>>> US Close Dow +0.15% S&P +0.10% Nasdaq -0.81% Russell -0.45%

Closing Stock Market Summary

The S&P 500 increased 0.1% on Tuesday after being down as much as 0.6% following a key revenue miss from Alphabet (GOOG 1188.48, -99.10, -7.7%). Investors bought the intraday dip to help the benchmark index set a new closing high and close out the month with a gain of 3.9%.

The Dow Jones Industrial Average (+0.2%) increased its monthly gain to 2.6%. The Nasdaq Composite (-0.8%) and the Russell 2000 (-0.5%) lowered their monthly gains to 4.9% and 3.3%, respectively.

Shares of Alphabet fell 7.7%, as its revenue shortfall raised concerns about its ability to sustain strong growth amid increasing competition. Its underperformance weighed on the S&P 500 communication services sector (-2.6%) and contributed to some profit taking in shares of Apple (AAPL 200.67, -3.94, -1.9%) in front of its earnings report.

The news was also an excuse to sell a market fresh off record-highs. Investor regrouped, though, attributing the results as company-specific, and positioned themselves ahead of the Fed's policy decision tomorrow.

The stock market was able to muster gains from nine of the 11 S&P 500 sectors, including the defensive-oriented utilities (+1.7%), consumer staples (+1.2%), and real estate (+1.2%) sectors. 

At the same time, positive reactions to earnings reports from Merck (MRK 78.71, +1.93, +2.5%), Pfizer (PFE 40.61, +1.02, +2.6%), McDonald's (MCD 197.57, +0.45, +0.2%), MasterCard (MA 254.24, +7.11, +2.9%), and General Electric (GE 10.17, +0.44, +4.5%) were added measures of support for the market.

Separately, Berkshire Hathaway (BRK.B 216.71, +0.13, +0.1%) committed to invest $10 billion in Occidental Petroleum (OXY 58.88, -1.25, -2.1%) to finance its acquisition of Anadarko Petroleum (APC 72.85, -0.08, -0.1%). The news boosted shares of Chevron (CVX 120.06, +2.34, +2.0%), as the investment dampens Chevron's attempt to acquire Anadarko for a hefty premium.

U.S. Treasuries saw increased buying interest, pushing yields lower across the curve. The 2-yr yield and the 10-yr yield declined three basis points each to 2.27% and 2.51%, respectively. The U.S. Dollar Index lost 0.4% to 97.52. WTI crude increased 0.6% to $63.80/bbl, aided by Saudi Arabia saying that OPEC+ production-cuts may continue beyond June. 

Reviewing Tuesday's batch of economic data:

  • The Conference Board's Consumer Confidence Index jumped to 129.2 in April (consensus 127.3) from 124.2 in March.
    • The key takeaway from the report is the understanding that consumer attitudes about the short-term outlook (i.e. the next six months) improved, which is a supportive indication for consumer spending since it was matched with a more favorable outlook for the labor market.
  • The MNI Chicago Business barometer, otherwise known as the Chicago PMI, dropped to 52.6 in April (consensus 58.2) from 58.7 in March. The April reading marks the lowest level for the index since January 2017.
    • The key takeaway from the report is the acknowledgment from the senior economist at MNI that most barometer components have fallen below their 12-month averages, which suggests greater business uncertainty among firms.
  • The Q1 Employment Cost Index increased 0.7% (Briefing.com consensus +0.8%), seasonally adjusted, for the three-month period ending in March 2019 after increasing 0.7% for the three-month period ending in December 2018. Wages and salaries, which account for about 70% of compensation costs, rose 0.7%, while benefit costs, which make up the remainder of compensation costs, also increased 0.7%.
    • The key takeaway from the report is that there has been some moderation in the growth rate of employment costs.
  • Pending Home Sales increased 3.8% in March (Briefing.com consensus 1.1%). Today's reading follows an unrevised decrease of 1.0% in February.
  • The Case-Shiller Home Price Index for February increased 3.0% (Briefing.com consensus 3.1%), down from a revised reading of 3.5% in January (from 3.6%).

Looking ahead, investors will receive the following reports on Wednesday: the ISM Manufacturing Index for April, the FOMC rate decision, the ADP Employment Change for April, Construction Spending for March, and the weekly MBA Mortgage Index. 

  • Nasdaq Composite +22.2% YTD
  • Russell 2000 +18.0% YTD
  • S&P 500 +17.5% YTD
  • Dow Jones Industrial Average +14.0% YTD

>>> Apple beats by $0.10, beats on revs; in-line iPhone and service revenue; gui

Apple beats by $0.10, beats on revs; in-line iPhone and service revenue; guides Q3 revs above consensus; raises dividend 5% to $0.77/share; adds $75 bln to buyback plan (200.67 -3.94)
  • Reports Q2 (Mar) earnings of $2.46 per share, $0.10 better than the S&P Capital IQ Consensus of $2.36; revenues fell 5.1% year/year to $58.02 bln vs the $57.4 bln S&P Capital IQ Consensus. Gross m,argin 37.6% vs. 37-38% guidance, in-line with estimates.
  • iPhone rev -17% to $31.05 bln vs. $31 bln ests; margin
  • Service rev +16% to $11.45 bln vs. $11.4 bln ests; gross margin +100 bps sequentially 63.8%
  • Wearables, Home and Accessories +30% to $5.13 bln
  • iPad +22% to $4.87 bln
  • Co issues upside guidance for Q3, sees Q3 revs of $52.5-54.5 bln vs. $52.09 bln S&P Capital IQ Consensus; gross margin 37-38% vs. 37.9% ests
  • "Our March quarter results show the continued strength of our installed base of over 1.4 billion active devices, as we set an all-time record for Services, and the strong momentum of our Wearables, Home and Accessories category, which set a new March quarter record," said Tim Cook, Apple's CEO. "We delivered our strongest iPad growth in six years, and we are as excited as ever about our pipeline of innovative hardware, software and services. We're looking forward to sharing more with developers and customers at Apple's 30th annual Worldwide Developers Conference in June."
  • "Given our confidence in Apple's future and the value we see in our stock, our Board has authorized an additional $75 billion for share repurchases. We are also raising our quarterly dividend for the seventh time in less than seven years."
  • Reflecting the approved increase, Apple's board of directors has declared a cash dividend of $0.77 per share of the Company's common stock, an increase of 5 percent.

CNBC : Alphabet is a ‘black box’ and isn’t being straight with investors


Alphabet is a ‘black box’ and isn’t being straight with investors, says hedge-fund manager Dan Niles
PUBLISHED 6 MIN AGO

Alphabet shares tumbled on Tuesday after the company reported disappointing quarterly revenue.
Dan Niles of AlphaOne Capital Partners said that the problem for Alphabet is the company doesn’t provide sufficient details about why it misses expectations.
Niles said he’s been reducing his Alphabet holdings.
GP: Alphabet Sundar Pichai Google Germany 190122
Sundar Pichai, CEO of Google, speaks to the media before the opening of the Berlin representation of Google Germany in Berlin on January 22, 2019.
Carsten Koall | Getty Images News | Getty Images
Hedge-fund manager Dan Niles said on Tuesday that the problem with Alphabet isn’t just that it fell way shy of revenue numbers, but that the company didn’t give investors enough of an explanation for the miss.

“It’s a black box,” Niles, founding partner at AlphaOne Capital Partners, told CNBC’s Halftime Report. “When something goes wrong, you want an explanation. You’re not getting one.”


Alphabet shares tumbled more than 8%, the biggest plunge since 2012, after the company said that ad revenue growth slowed to 15% from 24% a year earlier and total sales missed analyst estimates by about $1 billion. Ruth Porat, Alphabet’s CFO, attributed the slowdown to a deceleration in click growth at YouTube. But neither she nor CEO Sundar Pichai offered many more details.

Niles said his firm had been reducing its exposure to Alphabet heading into the report and plans to cut it even more. He’s frustrated that company executives didn’t make clear if this was a one-quarter issue or if it will persist. He noted that in its previous earnings report, investors were skeptical because of the company’s capital expenses. Alphabet reeled in its costs and beat on profit in the first quarter, but now revenue growth is causing concern.

Some of his questions for the company relate to the macro online advertising environment, which appears strong. Facebook, Twitter and Snap all reported better-than-expected results in their latest earnings reports, and Amazon’s ad growth was impressive, Niles said.

“You look at this and go, well advertising and Google on the internet are obviously synonymous,” Niles said. “And when you don’t know what’s going on, you sit there and go, well I know what’s going on at these other names. I’d rather own Facebook, for example.

>>> Could these spin-off stocks become takeover targets?

Could these spin-off stocks become takeover targets? (MergerMa-rket.com)

Confirmation from Garda World that it was considering an approach for G4S [LON:GFS] earlier this month makes the UK security services provider the latest London-listed stock to have attracted buyout interest while in the process of completing a major asset separation.
G4S said at the end of 2018 it would separate and explore divestment options, including a spin-off, for its Cash Solutions business. It’s a pattern which has been repeated with a few slight variations in recent years.
Shire’s buyout by Takeda [TYO:4502] bears the closest parallels with G4S. Its takeover was preceded by Shire management’s decision to spin off its neuroscience business to shareholders following a prolonged period of share price weakness.
GKN is another business which was bought out alongside talk of a spin-off. The engineering conglomerate unsuccessfully attempted to fend off buyout interest by offering to divest its automotive unit to industry peer Dana [NYSE:DAN] via a demerger-type structure, in return for a shareholder rejection of a takeover.
Listed below are the five London-listed companies with the worst stock price performance since announcement of a demerger, taken from Dealreporter’s Spin-off universe.
SSE [LON:SSE]
Shares in SSE have struggled since the spin-off of its household energy and services business in Great Britain and combination with npower was proposed back in November 2017. The share price decline is firstly due to the collapse of talks with Joint Venture (JV) partner npower, and secondly because of adverse regulatory developments affecting the business.
Stock price declines of around 13% since the initial announcement might perhaps put the takeover spotlight on SSE and an attractive portfolio of assets outside of its retail business.
CAPITAL & COUNTIES PROPERTIES [LON:CAPC]
Shares in real estate investment trust (REIT) Capital & Counties are down 19% since it announced in May 2018 it would consider a spin-off of its Covent Garden property assets.
And its decision to pursue a demerger has not helped its sector-relative performance either: the business failed to achieve the median total shareholder return of its peer group in the three years to end-2019, according to its annual report.
Capco’s poor performance since its demerger announcement, an attractive portfolio of London property, a concentrated shareholder base and deep discount to book value are all factors which might attract an opportunistic bid.
AUTOGRILL [BIT:AGL]
Catering concessions operator Autogrill’s shares are down 15.0% since it said in June 2018 that it would look to separate its food and beverage business in Italy from the remainder of the group. Autogrill has toyed with a number of different options since 2013: first a separation of HMS Host, its North American business, then a split across its highway and airport operations, before settling on an Italy, rest-of-the-world structure.
THYSSENKRUPP [ETR:TKA]
Industrial conglomerate Thyssenkrupp is the worst performer among ongoing demerger situations tracked by Dealreporter, down by around 40% since confirming it was considering a split in September 2018. Thyssenkrupp’s plan is to separate its engineering and steel businesses, as well as forming a steel JV with Tata Steel [BOM:TATA]. Activist investor Cevian has been a long-term shareholder in Thyssenkrupp while Elliott Management and Harris Associates have invested more recently.
TELECOM ITALIA [BIT:TIT]
Telecom Italia shares are down 28.6% since it said in March last year it would legally separate its wholesale network assets. Options being explored for the unit revolve around a tie-up with network infrastructure rival Open Fibre, owned by utility Enel [BIT:ENEL] and the Italian state. Elliott Management owns 9% of Telecom Italia and Vivendi [EPA:VIV] has 24%, while Italian state-backed Cassa Depositi e Prestiti owns 5%.