From Briefing.com: Weekly Recap - Week ending 16-Aug-13The week in review for the stock market begins with the week in review for the Treasury market. Specifically, it begins with the yield on the 10-yr note sitting at 2.58% when the week began and ending at 2.84% when the week ended. That move was at the root of why the major averages suffered another losing week, highlighted by the Dow, S&P 500, S&P 400 and Russell 2000 all declining in excess of 2.0%.
It wasn't all about interest rates, though. Increasing worries about the escalating violence in Egypt's political battle, uneven economic data, and disappointing earnings outlooks provided by Macy's (M), Cisco (CSCO), Wal-Mart (WMT) and Nordstrom (JWN) all factored into the broad-based weakness.
The basis for the jump in long-term rates was attributed to concerns that the Federal Reserve is going to announce at its September FOMC meeting a decision to taper its asset purchases. Those concerns were driven by stronger-than-expected reports for retail sales and weekly initial claims, the latter of which fell to its lowest level since October 2007.
Notwithstanding the encouraging signs in those reports, other pieces of data were less convincing as it relates to the prospect of the Fed tapering in September. To that end, it was indicated that industrial production was flat in July, led by a 0.1% decline in manufacturing output, that inflation at both the producer and consumer level remained below the Fed's target rate, that single-family housing starts declined 2.2% in July, and that consumer sentiment measured in the University of Michigan consumer sentiment survey slipped to 80.0 in August from 85.1 in July.
The fact that long-term rates continued to rise in the face of those reports, and declarations from Atlanta Fed President Lockhart and St. Louis Fed President Bullard that the Fed needs more data before making a tapering decision next month, proved to be an intriguing development.
To be sure, there were some irreconcilable messages in the similarly weak showings by the stock and bond markets this week. If there is a true tapering trade in Treasuries, that would be based on the recognition that the economy is strengthening -- something that should be viewed as a positive development by the stock market given the favorable implications for corporate profits. Cisco's and Wal-Mart's guidance in particular, though, undercut that macro view, which leads one to wonder if the weakness in Treasuries could also be a function of concerns that the Fed is losing its grip on things.
In the same vein, the stock market is no doubt grappling with the concern that a rise in long-term rates threatens to slow the economic recovery, and an even bigger concern today in thinking the Fed risks playing with economic fire by tapering in September given the inconclusive messages in the data about economic activity. So, one could argue that the stock market was buffeted by weak guidance at the micro level and concerns the macro picture isn't yet strong enough to handle higher interest rates that come either via the Fed's hand or the market's own hand.
Per usual, time will ultimately tell the tale, but insofar as the past week was concerned, the tale of the tape was one of a decidedly weak picture. Every sector lost ground, with the high dividend-yielding utilities sector taking honors as the biggest laggard with a 4.4% decline. The consumer discretionary, consumer staples, and health care sectors followed behind with losses of 3.3%, 3.2%, and 3.1%, respectively.
The technology sector was the relative strength leader, falling only 0.3%. It has Apple (AAPL) to thank for that. Shares of AAPL surged 10.7% on the news that activist investor Carl Icahn reported a large position in the company and recommended to Apple CEO Tim Cook that the company do a large share buyback.
Over the last two weeks, the S&P 500 has declined 3.2%. On the bright side, it still remains up 16.1% year-to-date.
| Index | Started Week | Ended Week | Change | % Change | YTD % | | DJIA | 15425.51 | 15081.47 | -344.04 | -2.2 | 15.1 | | Nasdaq | 3660.11 | 3602.78 | -57.33 | -1.6 | 19.3 | | S&P 500 | 1691.42 | 1655.83 | -35.59 | -2.1 | 16.1 | | Russell 2000 | 1048.40 | 1024.30 | -24.10 | -2.3 | 20.6 |
4:46PM This week's biggest % gainers/losers ( SCANX) : The following are this week's top 20 percentage gainers and top 20 percentage losers, categorized by sectors (over $300 mln market cap and 100K average daily volume).
This week's top 20 % gainers
- Technology: VLTR (22.8 +55.64%), UBNT (29.47 +33.16%), FENG (8.91 +23.33%), OLED (35.46 +23.05%)
- Services: DGIT (12.32 +23.96%)
- Healthcare: OSIR (19.48 +90.37%), NPSP (23.7 +27.18%), ANAC (10.61 +26.21%)
- Financial: EJ (6.07 +41.29%), NOAH (18.37 +35.31%)
- Basic Materials: EXK (5.25 +36.32%), MUX (2.52 +31.96%), FSM (4.34 +31.83%), RBY (1.76 +30.3%), SVM (3.77 +29.45%), IAG (6.31 +29.2%), WG (9.47 +27.42%), AG (14.78 +24.65%), SSRI (9.13 +24.2%), CDE (15.92 +22.42%)
This week's top 20 % losers- Technology: SSNI (23.65 -22.84%), CREE (57.12 -22.78%), CSIQ (11.47 -19.21%), YOKU (21.24 -15.59%)
- Services: MM (6.93 -25.2%), OWW (9.68 -24.25%), VIPS (39.9 -18.87%), LCC (16.01 -17.18%), NDLS (41.25 -15.78%), GTN (6.69 -14.23%), UAL (30.86 -13.53%), ONE (8.83 -12.84%)
- Industrial Goods: CPST (1.16 -18.38%), PGEM (15.78 -16.97%)
- Healthcare: DNDN (3.18 -31.37%), SNTA (5.76 -14.24%), SRPT (33.08 -13.05%)
- Basic Materials: ALDW (15.73 -18.84%), MCP (6.17 -15.11%), IOC (71.7 -14.47%)
4:22PM End of Day Summary ( WRAPX) : The stock market fluttered on Friday, trying to bounce back from Thursday's drubbing while at the same time contending with a further rise in the 10-yr note yield, which hit 2.86% at its highest level of the day. The latter got in the way of rebound efforts as the major indices ended this options expiration day modestly lower.
There was evidence in today's session of participants pressing the buy-the-dip trade that has worked so well for so long. That evidence was seen early on in the outperformance of the homebuilding stocks, which have been hit hard of late. Ultimately, though, the strength in homebuilding stocks faded as the yield on the 10-yr note, and concerns about rising mortgage rates, increased.
The on again-off again showing of the homebuilders was representative of the overall action. There just wasn't a lot of conviction on either the buy side or the sell side.
The S&P 500, for its part, danced above and below its 50-day simple moving average (1657/1656), but closed just below that notable support level due to some closing selling interest. Gains in individual stocks like Boeing (BA 103.47, +0.74), Apple (AAPL 502.33, +4.42), American Express (AXP 75.17, +0.29), and United Continental (UAL 30.86, +0.76) offered a measure of support, but clear-cut sector strength was lacking for the most part today.
The transports were about the only area where buying interest was broad-based and semiconductor stocks fared reasonably well after analysts defended Applied Materials (AMAT 15.62, +0.30) following an otherwise disappointing earnings report and fiscal fourth quarter outlook. The Dow Jones Transportation Average increased 0.6% while the Philadelphia Semiconductor Index rose 0.4%.
Retailers were once again on the soft side after Nordstrom (JWN 56.43, -2.90) and Jos. A. Bank (JOSB 41.00, -3.10) joined the roster of retail companies providing earnings warnings. Those warnings weighed most heavily on the apparel companies.
In terms of interest rates, they started out on a pretty subdued path, but selling picked up noticeably around 12:30 p.m. ET. Soon thereafter, CNBC reported that it had been told by a White House source that chances of Larry Summers being nominated for Fed chairman were two in three. That report presumably triggered increased selling interest with participants concerned that Mr. Summers might be more inclined than Janet Yellen (the current Vice Chairman and other leading candidate) to dial back the Fed's asset purchases more readily than Ms. Yellen would be. The selling pressure took the yield on the 10-yr note as high as 2.86% before it settled at 2.84%.
The continued rise in long-term rates continued to take a toll on the high-dividend yielding utilities (-1.1%) and telecom services (-1.0%) sectors, which were the only sectors to lose at least 1.0% today. For the week, the utilities sector dropped 4.4% while the telecom services sector fell 2.3%.
There was another batch of economic data today that included the Housing Starts and Building Permits report for July, the Productivity report for the second quarter, and the University of Michigan Consumer Sentiment report for August. True to recent form, the economic data was uneven.
Housing starts and building permits were basically in-line with expectations, rising 5.9% and 2.7%, respectively, to an annualized rate of 896,000 and 943,000, yet those increases were driven entirely by multi-family units. Starts and permits for single-family homes were down 2.2% and 1.9% from June.
Second quarter productivity increased 0.9% and unit labor costs rose 1.4%. Both numbers were better than expected and both were promptly ignored by the market given the dated nature of the report.
The University of Michigan Consumer Sentiment report, however, captured some of the market's attention with a disappointing headline print of 80.0. That was down from 85.1 in July which, to be fair, was a six-year high. Still, the pullback in the indexes for current conditions and expectations were downers in terms of the report's overall messaging.
With the options expiration today, volume was the heaviest it has been all week with 835 mln shares traded at the NYSE.
3:32PM Earnings Preview for the week of August 19 - 23 ( SUMRX) : Of the companies reporting earnings for the week of August 19 - 23 some of the bigger names include:
- Monday:
- Pre Market - PACT
- After Hours - ANW, BOBE, IRF, CRMT, PWRD
- Tuesday:
- Pre Market - HD, BBY, TJX, MDT, JCP, DKS, BKS, SKS, TSL
- After Hours - ADI, INTU, LZB, TUES, GSM
- Wednesday:
- Pre Market - TGT, LOW, SPLS, PETM, SJM, AEO, TOL, EV, MSG
- After Hours - HPQ, LTD, SNPS, HAIN, SMTC
- Thursday:
- Pre Market - HRL, DLTR, GME, ANF, PDCO, BONT, TTC, SSI, PLCE, SMRT
- After Hours - GPS, MRVL, SCSC, ADSK, ARO, NDSN, MCRS, DLLR
- Friday: From an individual stock standpoint, Applied Materials (AMAT 15.73, +0.41) and Nordstrom (JWN 57.35, -1.98) have been story stocks. Both companies disappointed with their guidance after reporting quarterly earnings. Applied Materials, however, has managed to hold up thanks to a number of analysts defending its outlook. Nordstrom, and its retailing brethren, haven't been so lucky.
Large Cap Gainers
- TMHC (20.91 +4.24%): Strength in home builders following strong housing economic data
- GMCR (76.63 +3.65%): To join the NASDAQ-100 Index beginning August 22, 2013, replacing Life Technologies (LIFE)
- AMAT (15.82 +3.26%): Missed quarterly EPS by $0.01 ($0.18 ex items vs $0.19 estimate), revs fell 15.7% yoy to $1.98 bln vs $2.06 bln estimate; sees Q4 EPS of $0.16-0.20 ex items vs $0.21 estimate, revs flat at ~$1.975 bln vs $2.14 bln estimate; co provided long term bullish outlook; upgraded to Buy from Neutral at DA Davidson, target $18
Large Cap Losers - IBN (29.72 -5.58%): Weakness in Indian markets, with S&P BSE SENSEX declining 4% and a decline in the rupee
- JWN (57.4 -3.25%): Beat quarterly EPS by $0.05 ($0.93 vs $0.88 estimate), revs rose 6.4% yoy to $3.10 bln vs $3.19 bln estimate; sees FY14 EPS of $3.60-3.70 ex items vs $3.78 estimate; sees Q3 same store sales below 2-3% vs +2.2% estimate; downgraded to Neutral from Buy at Sterne Agee
- GIS (49.2 -2.67%): Downgraded to Underperform from Hold at Jefferies
Mid Cap Gainers - QIHU (68.47 +9.49%): Marbridge Consulting reporting co's President announced that query share for the company's So.com search engine is approcahing 20%, and expects market share will reach 30% by the end of 2014
- AZPN (34.44 +8.23%): Beat quarterly EPS by $0.16 ($0.24 ex items vs $0.08 estimate), revs rose 30.2% yoy to $83.3 mln vs $78.88 mln estimate; sees Q1 EPS of $0.14-0.16 vs $0.13 estimate, revs of $83-86 mln vs $83.7 mln estimate; reaffirmed FY14 rev guidance of $353-363 mln vs $360.63 mln estimate, EPS of $0.60-0.66 vs $0.63 estimate
- P (21.18 +6.70%): Upgraded to Buy from Neutral at Goldman, target $27; also mentioned positively at JPMorgan
Mid Cap Losers - BBRY (10.58 -3.47%): Continued volatility surrounding rumors co may go private; yesterday Lenovo's CEO said that Lenovo, rumorerd to have interest in BlackBerry, is focused on itself
- IOC (71.81 -3.09%): PNG Industry News reporting that ExxonMobil's exclusive period of negotiations for stake of co's Elk-Antelope field in Papua New Guinea has ended without a deal; co said it would not comment on the report and that negotiations are ongoing
- JCP (13.49 -2.46%): Weakness following poor results from Nordstrom (JWN)
10:00AM Alcatel-Lucent announced amendments to Alcatel-Lucent USA Inc.'s senior secured credit facilities ( ALU) 2.75 +0.08 : Co announced that its wholly-owned subsidiary, Alcatel-Lucent USA Inc., has entered into amendments to its Senior Secured Credit Facilities announced on January 30, 2013. The amendments have the effect of changing certain covenants governing the Facilities, lowering the interest rate on the $1,750 million 7.25% Senior Secured Term Loan Facility due 2019 to 5.75% and lowering the interest rate on the EUR 300 million 7.50% Senior Secured Term Loan Facility due 2019 to 6.25%. As of August 16, 2013 the principal amount outstanding on the Dollar tranche is $1,741 million and the principal amount outstanding on the Euro tranche is EUR 298 million.
Cisco (CSCO) announced that Shenandoah Telecommunications (SHEN) has updated its dense wavelength division multiplexing fiber-optic network with Cisco's Coherent DWDM technology to support 100 Gigabit per second speeds to its subscribers throughout Virginia, West Virginia and Maryland.
07:39 am Applied Materials shares fall 2% following miss on earnings and disappointing guidance
Applied Materials (AMAT $15.00 -0.32) reported third quarter earnings of $0.18 per share, which was below expectations, while revenues fell 15.7% year/year to $1.98 billion which is also below expectations. The company issued guidance for the fourth quarter with EPS of $0.16-0.20, which is worse than expected, with revenues of approximately flat compared to previous quarter or approximately $1.975 billion which is below expectations.
Applied generated orders of $2.00 billion, down 12 percent from the prior quarter as a seasonal decline in foundry bookings was partially offset by growth in memory and logic orders along with higher bookings in the Display Group and Applied Global Services. Silicon Systems Group orders were $1.20 billion, down 22 percent, due to a decrease in foundry orders, partially offset by increases in memory and logic orders. Net sales of $1.27 billion declined 1 percent. Display orders were $256 million, up 31 percent led by a recovery in TV equipment demand. Gross margin was 42.9 percent on a non-GAAP adjusted basis, down slightly from 43.2 percent in the prior quarter.
"Consumers' appetite for mobile devices and larger TVs is driving healthy demand for our semiconductor and display equipment...We are seeing stronger investment by our memory customers, and our display business booked its highest orders in over two years."
The company announced that its Board of Directors has appointed Gary E. Dickerson as president and chief executive officer (CEO) and Michael R. Splinter as executive chairman of the Board of Directors, effective September 1, 2013. Mr. Dickerson also was elected a member of the Board of Directors, effective at the same time. Mr. Dickerson is currently president of Applied Materials and succeeds Mr. Splinter who has served as the Company's CEO since 2003. 07:38 am Aspen Tech shares spike 14% following better than expected earnings
Aspen Tech (AZPN $36.40 +4.58) reported fourth quarter earnings of $0.24 per share, which is better than expected, while revenues rose 30.2% year/year to $83.3 million which is better than expected. Subscription and software revenue was $65.2 million in the fourth quarter of fiscal 2013, an increase from $45.8 million in the fourth quarter of fiscal 2012. Services & other revenue was $18.0 million in the fourth quarter of fiscal 2013, compared to $18.2 million in the fourth quarter of fiscal 2012. 07:37 am Dell shares little changed following beat on earnings and LBO process continues
Dell (DELL $13.52 -0.18) reported second quarter earnings of $0.25 per share, excluding non-recurring items, which was better than expected, while revenues rose 0.2% year/year to $14.51 billion which was also better than expected. Operating Segments Summary: Enterprise Solutions Group revenue was $3.3 billion, an 8% increase. Operating income for the quarter was $137 million, a 9% decrease. Dell server, networking and peripherals revenue increased 10%, the fifth consecutive quarter of growth for this business, driven by continued strength in hyper-scale data center servers. Dell networking continued to grow, with a 19% revenue increase.
Dell storage revenue declined 7%. Dell Services revenue was $2.1 billion, up 2%, driven by a 3% increase in support and deployment revenue and a 5% increase for infrastructure, cloud and security services revenue. Applications and business process services revenue declined 6%. Total Services operating income was $339 million, a 1% increase. Dell Software revenue was $310 million, and recorded an operating loss. The co is continuing to enhance its software capabilities with investments in this business that increase R&D and sales capacity. End User Computing revenue was $9.1 billion in the quarter, a 5% decrease. Operating income for the quarter was $205 million, a 71% decrease.
Dell desktop and thin client revenue increased 1%, mobility revenue declined 10%, and revenue from software from third parties and peripherals declined 5%. Dell was the only vendor among the top five worldwide to increase PC unit-shipment share both year over year and sequentially in the past two calendar quarters, according to IDC. Given the company's announcement on Feb. 5 of a definitive merger agreement to take Dell private, the co is not providing an outlook.
Don, I know I am nitpicking but the SOXM data in your last post is sorted by future expectations for next year's P/E. MU is not profitable now and actually has had a long term high rate of cash burn so expectations have often been disappointing. I would not want anyone to think MU is profitable at this time. |
