and validated an intelligent, scalable, and distributed power management solution for Intel (INTC) Atom processors, Intel Xeon processors and Intel Core processors.
09:20 am First Solar upgraded to Hold at Maxim Group: . Maxim upgrades FSLR to Hold from Sell. With the Hold rating, firm no longer has a price target on the company. However, its previous $42 price target had established a reasonable fair value for the company in mid-CY14, and firm believes investors should wait for a price in the mid-$30's before considering the company on the long side. Other than having raised $420M in a secondary offering and diluting its shareholders by approximately 10%, firm does not believe much has changed for the company.
11:21 am Technology Sector trading lower by 1.3% just ahead of the broader market
The tech sector is trading lower today, just ahead of larger losses in the broader market. Semiconductors are showing relative weakness with the SOX trading 2.0% lower. Within the chip index, CREE (-5.0%) is a notable laggard. Among other major indices, the SPY is trading 1.6% lower today, while the QQQ is down 1.2% and the NASDAQ is trading 1.3% lower on the session. Among tech bellwethers, MSFT (+0.5%) is showing notable strength, while FB (-3.4%) is under pressure.
There were no notable tech earnings this morning. In a busy M&A morning, VOD (-0.4%) announced its intention to acquire Kabel Deutschland in a transaction delivering Kabel Deutschland shareholders EUR 87 per share in cash. The deal is expected to be accretive to EPS and FCF per share from the first and second full year post completion respectively. KEYN (+46.3%) will be acquired by Thoma Bravo for $20.00 per share. Also, STEC (+87.0%) will to be acquired by WDC (-2.0%) for $6.85 per share. FIO (-1.1%) and OCZ (+8.0%) are showing strength on the deal. Among notable analyst upgrades in tech this morning, AMD (+0.7%) was upgraded to Outperform at FBR, TIBX (-2.9%) was upgraded to Buy at Hilliard Lyons and FXCM (+0.4%) was upgraded to Buy at Citigroup. In downgrades, ROVI (-5.7%) was downgraded to Underperform at Pacific Crest, SPRD (-2.1%) was downgraded to Neutral at Credit Suisse, OTEX (-3.7%) was downgraded to Hold at Paradigm Capital and B. Riley & Co. downgraded RLD (-4.6%) to Neutral. There are no notable names in tech scheduled to report after the close.
Advanced Micro (AMD) upgraded to Outperform from Mkt Perform at FBR Capital; tgt raised to $5.50 from $3. The firm notes the business looks as though it has stabilized for now. Excluding another macro downturn, they think cash levels remain sufficient for the near future, particularly if management can execute on its path toward free cash flow breakeven in 2H13. Additionally, they believe AMD has wisely directed its strategic focus away from the core PC market and toward gaming APUs, microservers, and custom embedded processors. Firm's target is based on an EV/sales multiple of 1.1x given the firm's near-term business dynamics, potential upside surprises, and future abilities to generate cash.
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