Closing Stock Market SummaryThe S&P 500 lost 0.4% on Tuesday in a news-heavy session. Company-specific news contributed to outsized stock moves, but overall gains in broader market had been nominal until a hiccup on the Brexit front dragged the major indices into negative territory. The benchmark index closed at session lows below the 3000 level.
The Dow Jones Industrial Average shed 0.2% amid mixed reactions to earnings results from Procter & Gamble (PG 122.18, +3.10, +2.6%), United Technologies (UTX 141.41, +3.06, +2.2%), McDonald's (MCD 199.27, -10.58, -5.0%), and Travelers (TRV 130.15, -11.76, -8.3%). The Nasdaq Composite lost 0.7%, while the Russell 2000 added 0.1%.
Regarding Brexit, UK lawmakers endorsed Prime Minister Boris Johnson's deal, but voted against a speedy timetable to approve Brexit legislation in the next three days. The news caused a knee-jerk reaction to the downside for equities, as it makes an extension request more likely and increases the uncertainty in the market.
The information technology sector (-1.4%) succumbed to broad-based selling and was today's laggard. The communication services sector (-0.9%) followed suit amid sizable losses in Facebook (FB 182.34, -7.42, -3.9%) and Netflix (NFLX 266.69, -11.36, -4.1%), while the energy sector (+1.3%) was today's leader amid a bounce in oil prices ($54.38, +$1.09, +2.4%).
Facebook was hit by news that it is now being probed by 47 attorney generals for possible antitrust violations. Netflix fell after Verizon (VZ 60.77, +0.02, unch) partnered with Walt Disney (DIS 132.40, +2.14, +1.6%) to provide its customers with free access to Disney+ for one year.
Biogen (BIIB 281.87, +58.36, +26.1%) was a notable story stock on Tuesday. Shares surged 26% after the company surprised investors by saying it will seek FDA approval for its Alzheimer's drug in 2020 after it had renounced the treatment in March. Biogen also beat top and bottom-line estimates.
Separately, shares of Lyft (LYFT 43.56, +2.68, +6.6%) and Uber (UBER 32.53, +1.12, +3.6%) reacted positively to comments from Lyft's co-founders that it could reach profitability (adjusted EBITDA) sooner than expected by the end of 2021.
U.S. Treasuries finished the session mixed. The 2-yr yield increased two basis points to 1.61%, and the 10-yr yield declined two basis points to 1.77%. The U.S. Dollar Index increased 0.2% to 97.47.
Friday's lone economic report was Existing Home Sales for September:
- Existing home sales decreased 2.2% month-over-month in September to a seasonally-adjusted annual rate of 5.38 million (consensus 5.52 mln) from a revised 5.50 million (from 5.49 million) in August. Total sales were 3.9% higher than the same period a year ago.
- The key takeaway from the report is that upward pressure on prices is likely to persist as inventory of unsold homes continues decreasing from last year's levels.
Looking ahead, investors will receive the FHFA Housing Price Index for August and the weekly MBA Mortgage Applications Index on Wednesday.
- Nasdaq Composite +22.1% YTD
- S&P 500 +19.5% YTD
- Dow Jones Industrial Average +14.8% YTD
- Russell 2000 +15.0% YTD
WeWork board backs takeover by SoftBank
Co-founder Adam Neumann will get $1.7bn to step down as chair
The WeWork board agreed to a multibillion-dollar bailout and investment package from SoftBank on Tuesday, handing control of the cash-strapped company to the Japanese telecoms-to-technology group and releasing it from the grip of its co-founder Adam Neumann, according to people briefed on the matter.
SoftBank, which was already WeWork’s largest backer, is to pump billions of dollars into the shared office company through new loans and equity, and will provide Mr Neumann a nearly $1.7bn package to step down from the board, the people said.
SoftBank’s proposal includes injecting $6.5bn into WeWork, with $5bn of that in debt, in a deal that values the company at about $8bn, the FT reported on Monday.
The Japanese group founded by Masayoshi Son is expected to pay Mr Neumann a roughly $185m consulting fee that will also see him step down as chairman of the board and will loan him $500m to pay off debts of a similar amount, the people said.
SoftBank also plans to buy about $1bn worth of stock from the co-founder as part of a tender for as much of $3bn of shares from early investors and employees.
The board had considered a rival rescue financing package from JPMorgan, the bank that had led its attempt to go public and with which it has deep ties. But the Wall Street lender was unwilling to include the tender as part of its debt financing, one person said. The bank believed the tender overvalued WeWork and acted as a bailout to Mr Neumann, they added.
The deal would cap a stunning fall for Mr Neumann, who co-founded WeWork nine years ago and at one point had claim to a stake in the company worth roughly $13bn. But his role as chief executive atop the property group came to an end just days after the company aborted its initial public offering. His fortune is now worth a fraction of that earlier level.
The loans and payments from SoftBank to Mr Neumann will help alleviate a potential financial strain on the once high-flying WeWork chief executive. Mr Neumann had loans worth hundreds of millions of dollars outstanding to a number of Wall Street lenders this summer, and there were fears that a cash crunch at WeWork or a drastic repricing of his stake could raise the risk of losses to banks including JPMorgan Chase, UBS and Credit Suisse. Mr Neumann’s shares were collateral on some of those loans and banks can typically demand margin calls if the value of such assets falls below a certain point.
WeWork and SoftBank did not respond to multiple requests for comment.
Gapping down
In reaction to disappointing earnings/guidance:
- TTS -52.2%, HAS -11%, TACO -10.2%, TRV -4.2%, HXL -3.4%, SITC -1.6% (also commences public offering of 10.5 mln common shares), HLX -1.3%, SHW -1%, KMB -0.9%, NVS -0.6%
Other news:
- GOSS -27.8% (after Novartis (NVS) says its DP2 antagonist, fevipiprant, failed to meet its primary endpoint in ZEAL 1 and 2 trials )
- HHC -17.4% (announces Transformation Plan following strategic review process and names Paul Layne as CEO, effective immediately)
- PRVB -10.5% (announces top-line results from Phase 2a PRINCE clinical trial evaluating twice-daily PRV-6527 -- study did not achieve primary endpoint due to high placebo effect)
- UPS -3.7% (Stamps.com and UPS to collaborate on shipping solutions to E-commerce sellers; UPS also announces multiple tech-enabled services, new customers and partners)
- TNP -3.1% (files for ~11.67 mln share common stock offering by selling shareholders)
- ONCE -2.8% (UK's CMA launches investigation into Roche's (RHHBY) proposed takeover of Spark)
- SITC -1.6% (prices 11.5 mln shares of common stock at $14.90 per share)
Analyst comments:
- AAOI -6.1% (downgraded to Underweight from Neutral at JP Morgan)
- MSM -2.8% (downgraded to Underperform from Market Perform at Wells Fargo)
- AIN -1.8% (downgraded to Neutral from Outperform at Robert W. Baird)
- TXT -1.5% (downgraded to Neutral from Buy at BofA/Merrill)
- CVA -1.4% (downgraded to Mkt Perform from Strong Buy at Raymond James)
- ARI -1% (downgraded to Neutral from Overweight at JP Morgan)
- INTU -1% (downgraded to In-line from Outperform at Evercore ISI)
- KMT -0.8% (downgraded to Neutral from Buy at Longbow)
- SPR -0.8% (downgraded to Neutral from Outperform at Robert W. Baird)
- MAIN -0.7% (downgraded to Mkt Perform from Outperform at Raymond James)
Gapping up
In reaction to strong earnings/guidance:
- FBP +11.7%, ARCH +7.6%, HOG +7.4%, SNV +5.7%, CDNS +4.6%, PG +4.2%, AMTD +3.6%, PII +2.8%, VBTX +2.7%, UTX +2.3%, CE +2.2%, WSFS +2.2%, EDU +2.1%, PHM +2.1%, BXS +1.4%, ZION +0.9%, UBS +0.9%
Other news:
- BIIB +40.4% (plans to pursue regulatory approval for aducanumab for early Alzheimer's disease -- Company plans to submit Biologics License Application in early 2020; also released earnings)
- STMP +23.5% (Stamps.com and UPS to collaborate on shipping solutions to E-commerce sellers; UPS also announces multiple tech-enabled services, new customers and partners)
- ETON +21.4% (receives FDA approval for Biorphen)
- GNC +16.8% (Harbin Pharmaceutical said to mull bid to take GNC private, according to Bloomberg)
- FBP +11.7% (First Bancorp acquires Banco Santander Puerto Rico in transaction with $425 mln base purchase price)
- BMY +4.4% (says CheckMate -9LA met its primary endpoint of superior overall survival)
- VCYT +2.9% (announces data demonstrating "clinical validity" of Percepta classifier in lung cancer diagnosis)
- SNAP +2.3% (continued strength ahead of earnings tomorrow)
- VRTX +2.1% (FDA has approved TRIKAFTA in people ages 12 years and older who have at least one F508del mutation in the cystic fibrosis transmembrane conductance regulator gene)
- UAA +2% (appoints COO Patrik Frisk as CEO effective Jan. 1, 2020; Plank will become Executive Chairman & Brand Chief)
- ZEAL +1% (acquires Encycle Therapeutics)
Analyst comments:
- ACRS +6.4% (upgraded to Outperform from Mkt Perform at SVB Leerink)
- PLAN +4.8% (upgraded to Outperform from In-line at Evercore ISI)
- DBX +3.6% (upgraded to Buy from Neutral at Nomura)
- WDAY +2.5% (upgraded to Outperform from In-line at Evercore ISI)
- JNPR +2.1% (upgraded to Neutral from Underweight at JP Morgan)
Early premarket gappers
- Gapping up:
- BIIB +43.2%, STMP +29.8%, GNC +19.7%, FBP +11.7%, SNV +5.7%, AMTD +4.3%, CDNS +4.1%, EDU +3%, PHM +3%, VRTX +2.9%, VBTX +2.7%, ARCH +2.6%, WSFS +2.2%, ZION +2.1%, CIT +2%, CNC +1.7%, UPS +1.7%, CNC +1.7%, SNAP +1.6%, UBS +1.6%, BXS +1.4%, ZEAL +1%, LOGI +0.9%
- Gapping down:
- HHC -16%, TACO -12.7%, PII -9.4%, HAS -8.6%, TNP -3.1%, HXL -1.8%, SITC -1.5%, SITC -1.5%, HLX -1.3%, VCYT -0.8%
- AMS (DQW1 TH) +4.7%
- AMS Fourth Quarter Revenue Forecast 4.5% Above Estimates
- Wirecard (WDI TH) +1.4%
- Equinor (DNQ TH) +0.8%
- L’Oreal (LOR TH) +0.8%
- Dialog Semi (DLG TH) +0.6%
- ThyssenKrupp (TKA TH) +0.5%
- Air Liquide (AIL TH) +0.5%
- Henkel (HEN3 TH) -0.5%
- ProSieben (PSM TH) -0.6%
- Unilever (UNI2 TH) -0.8%
- Vodafone (VODI TH) -0.9
- Reckitt (3RB TH) -3.2%
- Reckitt Cuts FY LFL Net Rev Growth Target to 0-2% (1)
U.S. futures and most stocks in Asia climbed Tuesday as positive signs emerged on trade talks and ahead of earnings from some of the world’s biggest companies. The British pound edged higher as U.K. Prime Minister Boris Johnson prepares to put his Brexit deal to a vote.
The biggest gains in Asia were in South Korea’s equities, seen as a proxy for U.S.-China trade negotiations. Hong Kong and Australia had more modest increases, while China was little changed. Japan is closed for a holiday. S&P 500 futures climbed suggesting there is scope for the underlying gauge to extend gains after it surpassed 3,000. European futures edged higher.
US After Hours ACO -10.5%, CDNS +5.5%, AMTD +4.2% among notable earnings/guidance movers
Nikkei +0.25% Hang Seng +0.15% CSI +0.06% Shanghai +0.14% Shenzen +0.57%
Eur$ 1.1152 CNH 7.0730 CNY 7.0745 JPY 108.630 GBP 1.2969 RUB 53.75 CHF 0.9866 TRY 5.8441 WTI$ 53.20 -0.21%
S&P +0.10% EuroStoxx -0.03% FTSE - DAx +0.06% MI +0.2%
Macro :
- Netanyahu Fails to Form Government Again, Opening Door for Gantz
- Boris Johnson Finally Gets to Put His Brexit Deal to the Vote
- Trudeau Overcomes Scandals to Win Second Term in Divided Canada
- SoftBank Seeks Majority Stake in WeWork With Bailout Deal (4)
Keep an eye on :
- AAL LN : Anglo American’s De Beers 3Q Output Falls 14%; Keeps Guidance(1)
- AIR FP : EASA Could Clear Boeing 737 Max as Soon as January: Reuters
- AKERBP NO : Aker BP Third Quarter Loss Wider Than Estimates
- ARCAD NA : Arcadis Signs Pact With Evocra on PFAS Treatment Technology
- BIM FP : BioMerieux Sees FY Sales Growth at Bottom of Previous Range
- CPL ID : CPL Sees Earnings in Line With Market Expectations
- DNA FH : DNA Third Quarter Net Sales Beat Highest Estimate
- ELK NO : Elkem Third Quarter Ebitda 1.5% Below Estimates
- ENG SM : Enagas Nine Month Net Income EU333.1 Mln Vs. EU325.7 Mln Y/Y (1)
- EVN AV : EVN Increases Outlook for Year Group Net Result to ~EUR300M
- FIA1S FH : Finnair Third Quarter Ebit Misses Lowest Estimate
- FORT LN : Forterra Sees Pretax Profit ‘Modestly’ Below Prior Year
- GALP PL : Galp Third Quarter Adjusted Net Misses Estimates (1)
- HUSQB SS : Husqvarna 3Q Adjusted Operating Profit Misses Est.
- IDIA SW : Idorsia Nine Month Op. Loss CHF355m, Expenses Below Views (1)
- NK FP : Imerys Says CEO Keijzer Resigns, Lowers 2019 Outlook
- JE/ LN : Just Eat To Be Removed From FTSE 100, M&G Will Remain in Index
- LI FP : Klepierre 9M Gross Rental Income EU936M; Confirms FY Guidance
- KNIN SW : Kuehne + Nagel 9m Ebit +6.6% Y/y; Joebstl Purchase Price CHF23m
- LOGN SW : Logitech Second Quarter Operating Income Misses Lowest Estimate
- LUN DC : Lundbeck Completes Acquisition of Alder BioPharmaceuticals
- MBTN SW : Glass Lewis Backs Sentis Joining Meyer Burger Board, AWP Reports
- NOD NO : Nordic Semiconductor Third Quarter Ebit $5.7 Mln
- NOVN SW : Novartis Raises 2019 Sales, Operating Income Guidance (2) --> +2%
- COX FP : Nicox Reports Positive Results From NCX 470 Phase 2 Trial
- OHL SM : *VILLAR MIR IN TALKS TO SELL OHL TO MEXICO'S AMODIO: EXPANSION
- OR FP : L'Oreal's Bolt-On M&A Confirms Superior Luxury Pace: React
- OR FP : L’Oréal to Buy Mugler Brands, Azzaro Fragrances from Clarins
- OTB LN : On the Beach Says Performance is in Line With Expectations (1)
- PDG LN : Pendragon 3Q Pretax More Than Doubles; FY Loss in Line W/Views
- PRY IM : Prysmian Gets EU73m Binding Offer From Carlisle for Draka Fileca
- RAND NA : Randstad CEO Van den Broek Cautiously Optimistic on U.S. Market
- RB/ LN : Reckitt Cuts FY LFL Net Rev Growth Target to 0-2% (1)
- ROG SW : U.K. CMA Starts Probe on Roche’s Proposed Deal to Buy Spark
- RDSA LN : Ecopetrol’s Gato do Mato Stake Has NPV of $500m: Wood Mackenzie
- SAABB SS : Saab Third Quarter Sales Beat Highest Estimate
- SATS NO : SATS IPO Expected to Price at NOK 23.50 Per Share: Terms
- SOW GY : Software AG 3Q Beat Driven by A&N, Not IoT Cloud, Metzler Says
- SPD LN : Sports Direct Doesn’t Intend to Make Bid For Goals Soccer
- STJ LN : St James’s 3Q Net Inflows GBP2.11b vs GBP2.47b Year Ago (1)
- STERV FH : Stora Enso Completes Divestment of Stake in Dawang Paper Mill
- SRCG SW : Sunrise Calls off Vote on CHF2.8b Rights Issue for UPC Deal (2) -->+2%
- FTI FP : TechnipFMC Gets Integrated EPCI Contract for Shell Perdido
- TIT IM : Telecom Italia Appoints Former Central Banker Rossi as Chairman
- HO FP : Thales 9-Month Order Intake EU10.4b; Organic Change -6%
- FP FP : Total to Double Recycled Polypropylene Capacity for Auto Sector
- TPK LN : Travis Perkins Third Quarter Sales +3.8%
- USBG SW : UBS 3Q Net Beats as Global Wealth Management Gets $15.7b Inflows
- UBSG SW : UBS Pulls in $16 Billion From Rich Clients as Assets Hit Record
- VNET LN : Vianet Says Performance is in Line With Market Expectations
- VOLVB SS : Volvo Cars Backs On-The-Ground Monitors For Battery Metal Mines
- VOS GY : Vossloh to Sell Customized Modules Division; Confirms Forecast
- WALLB SS : Wallenstam 3Q Profit After Tax Rises to SEK463 Million
- WTB LN : Whitbread First Half Revenue GBP1.08 Bln
- YPSN SW : Ypsomed Enters New Partnerships in Diabetes Therapy