TheChek News Flow

Closing Market Summary: Wall Street Tumbles Amid Flurry of Headlines

Stocks tumbled on Thursday as a slew of leery headlines left buyers on the sidelines. The S&P 500 lost 2.5%, dropping into negative territory for the year (-1.1%) and extending its week-to-date decline to 3.9%, while the Nasdaq and the Dow tumbled 2.4% and 2.9%, respectively.

There was little doubt as to where the market was headed at Thursday's opening bell, as equity futures were down big in overnight trading. There wasn't a particular catalyst for the negative disposition, but disappointing PMI readings in the eurozone and Japan, an unsatisfying apology from Facebook's (FB 164.89, -4.50) CEO Mark Zuckerberg regarding the Cambridge Analytica data breach, and Wednesday's rate hike from the Fed didn't exactly bode well for investor sentiment.

The biggest headline catalyst, however, was President Trump's decision to impose tariffs of up to $60 billion on Chinese imports; Mr. Trump officially signed a presidential memorandum on Thursday afternoon. However, the decision wasn't a surprise -- Reuters first reported the president's desire to punish China for intellectual property theft via tariffs last week -- and actually had a silver lining considering the tariffs will only be implemented after a consultation period. Still, the duties do give new energy to the trade war debate.

Selling picked up notably in the final hour of the session, with the S&P 500 nearly doubling its earlier loss. The financial sector led the retreat, dropping 3.7%, as Treasury yields tumbled across the curve; the benchmark 10-yr yield declined eight basis points to 2.83%, while the 2-yr yield slid three basis points to 2.28%. The industrial sector (-3.3%) also showed notable weakness, while most of the remaining groups finished with losses of more than 2.0%.

The most influential sector, information technology, declined 2.7% -- a discouraging sign for investors who have looked to the sector for leadership; the tech group led last year's rally and is still the top-performing sector of 2018 despite Thursday's slide, up 4.3% year to date. Accenture (ACN 150.23, -11.80) was the tech sector's worst-performing component on Thursday, tumbling 7.3%, despite beating earnings and revenue estimates for its fiscal second quarter and raising its yearly guidance.

In other corporate news, AbbVie (ABBV 98.10, -14.35) shares dropped 12.8% after the drugmaker provided a disappointing update on its experimental cancer drug Rova-T, saying data from a phase two trial was not strong enough to justify seeking accelerated approval. The health care sector lost 2.9%.

On a positive note, the rate-sensitive utilities sector advanced 0.4%, benefiting from the decline in Treasury yields.

Investors received several pieces of economic data on Thursday morning, including the weekly Initial Jobless Claims Report, the FHFA Housing Price Index for January, and the Conference Board's Leading Economic Index for February:

• The latest weekly initial jobless claims count totaled 229,000, while the consensus expected a reading of 225,000. Today's tally was above the unrevised prior week count of 226,000. As for continuing claims, they declined to 1.828 million from a revised count of 1.885 million (from 1.879 million).
  • The key takeaway from this report is that it covered the period in which the survey for the March employment report was taken, so the low level of initial claims will feed estimates for another strong gain in nonfarm payrolls.
• The FHFA Housing Price Index increased 0.8% in January ( consensus +0.4%), while the December reading was revised to +0.4% from +0.3%.
• The Conference Board's Leading Economic Index increased 0.6% in February (consensus +0.5%). The prior month's reading was revised to +0.8% from +1.0%.
  • The key takeaway from the report is that the strength among the leading indicators remained widespread, with eight of its ten components making positive contributions.

On Friday, investors will receive just two economic reports -- Durable Goods Orders for February (consensus +1.5%) and New Home Sales for February (consensus 620K) -- which will be released at 8:30 AM ET and 10:00 AM ET, respectively.

• Nasdaq Composite: +3.8% YTD
• S&P 500: -1.1% YTD
• Dow Jones Industrial Average: -3.1% YTD
• Russell 2000: +0.6% YTD

After Hours Summary: SGH +10%, HOME +7%, NKE +6%, CTAS +2.4% higher, while MU -3% lower following earnings/guidance

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: SGH +9.8%, HOME +7%, NKE +6.3% (also has acquired consumer data analytics firm Zodiac), CTAS +2.4%

Companies trading higher in after hours in reaction to news: TOPS +42.8% (nano-cap stock determined to effect a 1-for-10 reverse stock split of the Company's issued common shares), PACB +11.1% (prevails in patent eligibility ruling against Oxford Nanopore; trial is scheduled to occur in early 2020), VTVT +4% (completes Phase 1b of Simplici-T1, an adaptive Phase 1b/2 study assessing TTP399 in type 1 diabetes), CXW +4% (still checking), UAA +2% and FL +1.8% (ticking higher following NKE results), CENX +1.1% (after closing ~18% lower on the day)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: MU -3.2%, HTGM -2.6%

Companies trading lower in after hours in reaction to news: PGNX -17.5% (FDA extends review of the New Drug Application for AZEDRA by three months to July 30, 2018), FLL -9.9% (thinly traded; registers direct offering of up to 4,166,667 shares of common stock for gross proceeds of up to $12.5 mln), LPTX -9.8% (commences an underwritten public offering of its common stock), AKBA -6.7% (proposes $85 mln public offering of common stock), SRNE -2.7% (files for approx 34.2 mln share common stock offering by selling shareholders; files for 1,381,345 share offering by holders pursuant to Scilex Pharmace Stock Purchase Agreement), FB -0.6% (continued weakness; COO Sheryl Sandberg appears on CNBC after the bell and mirrors comments made by CEO Mark Zuckerberg last night), AMAT -0.4% and INTC -0.3% (following MU earnings)

Gapping down
In reaction to disappointing earnings/guidance:

• MIK -10.3%, GIII -6%, MLHR -4.8%, CMC -3.4%, DRI -3%, JKS -2.5%, FIVE -0.9%, ACN -0.6%

Other news:

• RESN -9.7% (to sell shares of its common stock in an underwritten public offering)
• CRON -5% (to sell 10.42 mln common shares on 'bought deal' basis at $9.60 per share for gross proceeds of approx $100.0 mln)
• PLUG -3.6% (announces private offering of $100 mln of convertible senior notes )
• ARNA -2.7% (prices public offering of 8.5 mln shares of common stock at $41.50 per share)
• GAIA -2.2% (launches offering of shares of its Class A common stock)
• NYCB -2% (initiated with Sell ratings at UBS)
• TWTR -1.6% (likely in sympathy with FB)
• FB -1.5% (after Mark Zuckerberg released statement shortly before the close related to Cambridge Analytica situation,discusses actions already taken and next steps to address this issue)
• AVEO -1% (announces the publication of long-term follow-up results from Study 902, where patients were treated with tivozanib (FOTIVDA) as second-line treatment in advanced renal cell carcinoma)

Analyst comments:

• SIRI -1.3% (downgraded to Neutral from Buy at Citigroup)
• TRP -1% (downgraded to Market Perform from Outperform at Wells Fargo)
• CNP -0.8% (downgraded to Underperform from Neutral at BofA/Merrill)

Gapping up
In reaction to strong earnings/guidance:

• SCON +6.2%, ALTR +3.3%, EGO +1%, LE +0.9%

Other news:

• OMER +28% (spending bill includes segment allowing company to charge Medicare high prices for its cataract surgery drug Omidria)
• TTNP +21.5% (executes agreement for acquisition by Molteni of Probuphine in Europe and other select territories; received initial payment of €2.0 mln and will receive potential additional payments totaling up to €4.5 mln )
• MNGA +13.4% (has made a non-refundable deposit of $1.0 million toward the purchase of Trico Welding Supplies)
• GERN +7.6% (continued strength)
• TELL +7.2% (Bechtel has made a $50 million zero coupon preferred equity investment in Tellurian which has an implied Tellurian common share price of $8.16 per share)
• MGPI +4.5% (will replace Evercore the S&P SmallCap 600)
• TRHC +3.7% (ticking higher; to join S&P SmallCap 600)

Analyst comments:

• BWA +1.4% (upgraded to Overweight from Underweight at Morgan Stanley)