From Briefing.com: 4:10 pm : The major averages settled near their highs as better-than-expected Manufacturing PMI data out of China (50.3 actual, 49.9 expected), the eurozone (50.3 actual, 50.1 expected), and the U.S. (53.7 actual, 53.1 expected) helped entice investors into bidding up global equities.
The S&P 500 jumped above 1,700, a level the index had struggled with in the past few sessions, and registered a record high close of 1706.87.
After jumping above 1,700 shortly after the opening bell, the S&P spent the remainder of the session trading in a seven-point range. Growth-oriented sectors displayed broad strength with financials and industrials pacing the advance.
The financial sector advanced 1.7% as all top components posted gains with American Express (AXP 75.63, +1.86) leading the way.
Elsewhere, industrials received significant support from transportation companies. The relative strength of those names helped the Dow Jones Transportation Average surge 3.2%. Index component Con-way (CNW 45.79, +4.34) jumped 10.5% after reporting a bottom-line beat on below-consensus revenue.
Transportation stocks soared even as crude oil returned to its mid-July highs. The energy component advanced 2.5% to $107.70 per barrel.
While most of today's action in the equity markets took place during the opening minutes, Treasuries and the dollar were a bit more active.
Treasuries ended on their lows as heavy selling put significant upward pressure on yields. Better-than-expected data from around the world sparked a bid in risk assets and weighed heavily on Treasuries, causing longer dated yields to close at their highest level in two years. The long bond tumbled two points and the 10-yr note shed one point as their yields jumped roughly 13 basis points apiece to their highest closes of 2013. The benchmark 10-yr yield settled at 2.72%.
Elsewhere, the Dollar Index climbed to its best level in two weeks as the greenback registered largest gains against the yen and the euro.
Today's economic data was plentiful.
The initial claims level dropped to 326,000 for the week ending July 27 from an upwardly revised 345,000 (from 343,000) for the week ending July 20. The Briefing.com consensus pegged the initial claims data at 345,000. The Department of Labor continued to blame seasonal adjustment problems from the auto industry as the catalyst for recent volatility in the initial claims data. Thus, the lowest initial claims reading since January 2008 is a statistical anomaly and not a vast improvement in labor market conditions.
Separately, the ISM Manufacturing Index jumped to 55.4 in July from 50.9 in June. The Briefing.com consensus expected the index to increase to 51.5. That was the strongest reading since June 2011. The spike easily brushed off the concerns about a longstanding pullback in manufacturing activity that came about from the unexpected contraction reported in May.
Lastly, construction spending fell 0.6% in June after increasing an upwardly revised 1.3% (from 0.5%) in May. The Briefing.com consensus expected construction spending to increase 0.2%. The drop in construction had more to do with normal volatility than a change in trends. Spending rose too much in May and a normal reset was likely to occur.
Tomorrow's data will focus on jobs. July nonfarm payrolls, nonfarm private payrolls, the unemployment rate, hourly earnings, and average workweek will all be reported at 8:30 ET. Also at 8:30 ET, June personal income, personal spending, and core PCE prices will all cross the wires. The busy day will be topped off with a 10:00 ET release of June factory orders.DJ30 +128.48 NASDAQ +49.37 SP500 +21.14 NASDAQ Adv/Vol/Dec 1833/1.8 bln/704 NYSE Adv/Vol/Dec 1913/797.4 mln/1156
3:35 pm :
Sep crude oil extended yesterday's gains as both China's Manufacturing PMI and the ISM Manufacturing Index data came in above expectations. In addition, a Reuters survey said that in Libya, protests at oilfields and terminals cut average supply to 1.15 mln bpd in July, down 150,000 bpd from June. The energy component lifted from its session low of $106.71 per barrel and steadily trended higher until it settled at $107.87 per barrel, or 2.7% higher Sep natural gas touched a session high of $3.45 per MMBtu in early morning floor trade but plunged to a session low of $3.34 per MMBtu following inventory data that showed a build of 59 bcf when a smaller build of 56-57 bcf was anticipated. It erased some of the loss and settled 1.5% lower at $3.39 per MMBtu Dec gold and Sep silver pulled back from their respective session highs of $1328.00 and $19.95 per ounce set in early morning pit action as the dollar index advanced Gold touched a session low of $1307.10 per ounce and settled with a 0.2% loss at $1311.00 per ounce Silver spent the remainder of the session chopping around near the unchanged line where it eventually settled at $19.63 per ounce
4:34PM Sierra Wireless reports EPS in-line, beats on revs; guides Q3 EPS below consensus, revs in-line (SWIR) 12.73 -0.19 : Reports Q2 (Jun) earnings of $0.03 per share, in-line with the Capital IQ Consensus Estimate consensus of $0.03; revenues rose 14.9% year/year to $109.6 mln vs the $108.07 mln consensus. Co issues mixed guidance for Q3, sees EPS of $0.05-0.07, excluding non-recurring items, vs. $0.09 Capital IQ Consensus Estimate; sees Q3 revs of $111-115 mln vs. $114.58 mln Capital IQ Consensus Estimate.
4:29PM Rudolph Tech beats by $0.01, reports revs in-line (RTEC) 12.63 +0.28 : Reports Q2 (Jun) earnings of $0.06 per share, excluding non-recurring items, $0.01 better than the Capital IQ Consensus Estimate of $0.05; revenues fell 18.1% year/year to $46.1 mln vs the $46.06 mln consensus.
Gross margin of 51 percent of revenues was within the Company's guidance. In the 2013 first quarter, gross margin was 53 percent. The decline in gross margin was primarily driven by product mix.
"As we projected, overall trends in our core back-end business improved as the second quarter progressed and that has continued in July. In addition, our lithography business gained traction and we shipped a repeat order to a major OSAT customer in Asia for a second JetStep System for advanced packaging lithography, further validating the commercialization of Rudolph's revolutionary 2X stepper total lithography solution."
4:18PM ON Semiconductor reports EPS in-line, misses on revs; guides Q3 revs in-line (ONNN) 8.44 +0.19 : Reports Q2 (Jun) earnings of $0.13 per share, in-line with the Capital IQ Consensus Estimate consensus of $0.13; revenues fell 7.6% year/year to $688.3 mln vs the $696.1 mln consensus. Co issues in-line guidance for Q3, sees Q3 revs of $700-730 mln vs. $737.68 mln Capital IQ Consensus Estimate.
"Backlog levels for the third quarter of 2013 represent approximately 80 to 85 percent of our anticipated third quarter 2013 revenues. We expect that average selling prices for the third quarter of 2013 are expected to be down approximately one to two percent when compared to the second quarter of 2013. The outlook for the third quarter of 2013 includes stock-based compensation expense of approximately $8 to $10 million."
4:13PM LinkedIn beats by $0.07, beats on revs; guides Q3 below consensus; raises FY13 guidance, below consensus (LNKD) 213.00 +9.21 : Reports Q2 (Jun) earnings of $0.38 per share, excluding non-recurring items, $0.07 better than the Capital IQ Consensus Estimate of $0.31; revenues rose 59.4% year/year to $363.7 mln vs the $354.26 mln consensus; adj. EBITDA $88.6 mln vs. $77-79 mln guidance and $82 mln ests.
Co issues downside guidance for Q3, sees Q3 revs of $367-373 mln vs. $384.37 mln Capital IQ Consensus; sees adj. EBITDA of $81-83 mln vs. $88.5 mln ests.
Co raises guidance, below consensus; raises FY13 revs to $1.455-1.475 bln from $1.43-1.46 bln vs. $1.50 bln Capital IQ Consensus Estimate.
Talent Solutions: Revenue from Talent Solutions products totaled $205.1 million, an increase of 69% compared to the second quarter of 2012. Talent Solutions revenue represented 56% of total revenue in the second quarter of 2013, compared to 53% in the second quarter of 2012.
Marketing Solutions: Revenue from Marketing Solutions products totaled $85.6 million, an increase of 36% compared to the second quarter of 2012. Marketing Solutions revenue represented 24% of total revenue in the second quarter of 2013, compared to 28% in the second quarter of 2012.
Premium Subscriptions: Revenue from Premium Subscriptions products totaled $73.0 million, an increase of 68% compared to the second quarter of 2012. Premium Subscriptions represented 20% of total revenue in the second quarter of 2013, compared to 19% in the second quarter of 2012. 4:12PM Cascade Microtech acquires Aetrium's reliability test products business; terms not disclosed (CSCD) 7.13 +0.10 : The acquisition of the RTP business affords co the opportunity to leverage its market position, and focuses the necessary resources towards solving significant customer challenges resulting from advanced materials, new geometries, and new design rules.
4:11PM Axcelis Tech beats by $0.01, beats on revs (ACLS) 2.21 +0.03 : Reports Q2 (Jun) loss of $0.04 per share, $0.01 better than the Capital IQ Consensus Estimate of ($0.05); revenues fell 19.6% year/year to $47.5 mln vs the $46.03 mln consensus.
4:09PM TTM Tech misses by $0.02, beats on revs; guides Q3 EPS in-line, revs in-line (TTMI) 9.23 -0.01 : Reports Q2 (Jun) earnings of $0.09 per share, $0.02 worse than the Capital IQ Consensus Estimate of $0.11; revenues rose 3.2% year/year to $338 mln vs the $332.8 mln consensus. Non-GAAP gross margin was 14.4%.
Guidance: Co issues in-line guidance for Q3, sees EPS of $0.13-$0.19 vs. $0.18 Capital IQ Consensus Estimate; sees Q3 revs of $335-$355 mln vs. $354.69 mln Capital IQ Consensus Estimate.
Commentary: "Operating cash flow was strong in the second quarter. We generated $58.7 million in operating cash flow, which supports our growth initiatives through manufacturing capacity expansion and productivity enhancements. With the completion of the SYE and DMC transaction and expected normal seasonal strength in the third and fourth quarters, we believe that TTM is well positioned for improved margin performance in the second half of 2013."
4:05PM FEI Co. beats by $0.03, misses on revs; guides Q3 EPS below consensus, revs below consensus (FEIC) 78.67 1.22 : Reports Q2 (Jun) earnings of $0.72 per share, $0.03 better than the Capital IQ Consensus Estimate of $0.69; revenues rose 0.5% year/year to $222.5 mln vs the $227.5 mln consensus. Co issues downside guidance for Q3, sees GAAP EPS of $0.60-0.70 vs. $0.83 Capital IQ Consensus Estimate; sees Q3 revs of $215-225 mln vs. $240.6 mln Capital IQ Consensus Estimate.
S&P 500 Marks Fresh Highs
After enduring a modest June slip, stocks displayed broad strength during the first three weeks of July, with the S&P 500 advancing 5.3% over the course of 14 sessions. Of those 14 affairs, 12 ended with gains. Meanwhile, the final eight sessions of the month saw the S&P trade sideways after being unable to climb above the 1,700 level.
The Nasdaq outperformed the S&P with a gain of 6.6%, ending the month at a 13-year high. However, the index remains more than 1,500 points away from its own all-time high.
VIX Slides From Highs to (Near) Lows
The CBOE Volatility Index (VIX) notched its highest level of the year in late June, and has declined steadily since. The near-term volatility measure began July just below 17.00% and slipped all the way to a low of 12.07% as complacency began setting in. Although the VIX was trapped in a month-long downtrend, it did not slip below its 2013 low of 11.05%, which was registered in mid-March.
Mediocre Economic Data Continues
The early stage of this year's market rally was predicated on the belief that economic data would begin showing notable improvement into the second half of the year. However, data for the end of the first half reported in July did not point to an impending acceleration in trends.
Housing data for June revealed a slowdown in existing home sales while housing starts also came in below expectations. In addition, the weekly MBA Mortgage Index continued its steady slide as all four July readings showed a contraction in applications. The downtrend has been in effect since mid-May when Treasury yields began spiking. Homebuilders endured a volatile month after registering June losses. The iShares Dow Jones US Home Construction ETF (ITB) ended the month little changed.
The final session of the month brought the advance reading of second quarter GDP. While growth of 1.7% surpassed estimates (1.1% Briefing.com consensus), first quarter GDP was revised down to 1.1% from 1.8%.
Personal consumption expenditures fueled the Q2 gain, contributing 1.22 percentage points to the overall growth rate. Nonresidential investment added 0.55 percentage points, residential investment added 0.38 percentage points, and the change in private inventories contributed 0.41 percentage points. Net exports subtracted 0.81 percentage points while government spending subtracted 0.08 percentage points. Real final sales, which exclude the change in inventories, increased 1.3%.
Fed Reaffirms Support for Markets
With tepid economic data abounding, market participants, once again, looked to the Federal Reserve for reassuring words. The policy directive for the July 30-31 meeting was little changed from prior statements. The Federal Open Market Committee made no changes to its unemployment and inflation thresholds, and maintained its asset purchase program at a pace of $85 billion per month. New items in the statement were limited to:
A mention of economic activity expanding at a "modest pace" during the first half of the year, whereas before it was noted that activity had been expanding at a "moderate pace." A reference to a rise in mortgage rates that did not appear in the prior directive, underscoring the Fed's attention to higher rates exerting downward pressure on the housing recovery. An acknowledgment that inflation persistently below the Fed's 2% objective could pose risks to economic performance. That was not in the prior directive, much to the chagrin of St. Louis Fed President Bullard who cast a dissenting vote at the June meeting. Mr. Bullard did not dissent at the July meeting, so it can be presumed that he felt placated that the directive provided better signaling of the Fed's willingness to defend its inflation goal.
Second Quarter Earnings Season Gets Underway
The final two weeks of the month brought the first half of the Q2 earnings season. While most companies were able to beat bottom-line estimates, which declined steadily into the earnings season, revenue growth was generally disappointing.
According to FactSet, aggregate earnings growth for more than 350 S&P 500 members that have already reported, came in at 2.89% versus 3.91% expected by the general consensus. Earnings growth was the strongest among financials (30.79%) while the materials sector saw the largest decline (-9.85%). With regards to top-line growth, FactSet data show S&P 500 revenue growth of 1.29% against expectations for a 2.75% increase. The strongest revenue growth could be found in the discretionary sector (7.72%) while the energy space experienced the biggest decline (8.66%).
Sectors Dance to Their Own Tune
The July rally did not leave any sectors behind. The ten groups gained between 3.7% and 8.0% with telecom services in the lead and technology bringing up the rear. Interestingly, even though the tech sector registered the slimmest gain, the tech-heavy Nasdaq outperformed the Dow and S&P 500. This was largely due to the outperformance of companies specializing in biotechnology. The iShares Nasdaq Biotechnology ETF (IBB) surged 13.8%. In turn, the health care sector also contains a fair share of biotech companies, which helped the sector register a July gain of 7.2%.
08:46 am Sanmina shares rise 5% following better than expected earnings SanDisk (SNDK $58.00 +2.88) Board of Directors has approved the initiation of a quarterly cash dividend of $0.225 per share of common stock, equivalent to an annual yield of approximately 1.6% based on the July 31, 2013 closing price of $55.12. On an annualized basis, this will return approximately $220 million to stockholders based on shares outstanding as of June 30, 2013. The first dividend payment will be made on August 30, 2013 to holders of record on August 12, 2013. As of today, the company has entered into a $1.0 billion ASR agreement with a financial institution.
Under the terms of the ASR, SanDisk will receive during the third fiscal quarter of 2013 an initial delivery of approximately 14.5 million shares based on current market prices. The final number of shares to be repurchased will be based on SanDisk's volume-weighted average stock price during the term of the agreement, which is expected to be completed no later than April 8, 2014. The $2.5 billion of stock repurchase authorization brings the total amount authorized for stock repurchases to $3.75 billion. Approximately $2.1 billion remains available for repurchase following the execution of the $1.0 billion ASR agreement, year-to-date purchases of approximately $435 million and prior years' purchases.
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