TheChek News Flow

Closing Market Summary: Tech Sector Carries Market Ahead of Apple Earnings

Strength in technology shares carried the broader market to a modest victory on Tuesday, leaving the major averages at their best marks of the day. The S&P 500 added 0.3%, the tech-heavy Nasdaq rallied 0.9%, and the small-cap Russell 2000 jumped 0.6%. The Dow underperformed, however, losing 0.3%.

The major averages extended opening losses through the first half of Tuesday's session, with the S&P 500 losing as much as 0.9%. However, things turned around in the afternoon as the technology sector (+1.5%) rallied ahead of Apple's (AAPL 169.10, +3.84) latest earnings report -- which was due after the closing bell. Apple shares ended the session higher by 2.3%, and shares of other tech giants like Microsoft (MSFT 95.00, +1.48) and Alphabet (GOOG 1037.31, +19.98) added more than 1.5% apiece. Chipmakers also outperformed, pushing the PHLX Semiconductor Index higher by 1.7%.

Four other sectors finished Tuesday in positive territory, including financials (+0.1%), consumer discretionary (+0.2%), health care (unch), and real estate (+0.7%). The health care group was able to overcome a negative reaction to earnings reports from Pfizer (PFE 35.40, -1.21) and Merck (MRK 57.98, -0.89); Pfizer shares lost 3.3% after the company reported upbeat earnings on worse-than-expected revenues, and Merck shares declined 1.5% even though the company beat earnings estimates on in-line revenues and raised its guidance for fiscal year 2018.

On the downside, six sectors finished Tuesday in the red, with telecom services (-0.8%), consumer staples (-0.9%), industrials (-0.5%), and energy (-0.6%) leading the retreat. Energy shares struggled as crude oil prices pulled back from their highest levels in more than three years; West Texas Intermediate crude futures declined 1.8% to $67.28 per barrel.

In the bond market, U.S. Treasuries ended Tuesday on a lower note, pulling back after three days of gains. The yield on the benchmark 10-yr Treasury note finished four basis points higher at 2.98%, but saw limited intraday movement -- which makes sense considering the Fed will release its latest policy directive on Wednesday at 2:00 PM ET. Meanwhile, the jump in yields increased dollar demand, evidenced by the U.S. Dollar Index, which climbed 0.7% to 92.30 -- its highest level of the calendar year.

In Washington, President Trump delayed the imposition of steel and aluminum tariffs on the European Union, Canada, and Mexico by 30 days, and reached permanent exemptions for Australia, Brazil, and Argentina -- although the details still need to be worked out. 

Reviewing Tuesday's economic data, which was limited to the ISM Index for April and Construction Spending for March:

• The ISM Index for April declined to 57.3 from an unrevised reading of 59.3 in March, while the consensus expected a reading of 58.5.
  • The key takeaway from the report is that it is an April number, reflecting some growth deceleration for the manufacturing sector at the start of the second quarter which will continue to feed concerns about the message of a flattening yield curve.
• Construction Spending dropped 1.7% in March, while the consensus expected an increase of 0.5%. The prior month's increase was revised to 1.0% from 0.1%.
  • The key takeaway from the report is that construction spending growth continues to run at a relatively slow pace, which is an inhibitor of stronger overall growth.

On Wednesday, the Fed's latest policy directive will cross the wires at 2:00 PM ET. In addition, investors will receive the weekly MBA Mortgage Applications Index at 7:00 AM ET and the ADP Employment Change report for April (consensus 225K) at 8:15 AM ET.

• Nasdaq Composite: +3.3% YTD
• Russell 2000: +1.0% YTD
• S&P 500: -0.7% YTD
• Dow Jones Industrial Average: -2.5% YTD

Anadarko Petroleum beats by $0.11, misses on revs (66.52   -0.80)

• Reports Q1 (Mar) earnings of $0.52 per share, excluding non-recurring items, $0.11 better than the Capital IQ Consensus of $0.41; revenues fell 19.2% year/year to $3.04 bln vs the $3.14 bln Capital IQ Consensus
• Co achieved record divestiture-adjusted oil production of 367,000 barrels per day
• Increased the co's oil production mix to 57 percent, while generating its highest per-barrel margins since 2014, when oil prices averaged more than $93 per barrel for WTI
• Co sees Q2 total sales volumes (oil, nat gas and Nat gas liquids) at 615-640 MBOE/d; sees 2018 at 658-685 MBOE/d
• Note: Guidance excludes sales volumes for Alaska due to divestiture.
  

T-Mobile US beats by $0.03, beats on revs; increases FY18 Adj-EBITDA, net adds guidance (59.43   -1.08)

• Reports Q1 (Mar) earnings of $0.78 per share, $0.03 better than the Capital IQ Consensus of $0.75; revenues rose 8.8% year/year to $10.46 bln vs the $10.35 bln Capital IQ Consensus.
• 1.4 million total net additions - 20th consecutive quarter with more than 1 million net adds
• Record low 1.07% branded postpaid phone churn, down 11 bps year-over-year
• "On April 27, 2018, our Board of Directors authorized an increase in the total stock repurchase program to $9.0 billion, consisting of the $1.5 billion in repurchases previously completed and for up to an additional $7.5 billion of repurchases of our common stock, allocated as up to $500 million of shares of common stock through December 31, 2018, up to $3.0 billion of shares of common stock for the year ending December 31, 2019 and up to $4.0 billion of shares of common stock for the year ending December 31, 2020, with any authorized but unutilized repurchase capacity for any of the foregoing periods increasing the authorizedrepurchase capacity for the succeeding period by the amount of such unutilized repurchase capacity."
• Outlook: 
  • In 2018, we expect postpaid net customer additions between 2.6 and 3.3 million, an increase from the prior target range of 2.0 to 3.0 million.
  • Adjusted EBITDA is expected to be between $11.4 and $11.8 billion, an increase from the prior target range of $11.3 to $11.7 billion; Increased target for branded postpaid net customer additions of 2.6 to 3.3 million