From Briefing.com: 4:25 pm : The major averages finished the Thursday session near their lows after renewed concerns surrounding the situation in Ukraine, combined with more warnings signs from China, contributed to participants reducing their risk exposure. The jitters related to China are tied up in economic and financial risk, whereas, the concerns over Ukraine are tied up in geopolitical risk that has the potential to become a global economic problem.
The tech-heavy Nasdaq (-1.5%) led the retreat while the S&P 500 lost 1.2% with eight sectors ending in the red. As a result, the benchmark index settled below its 2013 closing high of 1848.36.
Equity indices began the session with modest gains, but the early strength was short-lived as the S&P 500 notched its high within the first ten minutes of action, spending the remainder of the trading day in a steady slide. Although stocks opened higher, the dollar/yen pair flashed an early warning signal when it began dropping at the start of the New York Session. The currency pair hovered near 102.80, but slumped all the way to 101.60 by the time the closing bell rang.
The yen often draws safe-haven interest in times of geopolitical distress and today's move basically snowballed given carry-trade dynamics that work against yen-based borrowers when the currency strengthens. In turn, the sharp move weighed on risk assets, including US stocks.
Continued worries about the strength of the Chinese economy fed into the risk-off posture after industrial production (8.6% year-over-year versus 9.5% expected), fixed asset investment (17.9% year-over-year versus 19.4% expected), and retail sales (11.8% year-over-year versus 13.5% expected) all fell short of estimates. Copper futures have been pressured recently, and continued retreating today. The red metal fell 1.3% to $2.923/lb.
Elsewhere, the dispute between Russia and Ukraine jumped back into focus after Ukraine's acting President Oleksandr Turchynov was quoted by Reuters as saying he believes Russian forces concentrated on Ukraine's eastern border are 'ready to invade.' The comments were followed by a statement from U.S. Secretary of State John Kerry, who said if the Sunday referendum goes ahead as planned there will be a 'serious series of steps' taking place on Monday from the United States and Europe.
Notably, Treasuries, which began climbing just after the start of the New York session, accelerated their advance following the remarks from President Turchynov. The 10-yr note added 24 ticks, sending the benchmark yield lower by nine basis points to 2.65%.
Similarly, volatility protection was in high demand as indicated by an 12.1% increase in the CBOE Volatility Index (VIX 16.22, +1.75).
Nine sectors posted losses with cyclical groups bearing the brunt of the weakness. The tech sector (-1.6%) registered the largest decline while industrials (-1.5%) and consumer discretionary (-1.4%) followed not far behind. The underperformance of technology weighed on the Nasdaq, which also suffered from the relative weakness of biotechnology. The iShares Nasdaq Biotechnology ETF (IBB 254.80, -6.70) tumbled 2.6%. Biotech also weighed on the health care sector (-1.4%), which was the only laggard among countercyclical groups.
The remaining defensive sectors-consumer staples (-0.6%), telecom services (-0.4%), and utilities (+0.9%)-outperformed with utilities overtaking the health care sector for the top spot on this year's leaderboard. The rate-sensitive sector extended its year-to-date gain to 6.2% versus 5.6% for health care.
Despite the daylong selling pressure, participation was below average with 678 million shares changing hands at the NYSE floor.
Reviewing today's data:
Retail sales increased 0.3% in February after declining a downwardly revised 0.6% (from -0.4%) in January. The Briefing.com consensus expected retail sales to increase 0.2%.The report was pretty solid, but did not represent an upward shock that would come as a result of pent up winter-delayed demand. Sales increased in-line with the 0.2% increase in aggregate earnings that were reported in the February employment report. We would have expected a bigger upward swing if pent up demand was unleashed.
The initial claims level fell to 315,000 for the week ending March 8 from an upwardly revised 324,000 (from 323,000) for the week ending March 1. The Briefing.com consensus expected the initial claims level to increase to 329,000. The DOL reported that there were no special factors that drove the initial claims level to its lowest point since November 2013.
Total business inventories increased 0.4% in January after increasing an unrevised 0.5% in December while the Briefing.com consensus expected an increase of 0.3%. Total inventories consist of manufacturers, merchant wholesalers, and retailers. Both manufacturer (0.2%) and wholesaler (0.6%) inventories were announced prior to the release. The only unknown was retailer inventories, which increased 0.4% in January after increasing 0.7% in December. The important takeaway from the report was that the inventory gain may not have been planned. Total business sales fell 0.9% in January after declining 0.1% in December. That sharp drop in spending caused an overstock situation as more goods than expected were left on shelves.
The Treasury Budget for February showed a deficit of $193.50 billion, which followed the prior month's deficit of $203.50 billion. The Briefing.com consensus expected the deficit to hit $195.00 billion.
Tomorrow, February PPI will be released at 8:30 ET while the preliminary reading of the Michigan Sentiment Survey for March will cross the wires at 9:55 ET.
Nasdaq Composite +2.0% YTD
Russell 2000 +1.5% YTD
S&P 500 -0.1% YTD
Dow Jones Industrial Average -2.8% YTD
DJ30 -231.19 NASDAQ -62.91 SP500 -21.86 NASDAQ Adv/Vol/Dec 619/2.15 bln/2186 NYSE Adv/Vol/Dec 975/678.1 mln/2085
3:30 pm :
Apr gold and May silver fell to their respective session lows of $1364.90 per ounce and $21.10 per ounce in early morning pit trade on better-than-anticipated retail sales and initial claims data.
Retail sales increased 0.3% in Feb after declining a downwardly revised 0.6% (from -0.4%) in Jan. TheBriefing.com consensus expected retail sales to increase 0.2%. The initial claims level fell to 315,000 for the week ending March 8 from an upwardly revised 324,000 (from 323,000) for the week ending March 1. TheBriefing.com consensus expected the initial claims level to increase to 329,000.
Gold then gained support from a weaker dollar index and rose above the unchanged line by afternoon action. It brushed a session high of $1375.40 per ounce and settled with a 0.1% gain at $1372.10 per ounce. Silver touched a session high of $21.34 per ounce in afternoon floor trade but lost momentum ahead of the close and settled with a 0.9% loss at $21.17 per ounce.
Apr crude oil see-sawed between positive and negative territory today. It dipped to a session low of $97.67 per barrel moments after floor trade opened and later touched a session high of $98.44 per barrel. The energy component eventually settled 0.3% higher at $98.26 per barrel.
Apr natural gas spent its entire floor session in the red, with prices falling as low as $4.36 per MMBtu. The weakness came on inventory data that showed a draw of 195 bcf when a draw of 191-196 bcf was anticipated. Unable to find buying support, natural gas settled 2.2% lower at $4.39 per MMBtu.
5:47PM Diodes maintains Q1 guidance for revs of $205-213 mln vs $208.85 mln Capital IQ Consensus Estimate (DIOD) 24.59 -0.26 : Co also sees Q1 GAAP gross margin to be 28.8 percent, plus or minus 2 percent; GAAP operating expenses to be 22.5 percent of revenue, plus or minus 1 percent; income tax rate to range between 19 and 25 percent, and shares used to calculate GAAP EPS to be approximately 48.2 million.
4:30PM QLogic completes acquisition of certain ethernet controller-related assets from Broadcom (BRCM); reaffirms Q4 guidance (QLGC) 11.72 -0.06 : Co announced it has completed the acquisition of the 10/40/100Gb Ethernet controller-related assets from Broadcom, pursuant to the definitive agreement that was previously announced on February 18, 2014. Under the terms of the agreement, QLogic paid approximately $147 million. In addition, QLogic entered into a license agreement that will cover its Fibre Channel products and made a one-time payment of $62 million.
QLogic announced today that it is also implementing a restructuring plan designed to consolidate its product roadmap in connection with the completion of the Broadcom transaction. The restructuring plan includes a workforce reduction primarily associated with the consolidation of its engineering activities and is expected to be substantially completed within the next three months. In connection with these restructuring activities, the company expects to incur pre-tax GAAP charges between $13 million and $16 million, the majority of which are expected to be recorded in the fourth quarter of its fiscal year ending March 30, 2014.
QLogic is also reaffirming its previously provided fourth quarter financial guidance of EPS $0.19-0.25 vs $0.22 Capital IQ Consensus Estimate, revs of $110-116 mln vs $113.24 consensus). QLogic will discuss the financial impact of the transaction during its fourth quarter earnings call. Further, as previously disclosed, the company expects the acquisition to be accretive to revenue and non-GAAP earnings in the first quarter and for the full year of fiscal 2015.
3:22PM SanDisk files lawsuit against SK Hynix for theft of trade secrets (SNDK) 73.40 -1.61 : Co announced that it has filed a civil lawsuit against Korea's SK Hynix, Inc., SK Hynix America and related entities in Santa Clara Superior Court. The lawsuit seeks damages, an injunction and other remedies against Hynix for trade secret misappropriation under California's Uniform Trade Secret Act. Additionally, SanDisk has submitted a criminal complaint with the Tokyo Metropolitan Police Department against a former employee.
These actions relate to the theft of trade secrets related to NAND flash technology by a former engineer of SanDisk who left the company in 2008 to work for SK Hynix. This engineer is alleged to have illegally taken SanDisk's proprietary technical information and to have subsequently provided it to SK Hynix.
Tokyo Metropolitan Police today announced the arrest of the former employee, who worked at SanDisk's joint venture manufacturing facility in Yokkaichi, Japan. SanDisk has been and continues to cooperate with law enforcement in their investigation.
12:16PM Notable movers of interest (SCANX) : The following are some of today's most notable movers of interest, categorized by market capitalization (large cap over $10 billion and mid cap between $2-10 billion) and ranked by % change (all stocks over 100K average daily volume).
Large Cap Gainers
AMZN (378.43 +2.1%): Co raised Amazon Prime and Amazon Student Prime membership fee, as expected.
ACT (215.1 +1.28%): Co confirmed favorable ruling in generic Celebrex patent suit.
ATVI (20.95 +1.7%): Upgraded to Buy from Neutral at BofA/Merrill.
Large Cap Losers
NOV (75.08 -2.88%): Downgraded to Neutral from Buy at ISI Group.
DG (57.9 -2.35%): Reported EPS in-line, missed on revs; guided Q1 and FY15 below consensus.
NTAP (37.27 -1.53%): Disclosed ~600 employee reduction; expects to incur aggregate charges of ~$35 -45 mln; downgraded to Hold from Buy at Lake Street Capital Mkts; initiated with a Hold at Wunderlich; tgt $44.
Mid Cap Gainers
WSM (65.33 +10.79%): Beat on EPS by $0.03, beat on revs; guided Q1 EPS below consensus, revs below consensus; guided FY15 EPS below consensus, revs in-line; Q4 comps +10.4%; increased quarterly dividend 6.45% to $0.33 from $0.31 per share; tgt raised to $63 from $59 at Canaccord Genuity; removed from US Focus list at Citigroup; tgt raised to $66 at RBC Capital Mkts.
CCJ (25.06 +3.43%): Announced ore production has begun at the Cigar Lake uranium mining operation in northern Saskatchewan.
APL (31.38 +4.01%): Priced offering of 4.4 mln of 8.25% Class E Cumulative Redeemable Perpetual Preferred Units at $25.00 per unit.
Mid Cap Losers
GOGO (22.38 -6.28%): Beat on EPS by $0.01, beat on revs; guided FY14 revs in-line.
NMBL (43.08 -5.94%): Initiated with a Hold at Wunderlich; tgt $48.
FIG (7.94 -5.14%): Announced launch of 28.28 mln share offering of Class A shares; certain officers and senior employees selling ~5.08 mln shares in the offering.
Cypress Semiconductor (CY) announced a new USB 3.0 hub controller certified by the USB Implementers Forum for the SuperSpeed USB 5 Gbps standard.
Plug Power (PLUG 7.56, +0.76): +11.2% after reporting in-line earnings on above-consensus revenue.
NetApp (NTAP) On March 12, 2014, the co committed to a business realignment plan designed to focus its resources on key strategic initiatives and streamline its business in light of the constrained IT spending environment. The Company expects that the business realignment plan will be implemented through the end of the first quarter of fiscal 2015 and will include changes to the Company's worldwide headcount. As part of the business realignment plan, the Company expects to reduce worldwide headcount by ~600 employees. The company expects to incur aggregate charges of ~$35 to $45 million for employee
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