From Briefing.com: Weekly Recap - Week ending 04-Nov-11Renewed weakness on Friday left stocks to finish the week on a down note, contributing to the market's worst weekly performance in more than a month. As has been the case all week, participants paid close attention to the events of Europe.
Greece drove trade for virtually the entire week and, by extension, was responsible for most of the market's volatility. During the course of this week's first two sessions stocks sank more than 5% as participants reacted to news that Greece wanted to pursue a referendum of the eurozone bailout, effectively threatening to undermine the efficiency with which the plan could be completed and implemented. Stocks spiked in the next two sessions as sentiment improved amid reports that officials put pressure on Greece to acquiesce to the agenda of other eurozone members by abandoning its plans for a referendum. Although the drama didn't exactly rival a Greek tragedy, it still made for interesting theatre.
By Friday, stocks were unable to build on the gains achieved in the past two sessions. Buying was partly diffused by news that discourse during a G-20 meeting became less than amicable. That seemed to suggest that, despite recent efforts, an agreement on how to handle Greece and precarious conditions in the rest of Europe remain elusive.
Market participants were also uninspired by news that unemployment eased down to 9.0% from 9.1%, which is where it had been expected to remain. Nonfarm payrolls for October totaled 80,000, which is slightly less than the tally of 85,000 that had been expected, on average, among economists polled by Briefing.com. Nonfarm private payrolls increased by 104,000, which is less than the consensus call for an increase of 117,000, but on par with the ADP Employment Change that was reported this past Wednesday. The latest weekly initial jobless claims count of 397,000 was not included in calculations, though it is worth noting that that tally marked the first time in a month that initial claims slipped below 400,000.
In all, the employment levels proved on par with weak-to-moderate economic growth. With that in mind, the Fed announced mid-week that it raised its long-run umemployment rate forecast to 5.6% from 5.4%. The Fed also cut its growth forecast for fiscal 2011 to the range 1.6% to 1.7% from the range 2.7% to 2.9%. For 2012, growth is expected the range from 2.5% to 2.9%, down from a range of 3.3% to 3.7% that had been previously projected.
In its most recent policy statement, the FOMC kept its target interest rate at 0.00% to 0.25%. It also stated that the Fed remains prepared to employ its tools to promote a stronger economic recovery and that it will continue to extend the average maturity of its securities holdings. At the European Central Bank's latest meeting, members decided to become more accommodative by trimming the key lending rate by 25 basis points to 1.25%.
Other data this week featured the October ISM Manufacturing Index, which declined to 50.8 from 51.6 in the prior month. It had been expected to improve to 52.1. As for the ISM Services Index, it came in at 52.9, which is less than the 53.9 that had been broadly expected.
Given the market's fixation on macro-related headlines, earnings were given secondary concern. Overall, results this week were generally better-than-expected. Pfizer (PFE 56.50, +0.39), Kraft (KFT 35.18, -0.60), MasterCard (MA 360.09, -6.50), and Qualcomm (QCOM 56.50, +0.39) were among the more major names that reported -- each exceeded what Wall Street had expected. Comcast (CMCSA 22.75, -0.57), ArcelorMittal (MT 20.31, -0.29), Kellogg (K 49.91, +0.00) and Marsh & McLennan (MMC 30.58, -0.19) were among the more widely held names that came short of the consensus estimate.
With earnings mattering little to market participants this week, stocks slid to a 2.5% weekly loss. That snapped four straight weeks of gains.
Amid the market's weakness, the dollar attracted buyers. For the week it climbed about 2.5% against a basket of major foreign currencies. Most of its strength came earlier in the week, when participants had dumped the euro amid all of the headlines out of the eurozone. The yen also slumped earlier this week. Its dive came after Japan's officials intervened in the currency in an effort to curb its strength. Just last week the yen set a post-WWII record high.
..Nasdaq 100 -0.5%. ..S&P Midcap 400 +0.1%. ..Russell 2000 -0.7%.
Index Started Week Ended Week Change % Change YTD %
DJIA 12231.11 11983.24 -247.87 -2.0 3.5
Nasdaq 2737.15 2686.15 -51.00 -1.9 1.3
S&P 500 1285.08 1253.23 -31.85 -2.5 -0.4
Russell 2000 761.00 746.49 -14.51 -1.9 -4.7
Advanced Energy Industries (AEIS) announced that its Solaron PV inverters have been installed at a 35-megawatt solar project located near Coalinga, California.
Skyworks (SWKS $20.70 +0.21) reported fourth quarter earnings of $0.54 per share, excluding non-recurring items, $0.01 better than the Capital IQ Consensus of $0.53, while revenues rose 28.4% year/year to $402.3 million versus the $400.69 million consensus. The company issued downside guidance for the first quarter with EPS of $0.50, excluding non-recurring items, versus the $0.54 consensus and revenues in the $390 million range versus the $416.65 million consensus. "Our guidance reflects near term market weakness largely offset by new program ramps. Note, our outlook excludes any contribution from Advanced Analogic Technologies."
Alcatel-Lucent (ALU $2.30 -0.46) reported third quarter earnings of $0.08 per share, $0.05 better than the Capital IQ Consensus of $0.03, while revenues fell 6.9% year/year to $3.79 billion versus the $4 billion consensus. "And given economic uncertainties, we will take more radical actions to accelerate our transformation and reduce quickly our costs structure, especially in Europe. This will generate additional savings in 2012 of EUR 200 million in fixed costs addressing mainly our SG&A spending and EUR 300 million in variable costs addressing mainly project and delivery efficiency. For the remaining part of 2011, given these market uncertainties, and selective spending from our customers, especially in Europe, we now expect weaker revenues there than initially planned in the fourth quarter of 2011. Therefore, we now are aiming for an adjusted operating margin of around 4% of 2011 sales taking benefit of the fixed costs savings already achieved in 2011, at an exit run-rate level of around EUR300 mln a year."
Advanced Micro (AMD $5.55 -0.18) announced a restructuring plan and expects that the restructuring plan will result in operational savings, primarily in operating expenses, of approximately $10 million in the fourth quarter of 2011 and $118 mln in 2012, primarily through a reduction of its global workforce by approximately 10% and the termination of existing contractual commitments. The workforce reduction will occur across all functions globally and is expected to be substantially completed by the end of the Q1 of 2012. Based on anticipated savings from the restructuring plan, AMD expects Q4 2011 operating expenses will be approximately $610 million. As a result of implementing efficiencies across the company's operations, AMD expects to save approx $90 million in 2012 operating expenses in addition to the restructuring plan savings, resulting in more than $200 million of expected combined operational savings in 2012. The company's actions pursuant to the restructuring plan will take place primarily during the fourth quarter of 2011, with some restructuring plan activities extending into 2012. Co currently estimates that it will record restructuring expense in the fourth quarter of 2011 and in 2012 of approximately $101 million and $4 million, respectively. Of the total restructuring expense, approximately $56 million will be future cash expenditures in 2011, $33 million will be future cash expenditures in 2012 and $15 mln will be future cash expenditures in 2013. As a result of implementing efficiencies across the company's operations, AMD expects to save ~$90 mln in 2012 operating expenses in addition to the restructuring plan savings, resulting in more than $200 mln of expected combined operational savings in 2012.
RealNetworks (RNWK $8.09 -1.27) was downgraded to Hold from Buy at Brigantine with an $8.50 target following earnings saying there is a new CEO coming in with a strategic plan developed by the board. The firm notes the underlying business is seeing declining revenues in the mean time. They are happy to give the new plan full attention and interest when it is rolled out. However at this time they cannot tell investors to put new money into RealNetworks until they have some new direction.
Alcatel-Lucent (ALU $2.31 -0.45) reported third quarter earnings of $0.08 per share, $0.05 better than the Capital IQ Consensus Estimate of $0.03.
Revenues fell 6.9% year/year to $3.79 billion versus the$4 billion consensus.
"And given economic uncertainties, we will take more radical actions to accelerate our transformation and reduce quickly our costs structure, especially in Europe. This will generate additional savings in 2012 of € 200 million in fixed costs addressing mainly our SG&A spending and EUR300 mln in variable costs addressing mainly project and delivery efficiency. For the remaining part of 2011, given these market uncertainties, and selective spending from our customers, especially in Europe, we now expect weaker revenues there than initially planned in the fourth quarter of 2011. Therefore, we now are aiming for an adjusted operating margin of around 4% of 2011 sales taking benefit of the fixed costs savings already achieved in 2011, at an exit run-rate level of around EUR300 mln a year. |
