>>> Walt Disney Q1 earnings call notes; shares are up 2.2% in AH trade at $108.5

Walt Disney Q1 earnings call notes; shares are up 2.2% in AH trade at $108.50/share
  • Update on Twenty First Century (FOXA) asset acquisition
    • Regulatory process has begun regarding the Fox media asset acquisition.
    • 3 primary strategic priorities: more content, will enhance direct to consumer initiatives, will great diversify businesses geographically.
  • Reaffirms ESPN direct to consumer product, ESPN Plus, will launch sometime this spring
    • More compelling visuals, easy interface, personalized experience, the app will blend implicit choices with specific behavior tailored to the taste of each individual user.
    • Will provide sports, highlights, podcasts, live stream of all ESPN networks.
    • Will feature thousands of additional live events.
    • ESPN Plus will feature full library of ESPN films and will also have exclusive content to platform.
    • Pricing ESPN Plus at $4.99/month, will be available on IOS, Chromecast, Android, among others.
  • Reaffirms unnamed Disney direct to consumer offering will launch sometime in 2019.
  • Excited about upcoming 'Black Panther' film, which opens on February 16, ticket pre-sales outpacing every superhero movie ever made.
  • Will release 'Solo' on May 25, and reaction to first trailer has been fantastic.
  • 'Game of Thrones' creators will write and produce new series and new films.
  • Q1 adj. AD revenue was down 7%, this quarter Advertising pacing is on pace with last year.
Shares of Disney are trading up 2.2% at $108.50/share as the conference call is ongoing.

>>> US Notable post-earnings movers

Notable post-earnings movers

  • Post-earnings gainers: SNAP +21.6%, MX +6.3%, NTGR +5.3%, AKAM +5.2%, ZEN +4.7%, PXD +4.3%, DIS +2.6%
  • Post-earnings losers: TCS -7.4%, MTSI -6.3%, MCHP -5.9%, MTCH -5.3%, MANH -4.9%, SITO -3.3%, MNTX -2.5%

>>> US Close Dow +2.33% S&P +1.74% Nasdaq +2.13% Russell +1.08%

Closing Market Summary: Another Roller Coaster Ride, But Different Result

Stocks went on another roller coaster ride on Tuesday, but, unlike Monday, this ride left the major indices solidly higher.

The Dow Jones Industrial Average jumped 2.3%, the Nasdaq Composite climbed 2.1%, and the S&P 500 advanced 1.7%, ending near the top of their trading ranges, which were quite large; at its worst mark of the day, the S&P 500 was down 2.1% and, at its best, held a gain of 2.0%. The market was very volatile, weathering several sharp reversals.

Tuesday's advance put a sizable dent in Monday's decline, but the major averages are still solidly lower for the week, showing losses between 1.7% and 2.4%.

Nine of eleven sectors finished in positive territory, with cyclical groups setting the pace--a possible sign that investors are shifting their focus back to the fundamentals, including an upbeat economic growth outlook that is expected to translate into impressive earnings growth.

The top-weighted technology space (+2.8%) showed particular strength. Within the group, chipmakers were strong, evidenced by the 3.7% increase in the Philadelphia Semiconductor Index, after Micron (MU 43.88, +4.48) raised its profit and sales guidance for the current quarter; MU shares jumped 11.4%. Heavyweights like Apple (AAPL 163.03, +6.54), Microsoft (MSFT 91.33, +3.33), Facebook (FB 185.31, +4.05), and Alphabet (GOOGL 1084.43, +22.04) also had solid showings, adding between 2.1% and 4.2%.

General Motors (GM 41.86, +2.32) led the consumer discretionary sector (+2.5%) higher, climbing 5.9%, after reporting better-than-expected earnings for the fourth quarter and reaffirming its guidance for fiscal year 2018. The group's largest component by market cap--Amazon (AMZN 1442.84, +52.84)--also outperformed, adding 3.8%.

The materials sector (+2.8%) also had a solid day, with DowDuPont (DWDP 71.89, +4.05) rallying 6.0%.

On the downside, the rate-sensitive utilities (-1.5%) and real estate (-0.2%) sectors declined on Tuesday as Treasury yields bounced back from their overnight lows. Yields still settled mostly lower though, with the benchmark 10-yr yield slipping two basis points to 2.77%. The 10-yr yield was down as much as 14 basis points overnight.

Meanwhile, the CBOE Volatility Index (VIX 30.14, -7.18), often referred to as the "investor fear gauge," dropped 19.2% after surging more than 100% on Monday.

Elsewhere, equity indices in the Asia-Pacific region finished Tuesday lower, with Japan's Nikkei, Hong Kong's Hang Seng, and China's Shanghai Composite losing between 3.4% and 5.1%, as did the major European bourses; Germany's DAX, the UK's FTSE, and France's CAC lost between 2.2% and 2.8%.

In Washington, Politico reported that the Senate is nearing an agreement on a two-year spending deal that would increase spending levels for both domestic and defense programs. Congressional leaders are expected to stick said budget deal into a funding bill that the House plans to vote on tonight and get lawmakers to pass the combined measure before funding runs out at midnight on Thursday.

It's worth noting that these bills don't address immigration. Lawmakers expect to begin working on immigration after getting past the upcoming spending deadline.

Reviewing Tuesday's economic data, which included the December Trade Balance and the December Job Openings and Labor Turnover Survey:

  • The December trade balance showed a deficit of $53.1 billion (consensus -$52.3 billion). The November deficit was revised to $50.4 billion from $50.5 billion.
    • The December trade deficit was the largest since October 2008 and it revealed increased trade deficits with the European Union and China. The key takeaway from the report, then, is that it is apt to feed concerns about protectionist trade policies being adopted in an attempt to narrow those trade deficits.
  • The December Job Openings and Labor Turnover Survey showed that job openings decreased to 5.811 million from a revised 5.978 million (from 5.879 million) in November.

>>> Anadarko Petroleum beats by $0.15, beats on revs

Anadarko Petroleum beats by $0.15, beats on revs (57.49   +0.64)

  • Reports Q4 (Dec) earnings of $0.18 per share, $0.15 better than the Capital IQ Consensus of $0.03; revenues rose 22.7% year/year to $2.93 bln vs the $2.9 bln Capital IQ Consensus.
  • Anadarko's 2018 guidance has been adjusted from its November 2017 news release for the divestiture of its Alaska assets and anticipated production impacts related to non-operated downtime in the Gulf of Mexico. The company expects full-year capital investments in the range of $4.1 to $4.5 billion, not including capital investments made by Western Gas Partners, LP (NYSE: WES).
  • Also sees FY18 total sales volume of 238-248 mln BOE (versus prior 245-255 mln BOE)
  • 2018 Oil sales volumes of 370-390 thousand BOPD (versus prior 385-405 thousand BOPD)

>>> EXPLAINER - Investors burned as bets on low market volatility implode - Reut

EXPLAINER-Investors burned as bets on low market volatility implode - Reuters News

06-Feb-2018 16:37:25

  • Volatility spikes from historic lows
  • Unwinding of 'short' VIX trades burns retail investors
  • VIX was below 20-year average for nearly two years
  • Retail investors flee short VIX ETFs: http://tmsnrt.rs/2BGGFiP
  • VIX crosses over VSTOXX: http://tmsnrt.rs/2BcwcdK

 

By Saikat Chatterjee and Helen Reid

https://uk.reuters.com/article/uk-global-markets-volatility/investors-burned-as-bets-on-low-market-volatility-implode-idUKKBN1FQ2GS

 

LONDON, Feb 6 (Reuters) - Spikes in expected stock price swings in the United States and Europe have sent shockwaves through a market that allows investors to take leveraged bets on the volatility of equity indexes, forcing some funds to close down.

 

WHAT HAPPENED TO STOCKS?

World stock markets nose-dived again on Tuesday amid concerns about a bond market sell-off and rising inflation.

U.S. stocks, which triggered the global reversal on Friday when payrolls data showed a spike in wage inflation, suffered their worst fall since August 2011 on Monday. (Full Story)

The gauge of U.S. stocks volatility known as VIX .VIX, which tracks the volatility implied by options on the S&P 500 .SPX, recorded its biggest one-day surge in more than two years as investors rushed to buy derivative products to protect against a further slide in stock prices.

The trading range for the VIX, or the Cboe Volatility Index, on Monday was 17 points, much wider than the 10-point range the day global markets were shaken by Britain's vote in June 2016 to leave the European Union.

As European markets sank on Tuesday, the region's equivalent to the VIX - the VSTOXX .V2TX - followed suit with its biggest one-day surge since the Sept. 11 attacks in 2001.

 

WHY ARE VOLATILITY PRODUCTS POPULAR?

Derivatives contracts tied to the VIX - known as the "stock market's fear gauge" - have grown rapidly in recent years as central bank stimulus and a recovering global economy lowered volatility across asset classes.

With day-to-day trading volumes dented by the lower market volatility, banks created products to turn the generally calm market environment into a trading opportunity.

Many of these products were sold on a leveraged basis, meaning investors buying notes tied to measures of volatility could take large bets for little upfront cash.

Because many of these products were sold on stock exchanges as exchange-traded funds (ETFs) or exchange-traded notes (ETNs), retail investors had easier access than before to these highly leveraged trades which were winners for months.

Both the VIX and the VSTOXX have drifted lower since early 2016, staying at depressed levels below their 20-year average for nearly two years - until Monday's slide in U.S. stocks.

The S&P 500 had not fallen by more than 5 percent for more than 400 days, the longest run since the 1950s, according to Mark Haefele, chief investment officer at UBS Wealth Management.

 

WHAT WENT WRONG?

Because the products bet on market volatility remaining low, or declining consistently, they essentially profit from the difference between the price of volatility now and in one month's time.

Normally, one-month futures contracts on the VIX VXc1 trade at a discount to the spot price, a structure known as backwardation. That allowed traders to sell one-month futures contracts and make money as those contracts matured.

Friday's rise in volatility put investors on edge, but this week's surge brought the roof crashing down on such trades.

As the VIX surged on Monday, the one-month futures contract rallied more than 110 percent, forcing market participants who had been hoping to profit from its decline to close out their positions well after market hours.

The notional value of contracts on such products traded on Friday was six times the daily average for the last year, said the head of European equity market trading strategy at a bank in London.

"The last two days of trading has thrown a giant bucket of cold water on the short volatility trade and I think we're now in for a prolonged period of elevated volatility generally," said David Lafferty, chief market strategist at Natixis Investment Managers.

Investors said the proliferation of short-term traders, some using computers to trigger trading decisions, had also exacerbated the price swings of the past few days.

"Plentiful liquidity in markets has also allowed fast money, model and algorithmic investors to switch positions from long to short in quick time adding to the downward shift in prices," said Stephen Jones, chief investment officer at Kames Capital.

 

WHAT'S THE FALLOUT?

The repercussions have been severe for some funds.

Trading in the VelocityShares Daily Inverse VIX Short-Term ETN XIV.P, ProShares Short VIX Short-Term Futures ETF SVXY.K and VelocityShares Daily Inverse VIX Medium-Term ETN ZIV.O has been halted and all three products had a short-selling restriction placed on them by Nasdaq. (Full Story)

Credit Suisse CSGN.S, the issuer of the VelocityShares ETN XIV.P, in which it has a 32 percent stake, said on Tuesday it would redeem the ETNs. (Full Story)

Nomura Securities 8604.T also said on Tuesday it would redeem its Tokyo Stock Exchange-listed S&P 500 VIX Inverse ETN 2049.T. (Full Story)

The market capitalisation of short VIX products had ballooned over the past 12 months as retail investors rushed into trades betting on a decline in volatility of U.S. stocks, but fell sharply as the sell-off hit. http://tmsnrt.rs/2BGGFiP

WHAT NEXT?

The problems these tracker funds are facing should not cause permanent damage to the broader market, investors said, as the total assets under management pales in comparison to the broader options market and equity market overall.

But these funds, though small, did help amplify the sell-off and the surge in volatility, in a sign that abnormal positioning in derivatives markets can have knock-on effects on the wider market.

This was the first serious test for these ETFs, most of which were launched after the global financial crisis.

Derivatives markets indicated, however, that the spike in volatility of the past few days would not be sustained.

VIX futures contracts fell back on Tuesday to trade at a wide discount to the spot price, showing that traders expected volatility to fall sharply.

During its rapid surge higher, the VIX outpaced the VSTOXX, an event analysts flagged as an extreme move, also suggesting there would be a rapid normalisation.

"The VIX moving over VSTOXX is a rarity... it could be taken as showing how irrational things got over the past day or two," said Russell Rhoads, director of product advancement, global derivatives at Cboe Global Markets.

The impact of the market sell-off on other asset classes has been fairly muted though various gauges have risen reflecting broader uncertainty around markets in the short term.

Bond volatility, as measured by three-month option contracts on Bank of America .MERMOVE3M, has risen to $61 from $58 a week ago, but remains well below a 2016 high of $86.

Derivatives positioning also indicated so-called index dispersion trades - in which investors bet that the price swings in an individual stock will be greater than overall index volatility - are still popular, market participants said.

"A lot of people are still more concerned about individual stock risk than index risk," said the Cboe's Rhoads. http://tmsnrt.rs/2BcwcdK

 

 

(Reporting by Saikat Chatterjee and Helen Reid; editing by David Clarke)

(( saikat.chatterjee@thomsonreuters.com ; +44-20-7542-1713; Reuters Messaging: saikat.chatterjee.reuters.com@reuters.net ))

 



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