Notable earnings/guidance movers: DOCS +14.9%, DESP +10.1% on upside; DXC -19%, CBRL -8.7%, AMAT -1.2% on downside
- Earnings/guidance gainers: DOCS +14.9%, DESP +10.1%
- Earnings/guidance losers: DXC -19%, CBRL -8.7%, GLOB -6%, CPRT -3.5%, TTWO -2.6%, AMAT -1.2%
Closing Stock Market Summary
The major indices extended further into record territory today. The S&P 500 was up 0.3% at its high, the Nasdaq Composite showed a 0.3% gain at its best, and the Dow Jones Industrial Average traded above 40,000 for the first time at its high, sporting a 0.4% gain
Participants were lacking conviction, though, even when the market was at intraday highs. Market breadth was mixed through the entire session, skewing more negative by the close. Decliners led advancers by an 11-to-10 margin at both the NYSE and the Nasdaq.
The major indices all closed with modest losses after early gains faded in the afternoon. The late pullback was driven in part by a sense that stocks are due for a cooldown after reaching fresh all-time highs.
A slight rise in market rates also contributed to the modest pullback in equities. The 10-yr note yield settled two basis points higher at 4.38% and the 2-yr note yield settled five basis points higher at 4.79%.
Ten of the 11 S&P 500 sectors registered declines, but like index-level moves, the losses were relatively modest. None of the sector fell more than 0.8%. The consumer discretionary sector was the worst performer, dropping 0.8%, followed by the materials sector, which closed 0.7% lower.
The S&P 500 consumer staples sector was alone in positive territory at the close, showing a 1.5% gain. A sizable gain in shares of Walmart (WMT 64.00, +4.17, +7.0%) following impressive earnings results and outlook.
Meanwhile, Fellow Dow component Cisco (CSCO 44.32, -1.34, -2.7%) received a negative response to its earnings news.
Today's economic data did not garner much of a response from stocks or bonds. Weekly jobless claims continue to run below slowdown-like levels and housing starts were weaker-than-expected April. April import-export prices, the May Philadelphia Fed Index, and April industrial production were also released this morning.
- S&P 500:+11.1% YTD
- Nasdaq Composite: +11.2% YTD
- S&P Midcap 400: +8.4% YTD
- Dow Jones Industrial Average: +5.6% YTD
- Russell 2000: +3.4% YTD
Reviewing today's economic data:
- Initial jobless claims for the week ending May 11 decreased by 10,000 to 222,000 (consensus 218,000). Continuing jobless claims for the week ending May 4 increased by 13,000 to 1.794 million.
- The key takeaway from the report is that the level of initial jobless claims remains supportive of an economy that is not steering toward a recession.
- Housing starts increased 5.7% month-over-month in April to a seasonally adjusted annual rate of 1.360 million units (consensus 1.440 million). Building permits declined 3.0% month-over-month to a seasonally adjusted annual rate of 1.440 million (consensus 1.488 million).
- The key takeaway from the report is that there wasn't any strength in single-unit starts (-0.4% month-over-month) or single-unit permits (-0.8%), which is a setback for an inventory-constrained existing home market dealing with the added constraint of high mortgage rates and high prices that have created affordability pressures.
- Import prices increased 0.9% month-over-month in April (+1.1% yr/yr). Excluding fuel, they were up 0.7% (+0.9% yr/yr). Export prices rose 0.5% month-over-month in April (-1.0% yr/yr). Excluding agricultural products, they were up 0.7% (+0.1% yr/yr).
- The key takeaway from the report is that import and nonfuel import prices have accelerated in each of the last two months, which is contributing to inflation sticking stubbornly above the Fed's 2% target.
- The Philadelphia Fed Index for May checked in at 4.5 (consensus 5.0) versus 15.5 in April. A number above 0.0 is indicative of expansion, so the May reading connotes a slowdown in the pace of expansion versus the prior month.
- The key takeaway from the report is that manufacturing activity in the Philadelphia Fed region is still positive, but weakened in May in a manner that fits with a slower growth narrative.
- Total industrial production was unchanged month-over-month in April (consensus 0.2%) following a downwardly revised 0.1% (from 0.4%) in March. The capacity utilization rate dipped to 78.4% (consensus 78.4%) from an upwardly revised 78.5% (from 78.4%) in March. Total industrial production was down 0.4% yr/yr while the capacity utilization rate was 1.2 percentage points below its long-run average.
- The key takeaway from the report was the weakness in manufacturing output, which goes hand-in-hand with a lower growth outlook.
Looking ahead, Friday's economic lineup is limited to the April Leading Indicators Index at 10:00 ET.
UK to lift ban on debit card use on gaming machines
Move designed to boost physical venues under pressure from online betting
The UK is to lift a ban on the use of debit cards on gaming machines in casinos, pubs and other venues, in a move to boost a physical gambling industry under pressure from online betting.
The Department for Culture, Media and Sport said it would propose to allow transactions of up to £100 a time and require account verification, such as the use of chip and pin, to protect players. It would retain a ban on the use of credit cards.
The measures were set out on Thursday as part of a drive to modernise decades-old gambling regulations.
The removal of the debit card ban would “strike an appropriate balance between regulation applicable to modern payment methods, consumer benefits and protection of the licensing objectives”, the department said.
The Gambling Commission will also consult on protection measures, such as imposing a minimum time between transactions and the triggering of staff alerts when limits are reached.
The commission had said after a 2021 survey that cash was viewed as “the best way to maintain control over gambling spend”.
The liberalisation of the gaming machine rules comes as the government moves to level the playing field between physical gambling locations and online betting.
The ban on digital payments was viewed by the gaming industry as disadvantaging casinos against online rivals, where cashless payments flow freely.
Stuart Andrew, the minister for sport, gambling and civil society, said in a statement that while the current prohibition, set in 2007, was intended to protect players, “some sectors, particularly machines in pubs, are seeing business disappear because customers do not carry cash”.
“We will help future-proof the industry by removing this prohibition subject to appropriate player protections being put in place,” he added.
Other measures to bolster land-based venues include enabling casinos to offer more machines and allowing arcades and bingo halls to have a higher number of bigger-stake gaming machines.
Casino operator Rank Group welcomed the lifting of the cashless ban and the increase in the number of slot machines. Its shares rose 6 per cent after the announcement. “We are looking forward to improving the customer proposition in our venues,” said John O’Reilly, chief executive.
Adam Rivers, managing director of Alvarez & Marsal, a consultancy, said cashless payments at casinos were a “real positive step” that followed good practice in other jurisdictions and would cater to changing consumer demand.
Matt Zarb-Cousin, director of Clean Up Gambling, a campaign group, said permitting debit cards directly on gaming machines would present “significant risks”.
He added the government should have only allowed cashless payments through a digital smartphone wallet, which could have enabled limits on the size of bets.
GSK sells off remaining stake in Haleon
The sale of its 4.2 per cent holding is expected to raise around £1bn
GSK is selling its remaining stake in Haleon, the consumer healthcare company it spun off and listed in London in July 2022, in a move that underscores how pharmaceutical groups are streamlining their businesses to focus on high-value medicines.
The sale of the 4.2 per cent stake will help the FTSE 100 drugmaker to raise just over £1bn, based on the current Haleon valuation. The move marks the end of GSK’s links to the maker of Panadol painkillers and Sensodyne toothpaste.
The British pharmaceutical company’s exit from Haleon was anticipated and it had made three previous stock disposals since May 2023, when it held 12.9 per cent of the company’s shares.
In total, stock disposals over the past year are expected to help GSK raise just under £4bn, which can be redirected to reducing debt or for mergers and acquisitions.
The listing and stock sale have come as pharmaceutical businesses seek to focus on developing new medicines that can be sold at high prices and cutting back on lower-earning divisions such as consumer healthcare.
Haleon was formed in 2019 as a joint venture of Pfizer and GSK’s consumer health assets. The decision to list the division in 2022 marked the largest public offering in London in a decade.
It came after years of pressure from shareholders, with activist investor Elliott Advisors building a stake in the UK drugmaker and pushing GSK to speed up the process.
Haleon has undertaken its own restructuring programme, taking steps to dispose of non-core brands, such as its sale of lip balm brand ChapStick to private equity group Yellow Wood Partners for $430mn.
GSK is not the only pharmaceutical company to take steps to streamline its business. France’s Sanofi is also preparing for a potential separation of its consumer healthcare division, while Johnson & Johnson spun out its consumer arm Kenvue in 2023.
Pfizer retained a 32 per cent stake in Haleon after its IPO and it continues to hold an 18.3 per cent position. The US drugmaker has also reduced its stake in recent months and plans to eventually exit the company.
Announcing the sale after market close on Thursday, GSK said the offer price would be determined through an accelerated bookbuild offering process that is to start immediately.
BT’s CEO says she ‘loves to squeeze’ short sellers while unveiling £3bn of cost cuts
UK’s biggest telecoms group rises 17% as Allison Kirkby announces strategy and raises dividend
BT’s new chief executive Allison Kirkby said “I always love to squeeze the shorts . . . and prove them wrong” as she laid out her plans to turn around the UK telecoms group, sending shares up over 17 per cent.
Kirkby made the remark after the Financial Times earlier this week revealed investors had placed a record £300mn bet against the FTSE 100 company. She announced on Thursday that BT would cut another £3bn of costs and increase its dividend, and added that having a new chief executive who had not yet unveiled a strategy had encouraged shorting.
“I’m hoping now that we’ve set out a very transparent, multiyear and confident plan that some of those shorts will start to diminish,” Kirkby told the FT.
Kirkby, who took over BT in February, said the group had hit an original £3bn target for gross annualised cost savings a year ahead of schedule, and announced a new target of the same size to be reached by the end of its 2029 financial year.
BT shares closed up 17.2 per cent to 132.60p on Thursday.
The company’s reported operating costs were £18.6bn in the year to March 31. Kirkby told journalists that the additional cost-savings programme would focus on the continuing shutdown of legacy networks and migration of customers to next-generation networks, simplifying products, platforms and processes and using new digital and artificial intelligence platforms.
She said there was no change to the previously announced target to cut up to 42 per cent of the group’s workforce by the end of the decade.
The comments came as the telecoms group reported results for the year to March. BT declared a final dividend of 5.69p a share, bringing the full-year dividend to 8p, up from 7.7p last year.
Kirkby said BT had “reached the inflection point on our long-term strategy”. She added that it would focus on the UK and was “exploring options to optimise our global business”, including exiting some markets. The group provides products and services in about 180 countries.
Kirkby added that BT had passed peak capital expenditure on its rollout of full fibre broadband across the country, helping it raise its cash flow guidance.
The group expects to reach normalised free cash flow of about £1.5bn in its 2025 financial year, up from £1.3bn in the year just ended, and about £3bn by the end of the decade. It expects adjusted revenue growth of between zero and 1 per cent in the current year and earnings before interest, taxes, depreciation and amortisation of £8.2bn, up from £8.1bn in the year just ended.
Karen Egan, head of telecoms at Enders Analysis, said the decision to increase the dividend and clearly define cash flow expectations helped to “shore up confidence” in the cash flow recovery and “assuage the doubters”.
However, BT warned it could face further broadband losses to competitors, after losing 491,000 customers for the full year, if the market remained weak.
The group’s business division, which was created from a merger of its global and enterprise units in 2022, reported a decline in annual adjusted revenue and ebitda. The company has taken a £488mn goodwill impairment charge on the operation, “reflecting a decline in profitability in recent years”.
This contributed to the 31 per cent fall in group pre-tax profits to £1.2bn.
BT also announced a delay to its public switched telephone network turn-off, an industry-led initiative to transition to a digital phone system, from the end of 2025 to the end of January 2027 following a pause in non-voluntary migrations across the sector.
The FT last month revealed two Virgin Media O2 customers had died following the failure of their telecare devices after the upgrade process, which prompted a government announcement in December that it had secured industry commitments to protect vulnerable customers.
WSJ : Crescent Energy to Acquire SilverBow in $2.1B Deal
The energy companies said the combination will create the second largest operator in the Eagle Ford Shale.
SilverBow Resources has agreed to be acquired by its Houston-based rival Crescent Energy in a deal valued at $2.1 billion.
Shares of SilverBow jumped 11% in premarket trading to $36. Crescent shares slid 1% to $12.11.
The energy companies said Thursday that combining will create the second largest operator in the Eagle Ford Shale.
Under the terms of the transaction, SilverBow shareholders are set to exchange one share for 3.125 shares of Crescent stock, with an option to receive all or a portion of the proceeds in cash valued at $38 a share. That option is subject to a possible proration based on a maximum cash consideration of $400 million.
The deal is structured so that Crescent shareholders will ultimately own about 69% to 79% of the combined company while SilverBow investors will own the remaining 21% to 31%, the companies said.
The tie-up has been unanimously approved by the boards of both companies. About 43% of Crescent shareholders are currently in support of the deal. Shareholders of each company and regulators still have to approve the transaction, which is expected to close by the end of the third quarter.
SilverBow has been working for months to fend off a proxy fight from shareholder Kimmeridge Energy Management, which has sought to combine the company with Kimmeridge Texas Gas.
Corrections & Amplifications
This article was corrected at 8:39 a.m. ET because it misstated that Kimmeridge Texas Gas was behind the proxy fight. SilverBow has been working for months to fend off a proxy fight from shareholder Kimmeridge Energy Management, which has sought to combine the company with Kimmeridge Texas Gas.
Dow Jones Newswires, 16 May 2024 8:38:59 AM
Correction to Crescent Energy Article
SilverBow has been working for months to fend off a proxy fight from shareholder Kimmeridge Energy Management, which has sought to combine the company with Kimmeridge Texas Gas. “Crescent Energy to Acquire SilverBow in $2.1 Bln Deal” at 8:09 a.m. ET misstated that Kimmeridge Texas Gas was behind the proxy fight.