After Hours Summary: JBLU makes bid for SAVE, setting up possible bidding war with ULCC; GOGO +11% on news it will join S&P SmallCap 600; ARRY +14.7% up nicely on earnings, new CEO
After Hours Gainers:
Companies trading higher in after hours in reaction to earnings/guidance: ARRY +14.7% (also names new CEO), NG +5%
Companies trading higher in after hours in reaction to news: GOGO +11% (to join S&P SmallCap 600), BCEL +3.9% (BCEL announces licensing agreement with ZYME), OSK +1.2% (House Committee holds hearing on USPS' truck contract, according to Electrek), RIVN +1% (provides Q1 production data, says well-positioned to meet 25,000 annual production guidance), IOVA +0.8% (provides regulatory and clinical updates for lifileucel in metastatic melanoma; plans to complete BLA submission by August), RIOT +0.7% (provides production and operations update for March), PSB +0.2% (names new CEO), REXR +0.1% (acquires four properties for $83 mln)
After Hours Losers:
Companies trading lower in after hours in reaction to earnings/guidance: SGH -1.8% (also authorizes $75 mln for share repurchases)
Companies trading lower in after hours in reaction to news: SAVE -1.8% (JBLU makes bid to acquire SAVE for $33/sh in cash; ULCC already has merger deal with SAVE, sets up possible bidding war), ULCC -1.6% (JBLU makes bid to acquire SAVE for $33/sh in cash; ULCC already has merger deal with SAVE, sets up possible bidding war), CRDF -0.8% (files mixed securities shelf offering), JBLU -0.7% (JBLU makes bid to acquire SAVE for $33/sh in cash; ULCC already has merger deal with SAVE, sets up possible bidding war), ADI -0.6% (announces new long-term financial modeling at Investor Day), ZYME -0.3% (BCEL announces licensing agreement with ZYME), NINE -0.3% (files for $250 mln mixed shelf offering; also files offering by selling shareholders), CBOE -0.2% (reports trading volume for March)
Closing Stock Market SummaryThe S&P 500 fell 1.3% on Tuesday, as a sharp rise in interest rates weighed on the growth stocks and risk sentiment following some hawkish-sounding Fed commentary. The Nasdaq Composite (-2.3%) and Russell 2000 (-2.4%) underperformed with losses over 2.0% while the Dow Jones Industrial Average fell 0.8%.
The session started with a slight reversal of yesterday's action, such that value stocks had a slight edge over growth stocks at the open. Selling interest picked up more broadly after Fed Governor Brainard (FOMC voter) said she expects the Fed's balance sheet to shrink considerably more rapidly than in the previous recovery, starting as early as May.
Interest rates pushed even higher, which was particularly harrowing for the growth stocks after they caught a speculative bid yesterday. The 2-yr yield rose nine basis points to 2.51%, and the 10-yr yield rose 14 basis points to 2.55%.
The S&P 500 information technology (-2.2%), consumer discretionary (-2.4%), and communication services (-1.4%) sectors underperformed amid weakness in the mega-caps. Despite the curve-steepening bias in the Treasury market, the financials sector (-0.8%) struggled in negative territory.
Investors leaned defensively into the utilities (+0.7%), health care (+0.2%), consumer staples (+0.1%), and real estate (+0.1%) sectors. Likewise, the U.S. Dollar Index (99.48, +0.48, +0.5%) strengthened, and the CBOE Volatility Index (21.03, +2.46, +13.3%) shot higher.
Another factor driving the increased selling in longer-dated maturities was the March ISM Non-Manufacturing Index. The headline index accelerated to 58.3% (Briefing.com consensus 58.5%) from 56.5% in February, but more noteworthy was the Prices Paid Index (83.8%), which hit its second-highest reading ever.
The report fueled inflation expectations, and in effect, rate-hike expectations. On a related note, Kansas City Fed President George (FOMC voter) told Bloomberg that a 50 basis-point rate hike is an option next month. A separate viewpoint was that the news served as an excuse for the stock market to further consolidate its recent rebound.
Separately, Twitter (TWTR 50.98, +1.01, +2.0%) shares rose 2% after the company said it will appoint Elon Musk to its Board of Directors. Recall, TWTR shares jumped 27% yesterday after Elon became the company's largest shareholder.
WTI crude futures settled lower by 1.8%, or $1.81, to $101.53/bbl.
Reviewing Tuesday's economic data:
- The ISM Non-Manufacturing Index for March increased to 58.3% (consensus 58.5%) from 56.5% in February. The dividing line between expansion and contraction is 50.0%. The March reading marks the 22nd straight month of growth for the services sector, with some acceleration from the prior month.
- The key takeaway from the report is that business activity for the non-manufacturing sector picked up in March following an Omicron-related slowdown in February; however, respondents continue to bemoan supply chain constraints and elevated cost pressures.
- The February Trade Balance Report showed a deficit of $89.2 billion (consensus -$88.5 billion) versus an upwardly revised deficit of $89.2 billion for January (from -$89.7 billion). The three-month moving average for total trade in goods and services widened to $86.8 billion in February from $83.7 billion in January and $66.2 billion a year ago.
- The key takeaway from the report is that it reflects a fractured trade situation that remains broken by COVID-related problems that have snarled supply chains and fueled economic imbalances.
Looking ahead, investors will receive the FOMC Minutes from the March meeting and the weekly MBA Mortgage Applications Index on Wednesday.
- Dow Jones Industrial Average -4.7% YTD
- S&P 500 -5.1% YTD
- Russell 2000 -8.9% YTD
- Nasdaq Composite -9.2% YTD