From Briefing.com: 4:20 pm : The S&P 500 settled lower by 0.6% despite making a brief appearance in positive territory following the release of the FOMC minutes.
Although the minutes from the July meeting offered few changes from prior statements, they did indicate broad support for Chairman Bernanke's timeline, which would likely call for tapering as early as September. However, this was coupled with cautious comments regarding the labor market as the minutes noted, "The June employment report showed continued solid gains in payrolls. Nonetheless, the unemployment rate remained elevated, and the continuing low readings on the participation rate and the employment-to-population ratio, together with a high incidence of workers being employed part time for economic reasons, were generally seen as indicating that overall labor market conditions remained weak."
Overall, the minutes did not provide a clear-cut signal regarding the Fed's tapering schedule and the mixed reaction across markets suggests a certain level of uncertainty remains present.
The reaction in Treasuries was consistent with expectations of tapering in the near-term as the benchmark 10-yr yield jumped four basis points to 2.86%. Today's selling had the biggest impact on the belly of the curve as the 5-yr yield jumped more than 6 bps to 1.606%. However, the yield still managed to close just below Monday's two-year high.
Meanwhile, equities sold off in a knee-jerk response, but the S&P followed the slide with a rally to fresh highs before returning into the red just ahead of the close.
All ten sectors registered losses with rate-sensitive telecom services (-1.2%) and utilities (-1.2%) leading to the downside.
Out of the ten sectors, only energy (-0.5%), health care (-0.5%), and technology (-0.1%) outperformed the broader market. The tech sector held up relatively well and despite today's loss, it is the only sector trading with an August gain (0.4%).
The CBOE Volatility Index (VIX 15.93, +1.02) jumped to its highest level since July 5 as participants favored protection against volatility.
Trading volume was the heaviest of the week, but at 658 million shares traded on the NYSE, it remained comfortably below average.
Today's economic data focused on housing. The weekly MBA Mortgage Index remained in a downtrend with today's 4.6% fall marking the thirteenth decline out of the past fifteen readings including last week's 4.7% slide.
In addition, July existing home sales rose 6.5% to 5.39 million from a downwardly revised 5.06 million (from 5.08 million) in June. The Briefing.com consensus expected existing home sales to increase to 5.10 million. Sales are at their highest point since November 2009 when the impending expiration of the homebuyer tax credit pulled forward a large number of existing home purchases. Excluding the stimulus measures, that was the most homes sold since March 2007. The big bump in sales was surprising considering both the Pending Home Sales Index and the Mortgage Bankers Association's Mortgage Purchasing Index declined notably in July and mortgage rates returned to two-year highs.
Tomorrow, weekly initial claims will be reported at 8:30 ET while the June FHFA Housing Price Index and July Leading Indicators will be announced at 9:00 ET and 10:00 ET, respectively.DJ30 -105.44 NASDAQ -13.80 SP500 -9.55 NASDAQ Adv/Vol/Dec 811/1.39 bln/1696 NYSE Adv/Vol/Dec 839/657.5 mln/2211
3:30 pm :
- Oct crude oil slipped deeper into negative territory following inventory data that showed a draw of 1.428 mln barrels when a draw of 1.0-1.5 mln barrels was anticipated. A stronger dollar index also put pressure on the energy component. Crude oil touched a session low of $103.50 per barrel after retreating from its session high of $105.07 per barrel. It eventually settled with a 1.2% loss at $103.88 per barrel
- Sep natural gas, however, spent its entire floor session in the black but traded in a narrow range between $3.46 and $3.40 per MMBtu. It settled with a 0.6% gain at $3.46 per MMBtu
- Precious metals traded lower as investors awaited the 14:00 ET release of the FOMC Minutes and as the stronger dollar pressured prices
- Dec gold fell to a session low of $1361.10 per ounce but erased most of the earlier losses, settling 0.1% lower at $1370.00 per ounce
- Sep silver brushed a session low of $22.88 per ounce and eventually settled at $22.97 per ounce, or 0.3% lower
5:02PM Photronics announces a product development initiative with Silicon Values BG Partners ( PLAB) 7.16 0.00 : Co announced a product development initiative with Silicon Values BG Partners, an early stage Silicon Valley venture capital fund, to adapt Photronics' novel glass structuring platform technology for use in thermal energy capture and processing applications. The initiative includes an investment from Silicon Values BG Partners.
4:33PM Semtech beats by $0.01, reports revs in-line; guides Q3 EPS below consensus, revs below consensus ( SMTC) 29.64 : Reports Q2 (Jul) earnings of $0.52 per share, $0.01 better than the Capital IQ Consensus Estimate of $0.51; revenues rose 9.5% year/year to $165.01 mln vs the $165.27 mln consensus.
Co issues downside guidance for Q3, sees EPS of $0.31-0.37, excluding non-recurring items, vs. $0.55 Capital IQ Consensus Estimate; sees Q3 revs of $135-145 mln, excluding non-recurring items, vs. $170.21 mln Capital IQ Consensus Estimate.
"We expect our Q3 results to be negatively impacted by both a reduction in demand and inventory corrections at several of our largest smartphone customers. We anticipate that this weakness will continue through most of the second half. However, we remain confident in our ability to manage through any short term demand fluctuations as we head towards our $1 billion revenue goal."
4:11PM Hewlett-Packard announces leadership changes: Chief Operating Officer Bill Veghte to become executive vice president and general manager of the HP Enterprise Group ( HPQ) 25.38 -0.46 : Co announced changes to its executive leadership team that will help the company accelerate its turnaround. Bill Veghte, HP's chief operating officer (COO), will become executive vice president and general manager of the HP Enterprise Group, a role that will now include responsibility for the coordinated development of the company's portfolio of cloud solutions. Dave Donatelli will take on a new role focused on identifying early-stage technologies as he did successfully with 3PAR and 3Com. In a separate organizational move, HP will combine its Marketing and Communications organizations under the leadership of Chief Communications Officer Henry Gomez.
4:10PM Hewlett-Packard reports EPS in-line, revs in-line; narrows FY13 EPS guidance ( HPQ) 25.38 -0.46 : Reports Q3 (Jul) earnings of $0.86 per share, excluding non-recurring items, in-line with the Capital IQ Consensus Estimate consensus of $0.86; revenues fell 8.2% year/year to $27.23 bln vs the $27.28 bln consensus.
- Personal Systems revenue was down 11% YoY with a 3.0% operating margin. Commercial revenue decreased 3% and Consumer revenue declined 22%. Total units were down 8% with Desktops units down 9% and Notebooks units down 14%.
- Printing revenue declined 4% YoY with a 15.6% operating margin. Total hardware units were up 5% with Commercial hardware units up 12% and Consumer hardware units up 2%. Supplies revenue was down 4%.
- Enterprise Group revenue declined 9% YoY with a 15.2% operating margin. Networking revenue was flat, Industry Standard Servers revenue was down 11%, Business Critical Systems revenue was down 26%, Storage revenue was down 10% and Technology Services revenue was down 7%.
- Enterprise Services revenue declined 9% YoY with a 3.3% operating margin. Application and Business Services revenue was down 11% and Infrastructure Technology Outsourcing revenue declined 7%.
- Software revenue was up 1% YoY with a 20.5% operating margin. Support revenue was up 4%, license revenue was flat, professional services revenue was down 11% and SaaS revenue was up 4%.
- HP Financial Services revenue was down 6% YoY with a 4% decrease in net portfolio assets and a 9% decrease in financing volume. The business delivered an operating margin of 11.3%.
Co issues in-line guidance for FY13, narrows EPS to $3.53-3.57, excluding non-recurring items, from $3.50-3.60 vs. $3.53 Capital IQ Consensus.
Large Cap Gainers - LOW (46 +4.36%): Beat quarterly Eps by $0.09 ($0.88 vs $0.79 estimate), revs rose 10.3% yoy to $15.71 bln vs $15.07 bln estimate; sees FY14 EPS of $2.10 (raised from $2.05) vs $2.09 estimate, sees FY14 revs +5% (~$53.04 bln, raised from +4% or ~$52.54 bln) vs $52.19 bln estimate; sees FY14 comparable sales +4.5% (raised from prior guidance of +3.5%)
- LMT (123.52 +0.91%): CNBC published article stating that cuts to Egyptian military aid are unlikely
- V (174.41 +0.69%): Bloomberg reporting that Visa and Mastercard (MA) do not plan to drop antitrust settlement with U.S. merchants over credit card fees
Large Cap Losers - SPLS (14.52 -13.78%): Missed quarterly EPS by $0.02 ($0.16 vs $0.18 estimatE), revs fell 2.2% yoy to $5.31 bln vs $5.37 bln estimate; lowered FY14 EPS to $1.21-1.25 (from $1.30-1.35) vs $1.32 estimate; lowered FY14 rev guidance
- IBN (26.57 -4.46%): Continued weakness in Indian markets and the Rupee
- TGT (65.62 -3.43%): Reported Q2 EPS of $0.95 (in-line), revs rose 2.0% yoy to $17.12 bln vs $17.27 bln estimate; sees Q3 EPS of $0.80-0.90 and FY14 EPS of $4.70-4.90
Mid Cap Gainers - INCY (34.86 +29.11%): Announced positive results of Phase 2 RECAP trial of ruxolitinib, its oral JAK1 and JAK2 inhibitor, in combination with capecitabine in patients with recurrent or treatment refractory metastatic pancreatic cancer
- VE (15.35 +7.79%): Upgraded to Overweight from Equal-Weight at Morgan Stanley
- CE (51.29 +4.82%): Signed Memorandum of Understanding to advance the development of synthetic fuel ethanol with PetroChina Company Limited
Mid Cap Losers - AEO (14.79 -9.71%): Reported Q2 EPS of $0.09 (vs $0.10 pre-announcement), revs fell 1.7% yoy to $727.3 mln vs $719 mln estimate and preannouncement of ~$725 mln; sees Q3 EPS of $0.14-0.16 vs $0.35 estimate, revs declining in high single digits vs -4.3% estimate; downgraded to Neutral at Piper Jaffray
- PETM (71.9 -4.13%): Beat quarterly EPS by $0.03 ($0.89 vs $0.86 estimate), revs rose 5.3% yoy to $1.71 bln (in-line); comparable store sales +3.4%; issued in-line Q3 guidance
- JCP (13.5 -3.64%): Hearing rumors that Bill Ackman may be selling his stake
12:02PM NVIDIA and Ubisoft form gaming alliance ( NVDA) 14.90 -0.05 : Co announced an alliance with Ubisoft to offer PC gamers the best gaming experiences possible for Ubisoft's biggest fall titles, including Tom Clancy's Splinter Cell Blacklist, Assassins Creed IV Black Flag and Watch Dogs. NVIDIA's developer technology team is working with Ubisoft's development studios on incorporating graphics technology innovations to create game worlds that deliver new heights of realism and immersion.
LSI Corp. (LSI) has started delivering the Axxia 5500 communication processor family to key OEM customers.
O2Micro International (OIIM) announced the grant of a key Battery Pack Protection patent.
7:02AM JinkoSolar Holding to supply 23MW PV modules to Swinerton builders for California solar farm ( JKS) 13.83 : Co announced that it will supply 23MW of Solar PV modules to Swinerton Builders, a leading US Engineering and Construction Company and Clenera, a clean energy finance and management firm. According to terms of the agreement, deliveries will be completed during the 4th quarter of 2013. Swinerton will utilize JinkoSolar's 300W 72 cells high-efficiency PV modules in its construction of the Westland Solar Farms, LLC ground-mounted solar plant in Fresno County, California. When completed, this Utility Scale Solar Farm will provide electricity to PG&E.
EVault, a Seagate company (STX), announced a strategic partnership with Memory World, a distributor of computer memory, digital storage solutions, digital media players and network access storage including both NAS and SAN solutions in Singapore. Memory World was selected to distribute EVault SaaS, EVault Endpoint Protection and EVault Software in Singapore, further expanding EVault's reach in this fast-growing market.
07:43 am Analog Devices shares fall 2% despite beat on earnings and in line guidance
Analog Devices (ADI $46.60 -1.25) reported third quarter earnings of $0.57 per share, excluding non-recurring items, which is better than expected, while revenues fell 1.3% year/year to $674.2 million which is slightly ahead of expectations. Q3 Gross margin was 64.5% of revenue. The company issued in-line guidance for the fourth quarter with EPS of $0.55-0.61 which is in line with estimates with revenues of $675-700 million which is line with expectations.
Q4 Gross margin estimated to be approximately 65%. "By end market, industrial applications totaled 47% of revenue, communications infrastructure was 21% of revenue, and automotive and consumer applications were 18% and 15% of revenue, respectively...Order rates improved across all of our end markets during the third quarter, and we saw the strongest sequential revenue growth from products used in communications infrastructure applications. It appears that customer order rates were in-line with consumption, keeping inventories low."
10:53 am Apple tgt raise details -- to $560 from $500 at UBS; higher 5C price and margin: . UBS raised its AAPL tgt to $560 from $500 after the firm 'rejiggered' its conservative assumptions in its detailed product model for the expected midrange iPhone 5C. Its price assumption increases from $379 to $399 and GMs rise from 32% to 38% on a lower bill of materials, making the 5C accretive to earnings. UBS values Apple on an increased EV/FCF multiple of 6.5x (from 6x) its C14 FCF estimate of $50 bln; on a P/E, its target would be 12x its C2014 EPS estimate of $47.18.
09:06 am Best Buy target raised to $42 at Telsey Advisory Group: . Telsey Advisory Group raises their BBY tgt to $42 from $31. Best Buy delivered a 2Q13 result that exceeded their expectations on every line item, including an impressive (0.4%) domestic comp, which beat their estimate of (2.5%) and the consensus of (0.8%). While the co continues to make good progress toward its target of $725MM in annualized cost savings, they believe a return to positive domestic comps this year would be a favorable, unexpected surprise for investors. CEO Hubert Joly's Renew Blue plan continues to deliver on the cost-cutting initiatives, while also driving e-commerce growth and store productivity metrics that should yield significantly higher earnings in 2014 and beyond.
09:00 am Best Buy target raised to $40 at Stifel: . Stifel raises their BBY tgt to $40 from $30; they believe mgmt is starting to build a track record at finding and executing on past mis- (or lack of) mgmt and such improved visibility warrants a more favorable multiple -- there remain significant pockets of opportunity. They continue to believe other store-within-a-store vendor concepts may happen. Mgmt, product cycle, and vendor support are all improving vs. 2008-2012. They think TV is benefiting (and will continue to) from housing turnover with LED 50"+ having fallen to attractive price points. While this does not mean BBY is a new growth story it does suggest significant opportunities exist -- and 2Q13 showed evidence of exactly that.
07:26 am ViroPharma: Peaking under the hood, a lot not in the stock - Mizuho: . Mizuho remains enthusiastic about VPHM's prospects for longer term Cinryze growth in HAE, with some subcutaneous clarity coming in the next 3-6 months from both ph20 and low volume studies, and non-HAE indications are garnering more attention: PNH, AMR and optic neuritis. They await FDA interaction on maribavir breakthrough status, which could shorten the timeline to a 2015/16 approval. The pipeline is largely not in Street models, the same goes for Meritage's OBS, for which VPHM could exercise option post mid-2014 Phase II data. $30 looks like attractive entry point.
06:48 am NPS Pharm target raised to $28 from $19 at Oppenheimer: . Oppenheimer raises their NPSP tgt to $28 from $19; they conducted a survey of 25 community gastroenterologists to assess their current view on Gattex and the future growth potential for the drug. Their results show that while most docs are aware of Gattex, most of their patients are not. Over the next three years their surveyed physicians plan to increase their Gattex prescriptions significantly, part of which is likely to be driven by increased patient awareness, positive feedback from initial patients, and improved reimbursements.
Micros Systems (MCRS) and PayPal announced a new strategic global collaboration to integrate PayPal into MICROS' widely deployed POS platforms to enable better payments experiences for consumers - whether using a card, online, mobile phone, checking in to pay, or by simply typing in a mobile number and PIN . Central to this collaboration, multiple MICROS hospitality and retail point-of-sale platforms used in hundreds of thousands of merchant locations around the world will soon offer the ability to seamlessly work with the innovative PayPal mobile application.
Advances & Declines
NYSE NASDAQ | Advances | 1,066 (26%) | 803 (31%) | | Declines | 2,986 (72%) | 1,692 (65%) | | Unchanged | 116 (3%) | 96 (4%) | | Up Vol* | 831 (25%) | 403 (29%) | | Down Vol* | 2,465 (74%) | 978 (70%) | | Unch. Vol* | 36 (1%) | 26 (2%) | | New Hi's | 46 | 86 | | New Lo's | 268 | 53 |
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