>>> US Close Dow +0.69% S&P +0.68% Nasdaq +0.47% Russell +0.46%


Closing Market Summary: Equities End the Week on a Positive Note

After posting its worst one-day loss in eight months on Wednesday (-1.8%), the stock market ended the week with two bounce-back performances that left the S&P 500 with just a modest loss for the week (-0.4%). The benchmark index challenged its flat line for the week at the peak of Friday's slow and steady climb, but couldn't hold its session high into the closing bell. The major averages settled in the middle of the day's trading range with the S&P 500 and the Dow adding 0.7% apiece. The Nasdaq (+0.5%) settled just a tick below its peers.

Thursday's positive sentiment lingered in the stock market on Friday morning, granting the major averages modest gains at the opening bell. From there, the industrials (+1.4%), energy (+1.2%), and financials (+0.8%) groups led the stock market in a slow and steady climb. The industrial sector rallied around Deere's (DE 120.90, +8.23) stronger than expected earnings and upbeat guidance. DE shares jumped 7.3% while peer Caterpillar (CAT 102.43, +2.21) also profited from the positive sentiment, adding 2.2%.

Crude oil underpinned the energy sector's positive performance, jumping 2.0% to $50.33/bbl, after reports that an OPEC panel is considering the possibility of not only extending its deal to cut oil production, which Russia and Saudi Arabia spoke in favor of earlier in the week, but also increasing the size of the production cut. For the week, the energy component added 5.2%. 

The financial sector held strong into the final hour of action but lost some of its vigor following a Washington Post report that claims a White House official is a person of interest in the investigation on Russia's influence in the U.S. presidential election. The broader market was in the midst of challenging last Friday's closing level before the report was released, but ticked down with the financial sector in the aftermath.

All eleven sectors ended the day in the green, but some groups showed relative weakness with the top-weighted technology sector (+0.5%) being the most notable laggard. The tech group failed to capitalize on chipmakers' relatively upbeat performance, evidenced by the 1.1% increase in the PHLX Semiconductor Index, as mega-cap names like Apple (AAPL 153.06, +0.52) and Microsoft (MSFT 67.69, -0.02) weighed. Salesforce.com (CRM 87.40, -0.35) also underperformed despite beating top and bottom line estimates.

In the currency market, the euro (1.1202) added 0.9% against the U.S. dollar after European Central Bank President Mario Draghi said late on Thursday that the eurozone crisis is now in the past and that the recovery was resilient and increasingly broad-based. The euro/dollar pair settled at a seven-month high while the U.S. Dollar Index (97.03, -0.74) finished at its lowest level since early November.

U.S. Treasuries saw some selling pressure amid the stock market's rebound performance, leaving the benchmark 10-yr yield one basis point higher at 2.23%. However, the CBOE Volatility Index (VIX 12.18, -2.48, -16.9%) better captured the day's risk-on tone, dropping over two points.

Investors did not receive any economic data on Friday. Monday's economic calendar is also blank. 

  • Nasdaq Composite +13.0% YTD
  • S&P 500 +6.4% YTD
  • Dow Jones Industrial Average +5.3% YTD
  • Russell 2000 +0.8% YTD

>>> US Gapping up

Gapping up
In reaction to strong earnings/guidance:
  • SPWH +12.3%, ADSK +12%, MCK +8.7%, DE +7%, SB +6.8%, GPS +4.4%, ROST +3.8%, CRM +2.5%, AMAT +2%, HCC +0.9%
M&A news:
  • DYN +20.5% (Vistra Energy (VST) is in talks to purchase DYN, according to WSJ)
  • PXLW +2% (Pixelworks to acquire ViXS in an all-stock transaction consisting of ~3.7 million shares of Pixelworks common stock valued at ~$20.2 million)
Select Brazil related names bouncing in pre-mkt following yesterday's declines:
  • BSBR +5.4%, PBR +4.1%, VALE +3.9%, GOL +3.7%, BBD +2.1%, GGB +1.9%
Select metals/mining stocks trading higher:
  • HMY +4%, AU +3.5%, GFI +3.2%, MT +1.4%, RIO +1.2%, BHP +1%
Other news:
  • GLYC +8.2% (seeing continued strength in after hours - being attributed to positive Suntrust comments)
  • FBIO +5.8% (receives NOA from the USPTO for an application describes and claims a dosing regimen of intravenous (IV) 50 mg tramadol)
  • SNGX +5% (indicated higher after Randal J. Kirk - in joint filing with Third Security/Intrexon- disclosed slightly increased active stake to 7.9%)
  • CNHI +4.9% (in sympathy with DE)
  • GBT +4.5% (announces new data supporting its GBT440 program in sickle cell disease will be presented at the upcoming 22nd Congress of the European Hematology Association)
  • FOLD +3.6% (on track to report top-line data from the ESSENCE study during)
  • SYF +1.9% (Synchrony Financial plans to increase quarterly common stock dividend to $0.15 per share and approval of a $1.64 billion share repurchase program through June 30, 2018)
  • CAT +1.8% (in sympathy with DE)
  • SHOP +1.8% (prices offering of 5.5 mln shares of Class A subordinate voting shares at $91.00 per share)
  • BABA +1.5% (slightly rebounding after yesterday's declines)
  • EGLT +1% (presents data from a harm reduction model at the 36th American Pain Society annual meeting)
  • DAR +0.9% (CFO disclosed purchase of 19710 shares worth nearly $300K)
Analyst comments:
  • ARNA +16.5% (initiated with a Outperform at Leerink Partners; tgt $5 )
  • PRTK +12.1% (initiated with Strong Buy at Raymond James; tgt $36)
  • VTL +9.6% ( initiated with Outperform at Raymond James; tgt $6)
  • LL +5.7% (upgraded to Outperform from Perform at Oppenheimer)
  • AXSM +5.5% (initiated with a Buy at BTIG Research; tgt $14 )
  • PANW +3.6% upgraded to Buy from Hold at Jefferies)
  • NVDA +2.4% (initiated with Outperform at Bernstein)
  • TMUS +1.8% (added to Conviction Buy List at Goldman)
  • WMT +0.5% (upgraded to Market Perform from Underperform at BMO Capital Markets)

>>> US Gapping down

Gapping down
In reaction to disappointing earnings/guidance:
  • FL -8.6%, CPB -5%, GLOB -1.8%, QSII -0.6%
Other news:
  • XBIT -10.4% (received a negative opinion from the European Medicines Agency's CHMP for its Marketing Authorization Application for its lead product candidate in Europe)
  • HALO -8.2% (prices 10 mln shares of common stock at $12.50 per share)
  • GSBD -3.4% (prices 3.25 mln share common stock offering at $22.50/share)
  • RSPP -3.3% (commences secondary offering of 15 mln shares of its common stock by Silver Hill Energy Partners Holdings; also files for 27,876,089 share common stock offering by holders)
  • NKE -0.7% (in sympathy with FL)
Analyst comments:
  • COF -1% (Wells Fargo downgrades Credit Card sector to Market Weight from Overweight)

>>> US Early premarket gappers

Early premarket gappers
Gapping up:
  • DYN +20.1%, PTXP +19.3%, ADSK +11.1%, SPWH +9.9%, VTL +9.6%, MCK +8.2%, SB +7.8%, DE +7.4%, GLYC +6.8%, GBT +6.4%, SNGX +5%, CNHI +4.9%, BBD +4.7%, PBR +4.4%, GPS+4.1%, PRTK +4%, GOL +3.7%, HMY +3.5%, AU +3.3%, PANW +3.2%, AMAT +2.9%, GFI +2.7%, VALE +2.5%, CAT +2.2%, CRM +2.2%, NVDA +2.1%, PXLW +2%, GGB +1.9%, CHK +1.6%,RBS +1.6%, BABA +1.6%, MT +1.4%, ROST +1.4%, RIO +1.2%, EGLT +1%, DAR +0.9%, BHP +0.9%, HCC +0.9%, BSBR +0.8%
Gapping down:
  • HALO -9.6%, XBIT -9.3%, FL -7.7%, CPB -5.2%, GSBD -3.8%, ASNA -2.9%, GLOB -2.9%, QSII -2.4%, ACHN -1.6%, SYMC -1.1%

(MS) Food Retailing ; Quantifying European grocers'exposure to Brazil

* What's new? 
Following the publication by Brazilian newspaper El Globo of an article on bribery allegations at the government level, the Brazilian market pulled back significantly (Ibovespa down -9% at the time of writing) and so did the Brazilian Real vs. the major currencies (down -6.5% against the Euro at the time of writing). In this short note, we quantify European grocers' exposure to Brazil.

* Bottom line: 
Three of the top sixth grocery retailers in Brazil are controlled by European-based retailers: Carrefour is the largest grocer with a market share estimated at 17%, CBD Pao de Acucar (controlled by Casino) is a close second with a share of ~16%. As for DIA, it has a more modest market share (slightly above 2%), but given the size of the Group, Brazil is nevertheless an important market for the retailer. While Brazil represents a great share of consolidated sales and EBIT for Casino, Brazil is actually more significant for Carrefour when looking at a sum of the parts valuation, given significant differences in ownership: Casino has an economic interest of only 33.2% of its Brazilian subsidiary, while Carrefour owns 88% of its subsidiary in the country. We are Underweight Casino shares and Equal-weight Carrefour's and DIA's.