From Briefing.com: 4:15 pm : The S&P 500 settled lower by 0.1% after recovering a portion of its losses into the close.
Equities saw little change at the start of today's session after index futures surrendered their pre-market gains just ahead of the opening bell. The decline in futures coincided with euro weakness after reports indicated the International Monetary Fund and Eurozone officials gave Greece three days to prove its reforms are on course.
Contributing to the euro weakness was the situation in Portugal where the country's foreign minister resigned after the finance minister, who constructed the country's EU/IMF bailout, submitted his resignation yesterday. The resignations of two key figures put the spotlight on Prime Minister Pedro Passos Coelho, who said he does not plan to step down. The uncertainty pushed the Portuguese 10-yr yield higher by nine basis points to 6.42%.
Stocks were able to look past the cautious open and the S&P 500 climbed to a session high less than a point above its 50-day moving average. However, similar to yesterday, the index was unable to hold above that level into the close.
The major averages retreated from their highs amid headlines from Germany, where Chancellor Angela Merkel said Greece may not receive the full bailout amount as planned. Instead, the funds could be paid out in installments.
The follow-up to earlier headlines took some wind out the market's sails and eventually pressured the euro below 1.3000, to a one-month low against the dollar.
Today's dollar strength did not slow the advance in crude oil as the energy component added 1.4% to $99.40 per barrel. On a related note, U.S. television networks brought some additional attention to the intensifying protests in Egypt. Yesterday, the Egyptian military said it will intervene if a solution is not reached in 48 hours. Today, subsequent reports indicated the military will suspend the constitution and dissolve the country's government if no agreement is reached by tomorrow.
While crude oil registered a solid gain, other commodities underperformed. Copper futures slid 0.7% to $3.134 per pound while gold futures declined 1.1% to $1242.00 per ounce. This weighed on the materials sector, which ended with a loss of 0.4%.
Elsewhere, the industrial space trailed behind the broader market from the start. Transportation-related names lagged as the Dow Jones Transportation Average shed 0.5%. In addition, defense contractors displayed broad weakness. The PHLX Defense Index fell 1.3% as 16 of its 17 components ended in the red. Of the 16 decliners, 11 names registered losses larger than 1.0%.
Countercyclical sectors ended in mixed fashion as the telecom space outperformed with a gain of 0.5% while the health care sector shed 0.3% after the Centers for Medicare and Medicaid Services announced a 9.4% decrease in payments to dialysis providers starting in 2014.
Today's economic data was limited to manufacturing orders, which increased 2.1% in May, up from an upwardly revised 1.3% (from 1.0%) in April. The Briefing.com consensus expected factory orders to increase 2.0%.
A full slate of economic reports is scheduled for tomorrow, beginning with the 7:00 ET release of the weekly MBA Mortgage Index. June Challenger Job Cuts and ADP Employment Change will be reported at their respective 7:30 ET and 8:15 ET while weekly initial claims will cross the wires at 8:30 ET. Finally, the May trade balance will be reported at 8:30 ET while June ISM Services Index will be announced at 10:00 ET.DJ30 -42.55 NASDAQ -1.09 SP500 -0.88 NASDAQ Adv/Vol/Dec 1227/1.64 bln/1283 NYSE Adv/Vol/Dec 1190/716.7 mln/1850
3:35 pm : Commodities ended the day mixed, with energy higher and metals and grains lower.
Crude oil rallied from below $98/barrel and rose as high as $99.87/barrel. By the end of today's session, Aug crude oil was up 1.4%, closing at $99.42/barrel. Natural gas trended high during today session, ending 2% higher at $3.65/MMBtu.
Metals ended the day in the red, with Aug gold losing 0.1% to $1243.30/oz, while July silver declining 1.2% to $19.33/oz. Sept copper ended 2 cents lower at $3.14/lb.
4:31PM Ultratech secures repeat AP order win with OSAT customer ( UTEK) 36.52 -0.20 : Co announced that it has received a repeat order from a leading outsourced semiconductor assembly and test (OSAT) company in Asia. The AP300W lithography system built on Ultratech's customizable Unity Platform will be utilized for wafer-level packaging (WLP) applications to support growth driven by communication devices. As the advanced packaging technology requirements evolve, OSATs will play an important role in establishing the supply chain. This major win further confirms Ultratech's ability to deliver operational flexibility, technology leadership and highest economic value for its customers.
3:52PM Oracle prices EUR 2.0 bln of investment grade notes ( ORCL) 30.06 -0.05 : Co announced the pricing of its sale of EUR 1.25 billion of 2.250% Notes due 2021 and EUR 750 million of 3.125% Notes due 2025. The offering is expected to settle on July 10, 2013. The 2021 Notes will bear interest at the rate of 2.250% per year and the 2025 Notes will bear interest at the rate of 3.125% per year. Interest will be payable annually on January 10 for the 2021 Notes, commencing on January 10, 2014, and on July 10 for the 2025 Notes, commencing on July 10, 2014. Oracle intends to use the net proceeds from the offering for general corporate purposes, which may include stock repurchases, payment of cash dividends on its common stock and future acquisitions. BNP Paribas, Deutsche Bank AG, London Branch and The Royal Bank of Scotland plc are as acting as joint book-running managers for the offering.
11:52AM Floor Talk: June Review ( TALKX) : After starting the year with five consecutive monthly gains, the three major averages ended June in the red. The losses took place amid spiking interest rates around the world, increased volatility in the U.S. dollar, and liquidity and growth concerns in China. Nine out of ten economic sectors ended the month in negative territory with cyclical groups leading to the downside. The S&P 500 found itself locked in a technical affair as the 20-, 50-, and 100-day moving averages all came into play during the month.
VIX Escalates
This year's prior bouts with volatility produced brief, sharp spikes in the CBOE Volatility Index (VIX). However, the most recent episode differed as VIX began climbing in mid-May. It entered June at 16.30%, and saw a post-FOMC spike to 20.49% before retreating to 16.86% by month's end.
Markets Throw Taper Tantrum
On June 19, the FOMC concluded its two-day meeting, but Ben Bernanke's subsequent press conference caught the market's attention as the chairman indicated the Fed could modify its asset purchase program before the end of this year with a potential end coming in the middle of 2014. Mr. Bernanke stressed that any such modifications would only take place if economic data continued to show improvement, yet the mere mention of tapering roiled the capital markets.
- U.S. Treasuries sold off, causing the benchmark 10-yr yield to spike from 2.175% to 2.657% over the course of four sessions. Yields then retreated off their highs into month-end, settling at 2.478%.
- The sharp rise in Treasury yields was accompanied by a spike in global interest rates. Peripheral European interest rates were noteworthy as Italy's 10-yr yield jumped to 4.934% before ending the month at 4.559%. Spain's benchmark yield climbed to a June high of 5.173% before easing to 4.776%.
The rapid rise in global interest rates pressured equities. The S&P 500 slashed through its 20- and 50-day moving averages, but a rebound off the 100-day average helped the S&P end the month almost 50 points off its lows. The recovery effort was aided by a parade of Fed speakers insisting the markets misunderstood Chairman Bernanke's message and that changes to asset purchases remain data dependent and not calendar dependent. Further, the final reading of first quarter GDP was hardly supportive of modifications to asset purchases as the prior reading of 2.4% was revised down to 1.8%.
The stock market rebound effort, however, ran into resistance that coincided with the S&P's 20- and 50-day moving averages.
Growth-oriented Sectors Slump
While the final week of the month saw the S&P 500 reclaim a good portion of its losses, some cyclical sectors were not as fortunate. On the flip side, income-oriented groups sold off with the post-FOMC spike in Treasuries, but received a solid bid into the end of the month.
- The materials sector was the biggest laggard, losing 4.8% as the softness in commodities weighed on the related sector. In addition, the large June loss caused the materials space to trim its year-to-date gain to 2.2% and fall to the bottom of this year's sector rankings. Interestingly, the discretionary sector managed to tack on 0.5% but a large subsector, homebuilders, was a notable laggard. The iShares Dow Jones US Home Construction ETF (ITB) fell 8.0% in June and registered a second quarter loss of 6.3%. Despite the significant loss, the homebuilders ETF ended the month with a year-to-date gain of 5.7%.
Dollar Roundtrips
The first half of the month saw significant dollar weakness as the Japanese yen continued its surge from late May. Dollar/yen opened June at 100.50, slid all the way to 94.00 (-6.5%), and then recovered nearly all of its losses.
- The sharp decline in the exchange rate pressured equities, sending the S&P 500 to its 50-day moving average.
- While dollar weakness dominated through the first half of the month, subsequent greenback strength helped the Dollar Index erase its earlier losses to end June little changed. The Index surged off its mid-June lows following the latest meeting of the Federal Open Market Committee and comments from Federal Reserve Chairman Ben Bernanke.
Chinese Liquidity Crunch Resonates
China began flashing signs of liquidity issues early in the month as the Shanghai Interbank Offered Rate (SHIBOR) began climbing. That rise turned into a mid-month spike in the overnight rate to 25% as inflation worries caused the People's Bank of China to refrain from injecting liquidity into the banking system. However, some of the market's fears were allayed when the central bank said funds would be provided to large lenders in need.
- The liquidity crunch sent shockwaves through global markets and the S&P 500 tested its 100-day moving average for the first time in 2013.
In addition to the liquidity concerns, Chinese economic data did not inspire much confidence. The country's June Manufacturing PMI declined to 50.10 from 50.80 (50.00 expected) while the HSBC Manufacturing PMI remained in contraction with a downtick to a nine-month low of 48.2 from 48.3 (48.3 forecast).
Commodities Suffer
The concerns surrounding the strength of the Chinese (and global) economy were reflected by the weakness in commodities. Copper futures tumbled nearly 8.0% to $3.06 per pound while gold futures had a flashback to April, falling 12.3% to $1,223.70 per troy ounce.
- Weakness in those metals was not exclusive to June. Over the course of the second quarter, copper declined 9.1% while gold endured a 21.6% plunge.
Unwelcomed Visitor Makes Return Appearance(s)
In our May summary we highlighted the first couple appearances this year of the Hindenburg Omen, which is said to foreshadow a correction based, in part, on a divergence in the market when NYSE issues making new 52-week highs and lows exceed 2.2%. This pattern becomes stronger when it appears in clusters no more than one month apart. In June, the Hindenburg Omen made return appearances on four separate occasions (June 3, 4, 10, and 20).
To recap, these conditions must be satisfied for the pattern to be activated:
- The number of NYSE new 52-week highs and new 52-week lows must both be greater than 2.2%.
- Of these two extremes, the smaller number must be greater than or equal to 69.
- The NYSE 10-week (50-day) moving average must be rising.
- The McClellan Oscillator must be negative.
- Finally, the issues making new 52-week highs cannot be more than twice the amount of shares at new 52-week lows.
Click here to see a breakdown of monthly sector performance.
8:13AM Silicon Motion lowers Q2 rev guidance, raises Q2 non-GAAP gross margin guidance ( SIMO) 10.70 : Co issues downside guidance for Q2 (Jun), lowers Q2 (Jun) revs to flat QoQ at $57.4 mln (from +5-10% QoQ) vs. $61.3 mln Capital IQ Consensus.
Gross margin (non-GAAP) is expected to be in the 47 to 49% range, above the co's guidance of 45 to 47%.
"In the second quarter, we saw demand for our embedded controllers (eMMC) exceed our own expectations along with continuing strong OEM sales of our other controller products. However, with availability of NAND flash still tight for module makers, procurement of our card and USB flash drive controllers from these customers was lower than expected."
8:04AM SanDisk announces definitive agreement to acquire SMART Storage Systems; SanDisk will pay ~$307 mln in cash ( SNDK) 61.42 : Co announced a definitive agreement to acquire SMART Storage Systems, a developer of enterprise solid state drives (SSDs) based on the SATA and SAS storage protocols. Under the terms of the agreement, SanDisk will pay ~$307 mln in cash and certain equity-based incentive awards to acquire SMART Storage Systems, which is part of the SMART Worldwide Holdings portfolio of companies, acquired in 2011 by two related investment funds of Silver Lake.
The transaction, which has been approved by the boards of directors of both companies, is subject to customary closing conditions, including regulatory review and approval, and it is expected to close in August, 2013. Approximately 250 employees of SMART Storage Systems will join SanDisk at the close of the transaction.
Microsemi (MSCC) added two new ultra-low dropout linear point-of-load regulators for space, commercial aviation and defense applications to its radiation-hardened solutions portfolio. The MHL8701 and MHL8705 regulators are the first devices of their kind to include an integrated single event effects filter to protect against soft errors caused by heavy ions often found in air- and space-borne applications.
6:11AM Spreadtrum comms Board of Directors selects financial advisor with respect to the previously-announced preliminary non-binding proposal made by Tsinghua Unigroup pursuant to which Unigroup proposes to acquire the Company for $28.50 in cash per ADS ( SPRD) 26.48 : Co announced that its Board of Directors has retained Morgan Stanley Asia Limited as its financial advisor with respect to the previously-announced preliminary non-binding proposal made by Tsinghua Unigroup pursuant to which Unigroup proposes to acquire the Company for $28.50 in cash per American Depositary Share Morgan Stanley has been retained to assist the Board in its evaluation of the Unigroup Proposal and the Board's consideration of potential alternatives to the Unigroup Proposal. The Board is continuing its review and evaluation of the Unigroup Proposal and other alternatives available to the Company. The Board has not yet made any decisions with respect to such matters. There can be no assurance that any agreement will be executed with Unigroup or any other party, or that this or any other transaction will be approved or consummated.
Fujitsu Semiconductor Limited and ARM (ARMH) announced a licensing agreement that enables Fujitsu Semiconductor to release a system on chip solution which takes advantage of the benefits of ARM big.LITTLE technology and ARM Mali-T624 graphics processing.
SanDisk (SNDK) announced that the construction of the phase two shell of the Fab 5 joint venture wafer fabrication facility located in Yokkaichi, Japan, will begin in August 2013 with expected completion in mid-2014.
10:29 am Technology
The tech sector is trading higher today, ahead of narrower gains in the broader market. Semiconductors are showing strength as well with the SOX trading 0.8% higher.
Within the chip index, RBCN (+4.5%) is a notable standout. Among other major indices, the SPY is trading 0.4% higher today, while the QQQ is up 0.4% and the NASDAQ is trading 0.3% higher on the session. Among tech bellwethers, AAPL (+2.2%) is showing notable strength, while FB (-1.3%) is under pressure. In notable tech earnings last night: AFOP (+6.2%) raised Q2 revenue guidance XRTX (+1.7%) reported a Q2 beat and guided inline with consensus This morning in tech earnings, MMS (-4.0%) guided mixed FY14 guidance. Also, SIMO (+0.2%) lowered Q2 rev guidance and raised Q2 non-GAAP gross margin guidance. In news, ZNGA (+10.4%) confirms that it will name Don Mattrick, formerly of MSFT (-0.3%), as CEO.
Elsewhere, NLSN (+2.3%) will replace S (+0.2%) in the S&P 500. Among notable analyst upgrades in tech this morning, STX (+0.1%) was upgraded to Equal Weight at Barclays. Also, GRPN (+2.7%) was initiated with a Buy at Wunderlich. In downgrades, CACI (-2.2%) was downgraded to Underperform at RBC, BCE (-0.2%) was downgraded to Hold at Canaccord and ACN (0.0%) was downgraded to Hold at Argus. Also, MU (-1.4%) is trading lower after peer SK Hynix was downgraded at Credit Agricole. There are no notable names in tech scheduled to report after the close.
Zynga (ZNGA) confirmed that it will name Don Mattrick Chief Executive Officer. Mattrick spent six years at Microsoft (MSFT) -- the last three as president of the Interactive Entertainment Business.
Xyratex (XRTX) reported second quarter earnings of $0.10 per share, ex items, which was better than expected, while revenues fell 32.9% year/year to $216.2 million which was also higher than expected. Co issued third quarter guidance with EPS of ($0.04)-$0.20, which was in line with range of estimates, and revenues of $195-225 million, which was also in line with expectations. Gross profit margin in the second quarter was 22.0%, compared to 16.5% in the same period last year and 18.9% in the prior quarter. The increases from last year and the prior quarter primarily reflect a favorable variation in product mix in both our Enterprise Data Storage Solutions and Hard Disk Drive Capital Equipment product segments. "The gradual revenue decline from our previously largest customer NetApp (NTAP) will cease after 2014 and this revenue is being replaced with new OEM business wins. With our new ClusterStor product line, which addresses the HPC/Big Data marketplace, we have achieved incremental design wins, added a number of new customers in just the last 3 months and are on course to meet our revenue target of $60m in fiscal 2013. I am very encouraged that ClusterStor is approaching the inflection point where, as revenue ramps year over year, the product line can generate a positive contribution to the overall business,"
Oppenheimer initiated Textura (TXTR) with a Outperform and price target of $35; co is currently disrupting the collaboration intensive commercial construction market by bringing to the owners, general contractors and subcontractor masses an easy-to-use suite of SaaS products that improves productivity and lowers risk. Textura's end market (estimated ~$1.2B TAM presently) is on the cusp of a major expansion cycle after a lengthy downturn that should triple its TAM over the next few years. They think Textura's unique combination of simplicity, computing power, fast deployment, and network effects puts the company, which recently IPO'd, in an enviable position to take advantage of this large opportunity by addressing industry participants who mostly use manual processes (i.e., spreadsheets) or legacy, on-premise software, but not formal SaaS construction collaboration applications today. |
