FT : Groupe Arnault seeks foothold in French tech start-ups

Groupe Arnault seeks foothold in French tech start-ups
Push to invest in promising companies at an earlier stage of development

Groupe Arnault, the family office of billionaire Bernard Arnault that controls luxury goods group LVMH, has invested in a Paris-based start-up accelerator as part of a wider push to invest in early-stage French companies.

Groupe Arnault has launched an early-stage investment programme called Aglaé Ventures that will invest between €100k and €2m at a time in France tech companies, as well as helping them to expand internationally. In total, Groupe Arnault wants to invest up to €40m in the next three years.

In an initial wave of investments, Groupe Arnault will invest in The Family, a group that has helped develop the French tech scene since it launched four years ago, as well as Back Market, an online marketplace for refurbished electronic devices at discounted prices.

The strategy reinforces Groupe Arnault’s commitment to France following a year in which French tech attracted record amounts of investment. It also illustrates how investors are increasingly looking to build a relationship with promising start-ups at an earlier stage in the race to find the next big tech success.

The French tech scene is trying to shake off criticism that it is too parochial, and build more companies that are globally competitive following the success of long-distance carpooling service BlaBlaCar and online advertising company Criteo.

Aglaé plans to invest in sectors such as software, big data and marketplaces that have “asset light” business models and can be scaled up. Entrepreneurs will gain access to Groupe Arnault’s network and have support in marketing, business development and market intelligence. Aglaé will take part in seed and Series A fundraisings.

Groupe Arnault has invested in the tech sector since the 1990s, typically at a later stage which means bigger sums of between €2m and €100m from Series B rounds onwards. Tech companies such as Netflix, Airbnb and sound-technology group Devialet have all been backed by the family office, although it is best known as the majority shareholder in LVMH, the world’s largest luxury group by revenues.

The Family brings entrepreneurs under one roof and supports them with workshops, infrastructure and access to investors. It has helped more than 550 start-ups, and the value of its portfolio companies is more than $1bn. It has recently added offices in London and Berlin to its base in Paris.

“We want to build start-ups at a European level using the best of every country,” said Oussama Ammar, co-founder of The Family.

He added that rather than positioning London, Paris and Berlin as competitors, the European tech industry should work together to challenge Silicon Valley.

“It’s about unifying Paris, London and Berlin. The Trump election is one of the biggest opportunities to put Europe in the front seat against the US.”

FT : Saudi finance minister vows reform push despite benefits U-turn

Saudi finance minister vows reform push despite benefits U-turn
Mohammed al-Jadaan plans to inject billions of dollars into economy to boost growth

Saudi Arabia’s finance minister says he will inject billions of dollars into the country’s economy to stimulate growth, while also pledging to push ahead with unpopular reforms after the government’s surprise benefits U-turn last week.

The kingdom has been struggling to strike a balance between boosting anaemic growth and pushing through austerity measures as it grapples with a fiscal crisis triggered by the slump in oil prices.

Last week, Riyadh reversed cuts to civil servants’ benefits, a move that some observers saw as a setback for the reform programme led by Mohammed bin Salman, the deputy crown prince, who last year launched an ambitious plan to overhaul the oil-dependent economy.

But Mohammed al-Jadaan, the finance minister, insisted that the reversal, the first major reform U-turn since Prince Mohammed launched his plan, did not indicate a reluctance to move forward with unpopular measures in the face of domestic criticism.

He told the Financial Times that reinstating the benefits, which spanned bonuses, overtime and other perks and affected two-thirds of Saudis in the civil service, would revive consumer demand. The cuts to civil servants’ benefits helped push the non-oil economy to the brink of its first recession in decades last year.

“The reforms will continue; we are committed,” he said in an interview. “Bringing back allowances is a response to bring back purchasing power and raise the confidence of consumers and the private sector.”

Previous increases in fuel, water and electricity prices, as well as salary freezes, had all been maintained, he added.

Mr Jadaan said a stimulus package for the private sector, including SR10bn-12bn ($2.7bn-$3bn) spent this year to support the construction of 280,000 housing units, would help ease the pain of further reforms.

The package involves a four-year SR200bn programme that is intended to provide low-cost loans to help businesses restructure debts, extend lending limits to companies that contribute to employment and fund small- and medium-sized enterprises.

“The stimulus package is one element to deal with the potential impact of reforms,” Mr Jadaan said.

He acknowledged that growth would be weak this year and next. The International Monetary Fund forecasts growth of 0.4 per cent this year, but Mr Jadaan said he expected it be higher. In 2016, the Saudi economy grew by 1.4 per cent, according to the IMF.

Under Prince Mohammed’s “Vision 2030” plan, Riyadh says it will privatise state entities, including Saudi Aramco, the oil company, shrink the role of the government in the economy and support development of the private sector.

The austerity measures are needed to plug a SR200bn fiscal deficit, but are also a test of the rulers’ ability to wean Saudis off decades of government largesse.

However, government critics say the reforms have so far been centred around austerity and are short on economic diversification. Concerns have also been growing among Saudis about the potential impact of further cost-cutting measures at a time when many are struggling with rising living costs and unemployment.



Mr Jadaan said that government aid to poorer Saudis via the “citizens’ account”, a new system of state benefits, would help cushion the next round of fiscal reforms, which will include the introduction of sales and excise taxes and increases in municipal fees.

“People will need to see Vision 2030 in its totality and we need to communicate, we need to explain what we are doing clearly,” Mr Jadaan said.

FT : HNA raises stake in Deutsche Bank to nearly 10%

HNA raises stake in Deutsche Bank to nearly 10%
Chinese conglomerate becomes biggest shareholder in German lender

HNA Group has raised its stake in Deutsche Bank to almost 10 per cent, making the Chinese conglomerate the top shareholder in Germany’s largest lender.

A filing made on Tuesday by entities including C-Quadrat — an asset manager through which HNA had already purchased a 4.76 per cent stake in Deutsche — showed the Chinese group had now acquired an aggregate 204.7m of 2.06bn shares outstanding in the German bank.

The purchase took HNA’s stake to 9.92 per cent, leapfrogging BlackRock’s 5.88 per cent holding to make it the top shareholder in the German bank.

The Chinese conglomerate began life in 1989 as a regional airline but has in recent years transformed itself into a sprawling holding company, with a reputation as China’s most omnipresent overseas acquirer.

HNA ranked top among Chinese outbound investors so far this year, sealing $5.5bn in deals or about 13 per cent of Chinese overseas transactions by value prior to the latest Deutsche Bank purchase, according to data from Dealogic. Last year, it ranked second with 12 per cent, including purchases made through entities that it controls.

The Chinese conglomerate, which has stakes in airlines, hotels, banks and logistics companies, said upon taking an initial stake in February that it was a passive investor in response to concerns from investors that HNA would seek to take a strategic role in the lender.

>>> Asian Update

Asia Mid-Session Market Update: New Zealand unemployment rate matches multi-year lows, but wage growth stays suppressed; AUD, ASX200 slide on lower iron ore prices

***US Session Highlights***
- (US) Pres Trump tweets: "Our country needs a good 'shutdown' in September to fix mess!"
- (US) House Freedom Caucus Chair Meadows (R-NC): GOP still a handful of votes short in the House on AHCA healthcare bill - press
- (US) April ISM New York: 55.8 v 56.5 prior
- Stock markets traded sideways for the most part on poor auto sales numbers and few other data points. At close, Blue Chips and the broader market managed to post small gains. The best performing sector of S&P were the Industrials +0.5%, worst sector, Consumer Staples -0.7%. Bonds opened lower, sending yield to 2.34% as the reflation trade seemed to gain traction. Eventually FI markets rallied, sending yield back down to 2.28%.

***US markets on close: Dow +0.2%, S&P500 +0.1%, Nasdaq +0.1%***
- Best Sector in S&P500: Industrials
- Worst Sector in S&P500: Consumer Staples and Energy
- Biggest gainers: COH +11.4%; MLM +7.6%; CMI +6.1%
- Biggest losers: ADM -8.9%; MOS -7.2%; NRG -5.4%
- At the close: VIX 10.59 (+0.5pts); Treasuries: 2-yr 1.26% (flat), 10-yr 2.29% (-3bps), 30-yr 2.98% (-3bps)

***US movers afterhours***
- ETSY Reports Q1 $0.00 v $0.00e, R$96.9M v $98.6Me; names Josh Silverman as CEO; +15.7% afterhours
- OB To Be Acquired By Intact Financial Corporation for $18.10/shr in cash, valued at $1.7B; +15.3% afterhours
- FEYE Reports Q1 -$0.09 v -$0.26e, R$173.7M v $164Me; Expects to be profitable from 2018 on, incl Q417; +14.7% afterhours
- WTW Reports Q1 +$0.16 v -$0.05e, R$329M v $323Me; 13.7% afterhours
- FSLR Reports Q1 +$0.25 v -$0.13e, R892M v $699Me; +8.3% afterhours
- MDLZ Reports Q1 $0.53 v $0.50e, R$6.41B v $6.37Be; +2.8% afterhours
- AAPL Reports Q2 $2.10 v $2.02e, R$52.9B v $52.6Be; raises dividend 10.5% to $0.63 from $0.57 (indicated yield 1.71%); increases buyback program by $35B (4.4% of market cap) to $210B; iPhone shipments 50.8M v 51.2M y/y (v 52Me); -1.8% afterhours
- APC Reports Q1 -$0.60 adj v -$0.23e (unclear if comp), R$3.77B v $2.66Be; -2.5% afterhours
- TWLO Reports Q1 -$0.04 v -$0.07e, R$87.4M v $83.5Me; Guides Q2 -$0.11 to -$0.11 v -$0.08e, R$85.5-87.5M v $87.6Me; -29% afterhours

**Following extended session:
- PRGO: Discloses DOJ investigation related to drug pricing
- CTXS: Said to be working with Goldman on a possible sale - press

***Key economic data***
- (NZ) NEW ZEALAND Q1 UNEMPLOYMENT RATE: 4.9% (matches lowest rate since Q4 of 2008) V 5.1%E; EMPLOYMENT CHANGE Q/Q: 1.2% V 0.8%E; Y/Y:5.7% V 5.3%E
- (AU) AUSTRALIA APR AIG PERF OF SERVICES INDEX:53.0 V 51.7 PRIOR; 2nd straight expansion and 3-month high
- (UK) APR BRC SHOP PRICE INDEX Y/Y: -0.5% V -0.5%E; 48th consecutive decline
- (VN) Vietnam Feb PMI Manufacturing: 54.1 v 54.6 prior

***Asia Session Notable Observations, Speakers and Press***
- Asian equities trading mixed in the wake of modest gains on Wall St, though volatility is also compressed ahead of tomorrow's FOMC decision and Japan and Korea closed for holiday. S&P futures are modestly lower, while Nasdaq futures are weighed down by disappointing earnings from Apple after market close. Oil futures were up over 1% on larger than expected draw in API inventories.
- In FX, NZD/USD spiked up some 30pips on the release of lower than expected New Zealand unemployment rate as it matched the lows not seen since late 2008, however half of those gains were erased in later Asian hours as traders noted low wage growth and limited expectations of altering RBNZ policy path. AUD/USD also came under some pressure late in the day, testing below $0.75 handle, just as ASX200 index fell to a 1-week low below 5,900, with weakness in the metals sector attributed to a steep 6% drop in Dalian iron ore prices.

China
- (CN) Out of 1.1K publicly traded companies in China to post results so far, about 60% project rising profits or reversal from loss to profit for H1 period - Chinese press
- (CN) China CBRC said to approve CCB and Agbank’s debt to equity swap units – Chinese Press

Australia
- (AU) Australia Trade Min Ciobo: TPP is still possible without US involvement

Korea
- (KR) According to 38 North, North Korea appears to continue activity at its nuclear test site - press

***Asian Equity Indices/Futures (00:30ET)***
- Nikkei closed, Hang Seng +0.3%, Shanghai Composite -0.3%, ASX200 -1.1%, Kospi closed
- Equity Futures: S&P500 -0.1%; Nasdaq -0.3%, Dax -0.1%, FTSE100 -0.2%

***FX ranges/Commodities/Fixed Income (03:00ET)***
- EUR 1.0920-1.0935; JPY 111.95-112.07; AUD 0.7500-0.7545; NZD 0.6930-0.6970
- June Gold flat at 1,256/oz; June Crude Oil +0.6% at $47.94/brl; July Copper -1.1% at $2.61/lb
- iShares Silver Trust ETF daily holdings rise to 10,417 tonnes from 10,308 tonnes prior
- (US) Weekly API Oil Inventories: Crude: -4.2M v +0.9M prior; (largest draw since Jan 18th 2017)
- (RU) Russia govt reportedly favors extension of OPEC deal by six months - press
- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.8892 V 6.8956 PRIOR
- (CN) PBOC to inject combined CNY200B v skipped prior in 7-day, 14-day and 28-day reverse repos
- (CN) China MOF sells 1-yr bonds at 3.32% v 3.18%e, bid-to-cover 1.47x; Sells 10-yr bonds at 3.52% v 3.49%e, bid-to-cover 2.20x
- (AU) Australia MoF (AOFM) sells A$600M in 2.75% 2028 Bonds; avg yield: 2.7213%; bid-to-cover: 4.69x

***Asia equities notable movers***
- NZME, NZM.NZ,-11.2%; NZCC denies merger with Fairfax
- Vocus Communications, VOC.AU, -27%, cuts FY17 guidance
- Nufarm NUF.AU -1.5%, guidance
- Star Entertainment SGR.AU 4.0%, trading update
- Woolworths WOW.au -2.0%, Macquarie cut
- Melbourne IT, MLB.AU, +7.8%, resumes trading, entitlement offering
- Epistar, 2448.TW, +3.3%, San Shing Fastech may make an offer
- MediaTek, 2454.TW, -1.8%, may have negative outlook

>>> US After Hours Summary: FEYE +15%, WTW +13%, FSLR +9% higher follow


After Hours Summary: FEYE +15%, WTW +13%, FSLR +9% higher following earnings/guidance, solar names lifting with FSLR... TWLO -30%, AKAM -14%, CRAY -10%, OCLR -9%, GILD -2.5%, AAPL -1.8% lower on earnings/guidance

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: FEYE +14.6%, WTW +12.8%, QUAD +12.8% (light volume), BGFV +11.6%, MYGN +10.8%, FSLR +8.5%, GNW +6.8%, LNTH +6.2%, HUBS +5.9%, TAHO +5.2% (ticking higher), GDDY +3.6%, BYD +3.5% (also reinstates dividend), CSOD +3.2%, MDLZ +2.9%, PAYC +2.9%, CPE +2.5%, FANG +2.2% (ticking higher), PZZA +1.9%, RRD +1.8%, QLYS +1.2% (light volume)

Companies trading higher in after hours in reaction to news: LOV +18.2% (thinly traded; unveils merger with Affinitas GmbH, operator of online dating platforms EliteSingles, eDarling and Attractive World), OB +15.3% (Onebeacon Insurance to be acquired by Intact Financial for $18.10 in cash per share or $1.7 bln), PRTO +8.1% (will increase the planned enrollment of its ongoing Phase 3 PATENCY-2 trial to 600 patients), VICL +3.3% (provides update on its internal programs VL-2397 for invasive aspergillosis and the HSV-2 therapeutic vaccine at its R&D day; full data set will be presented on June 2 as one of four presentations at the ASM Microbe 2017 conference)

A few cyber security names are higher on the heels of FEYE's upside earnings/guidance: FTNT +0.9% (also CEO featured on Mad Money), CYBR +0.6%, PANW +0.5%

Solar names higher on FSLR earnings sympathy (etf - TAN +0.6%): SPWR +2.6%, CSIQ +1.7%, JASO +1%

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: TWLO -29.7%, IPHI -17.4%, ETSY -16.2% (also the CEO is stepping down; co is not providing guidance and discloses additional workforce reductions), LCI -14.4%, AKAM -13.6%, PBPB -11.6%, CRAY -9.7%, OCLR -8.8%, FTR -8.3% (will set the reverse stock split ratio at 1-for-15 if stockholders approve the reverse stock split proposal that is now before them), DXCM -8.1%, NANO -7.5%, SPPI -7%, MTCH -6.4%, VRSK -6.3%, TNAV -5.7%, EVHC -5.7%, VIAV -4.7%, APC -2.6% (also issues statement regarding Firestone accident), GILD -2.5%, HBI -2.5%, AAPL -1.8% (also approves 10.5% increase to the quarterly dividend, increases share repurchase authorization to $210 billion from the $175 billion level announced a year ago)

Companies trading lower in after hours in reaction to news: RXDX -1.4% (commences an public offering of 10 mln shares of its common stock)

Apple (AAPL) suppliers are under pressure following Apple earnings: CRUS -3%, SWKS -1.4%, QRVO -1.2%, TXN -0.9%, AVGO -0.8%, QCOM -0.2%

Optical names are lower following OCLR earnings/guidance: IPHI -17.4%, LITE -2.9%, ACIA -2.8%, FNSR -2.6%, FN -1.7%, AAOI -1%

FT : Brussels hoists gross Brexit ‘bill’ to up to €100bn

Brussels hoists gross Brexit ‘bill’ to up to €100bn
France and Germany back tougher approach to Britain’s departure obligations

The EU has raised its opening demand for Britain’s Brexit bill to an upfront gross payment of up to €100bn, according to Financial Times analysis of new stricter demands driven by France and Germany.

Following direct requests from several member states, EU negotiators have revised their initial calculations to maximise the liabilities Britain is asked to cover, including post-Brexit farm payments and EU administration fees in 2019 and 2020.

Although over coming decades Britain’s net bill would be lower than the €100bn upfront settlement, the more stringent approach to Britain’s outstanding obligations significantly increases the estimated €60bn charge mentioned by Jean-Claude Juncker, the European Commission president.

It also reflects the steadily hardening position of many EU member states, which have abandoned early reservations about the bill’s political risks to pile on demands that will help to plug a Brexit-related hole in the bloc’s common budget.

Paris and Warsaw have pushed for the inclusion of post-Brexit annual farm payments, while Berlin is against granting Britain a share of EU assets.

Estimates of Britain’s Brexit bill are highly variable because they include assumptions on Britain’s exit date, its proper share of contributions, UK receipts such as its budget rebate or EU investment spending, and the type of liabilities it is expected to honour. European diplomats consider this flexibility as helpful in reaching a deal.

The hefty bill represents one of the biggest early obstacles to a smooth Brexit. To the alarm of the EU side, Theresa May bluntly rejected the notion of an exit bill at a recent dinner with Mr Juncker, saying any financial terms would be tied to securing a trade deal by 2019. On Tuesday, she promised to be a “bloody difficult woman” in talks.

Michel Barnier, the EU’s chief negotiator, has said no figure will be set until the end of the Brexit process and payments could be staggered. But he wants Britain to agree a methodology before trade talks can begin, including a definition of EU liabilities the UK would be expected to share. He will unveil a draft negotiating mandate — including the Brexit bill assumptions — on Wednesday.

As well as adding €10bn-€15bn of mainly farm- related payments, the commission’s tougher approach denies London a share of assets such as buildings. Significantly, it requires upfront payment for contingent guarantees and loans to countries such as Ukraine and Portugal, with Britain being reimbursed as the loans are repaid.

According to FT calculations, this brings the upfront gross settlement demand to approximately €80bn-€100bn, depending on how Britain’s share is calculated. Over a period of a decade or more, this would be reduced in net terms to roughly €55bn-€75bn as Britain received its share of EU spending and repaid EU loans.

Using similar assumptions, the Bruegel think-tank estimates that Britain would make an upfront payment of €82bn-€109bn, which would net out to €42bn-€65bn over the long term. Compared with the FT and some commission officials, Bruegel uses a higher estimate of expected EU spending in the UK and a lower estimate of net pension liabilities.

Zvolt Darvas, a senior fellow at Bruegel, said the EU’s latest approach clearly represented “the most extensive possible liabilities for the net bill”.

“It requires the UK to make a large upfront payment that is even bigger than the long- term net bill,” he added.

The commission has never published its preferred methodology. But in early discussions with member states it took a more conservative view of UK liabilities. The FT previously calculated the figure to be €40bn-€60bn in net terms — a number that corresponds to Mr Barnier’s informal estimates shared with member states.


This gave Britain a share of EU assets such as buildings, and included only what it sees as legally binding commitments to investment programmes — such as infrastructure projects in eastern Europe — running over multiple years.

However, during recent private deliberations, France and Poland insisted that EU liabilities worth €183bn, covering annual farm subsidies and administrative costs, should also be added to the tally.

Diplomats say this is reflected in the EU’s negotiating guidelines, which refer to “a single financial settlement including issues resulting from the MFF [the EU’s long-term budget]”. Greece asked that the UK also honour political commitments it made to fund refugee programmes in Turkey.

At the request of France, Germany and several other member states, the commission also abandoned its initial plans to offer the UK a share of assets, worth between €3bn and €9bn, depending on the definition used.

On the issue of contingent liabilities, Mr Barnier’s negotiating mandate is expected to require upfront payment to cover loans or guarantees, which will be “returned in accordance with the maturity of the underlying loans”.

The European Investment Bank is excluded from the FT calculations. However, the EU is insisting Britain would have a claim only on its paid-in capital, rather than a share of the bank’s €63.5bn own funds that Britain will demand.

>>> Parker Drilling beats by $0.03, misses on revs; co believes that, internatio

Parker Drilling beats by $0.03, misses on revs; co believes that, internationally, its drilling activity is at or near the bottom (1.65)
  • Reports Q1 (Mar) loss of $0.31 per share, $0.03 better than the Capital IQ Consensus of ($0.34); revenues fell 24.7% year/year to $98.3 mln vs the $99.53 mln Capital IQ Consensus.
    • "Parker continues to execute well in a difficult market and our first quarter results were in line with our expectations," said Gary Rich, the Company's Chairman, President and CEO. "Activity in the U.S. for both our rental tools and barge businesses improved in the first quarter. Our U.S. rental tools business performed well as U.S. land revenue growth of 37% outpaced U.S. land rig count growth of 27% and incremental margins for the segment, including land and offshore, were 67 percent. In the U.S. barge business, we mobilized one barge rig during the quarter and began operating two additional barge rigs in April. We are also in ongoing discussions to place up to two additional barge rigs into service by the middle of this year. "Internationally, we believe our drilling activity is at or near the bottom and we continue to see positive indicators across select markets for projects with anticipated start-ups in late 2017 and into 2018. In our international rentals business, the startup of several new well construction contracts have now commenced and should positively impact activity going forward.
  • Drilling services: Gross margin decreased 25.9% to $8.0 million from $10.8 million, and gross margin as a percentage of revenues was 12.4 percent, compared with 17.3 percent for the prior period
  • Rental tool services: Gross margin increased 63.0% to $4.4 million from $2.7 million, and gross margin as a percentage of revenues was 13.0 percent compared with 8.5 percent for the prior period

>>> Apple beats by $0.08, reports revs in-line, misses on iPhones -1.26%

Apple beats by $0.08, reports revs in-line, misses on iPhones; guides Q3 revs just below consensus; increases buyback and dividend 10.5% to $0.63/share (147.51 +0.93)
  • Reports Q2 (Mar) earnings of $2.10 per share, $0.08 better than the Capital IQ Consensus of $2.02; revenues rose 4.6% year/year to $52.9 bln vs the $53.08 bln Capital IQ Consensus.
  • Q2 iPhones 50.8 mln vs 52.5 mln ests 51.2 mln last year.... iPads 8.9 mln vs 9.6 mln ests vs 10.2 mln last year (first time in 6 years below 10 mln) Q2 Macs 4.2 mln vs 4.2 mln ests vs 4.0 mln last year.
  • Gross margin of 38.9% vs Street Expectations of ~38.8% vs 39.4% last year (guidance 38-39%)
  • Co issues downside guidance for Q3, sees Q3 revs of $43.5-45.5 bln vs. $45.65 bln Capital IQ Consensus; sees Q3 gross margins of 37.5-38.5% vs Street expectations of 38.2%.
  • As part of the latest update to the program, the Board has increased its share repurchase authorization to $210 billion from the $175 billion level announced a year ago. The Company also expects to continue to net-share-settle vesting restricted stock units.
  • The Board has approved a 10.5% increase to the Company's quarterly dividend, and has declared a dividend of $0.63 per share of the Company's common stock, payable on May 18, 2017 to shareholders of record as of the close of business on May 15, 2017. From the inception of its capital return program in August 2012 through March 2017, Apple has returned over $211 billion to shareholders, including $151 billion in share repurchases. The Company plans to continue to access the domestic and international debt markets to assist in funding the program


* Apple prelim Q2 $2.10 vs $2.02 Capital IQ Consensus Estimate; revs $52.9 bln vs $53.08 bln Capital IQ Consensus Estimate

* Apple Board approves 10.5% increase to the Company’s quarterly dividend, increases share repurchase authorization to $210 billion from the $175 billion level announced a year ago

* Apple reported Q2 gross margin of 38.9% vs Street Expectations of ~38.8% vs 39.4% last year (guidance 38-39%); Apple sees Q3 gross margins of 37.5-38.5% vs Street expectations of 38.2%

* Apple sees Q3 revs $43.5-45.5 bln vs $45.65 bln Capital IQ Consensus Estimate; sees gross margin between 37.5% and 38.5%

* Apple reports Q2 unit metrics
  • Co reported Q2 iPhones of 50.8 mln vs 52.5 mln ests 51.2 mln in the same quarter as last year.
  • Co reported Q2 iPads of 8.9 mln vs 9.6 mln ests vs 10.2 mln in the same quarter as last year (Note: This is the first time in 6 years that iPad sales were below 10 mln).
  • Co reported Q2 Macs of 4.2 mln vs 4.2 mln ests vs 4.0 mln in the same quarter as last year.

>>> US Close Dow +0.17% S&P +0.12% Nasdaq +0.06% Russell -0.57%

Closing Market Summary: Equities Eke Out Second Win of the Week

Investors chose to play it safe on Tuesday with Apple's (AAPL 147.51, +0.93) quarterly report on tap. As a result, the major averages never really deviated from their unchanged marks with the S&P 500 (+0.1%) trading within a seven-point range. The Nasdaq (+0.1%) settled in line with the benchmark index while the Dow (+0.2%) finished just a tad bit higher.

Apple, which is the largest company by market cap, has played a huge role in the stock market's 2017 campaign, evidenced by the company's 27.4% year-to-date gain. Consequently, investors lacked conviction in moving the market one way or the other with such an influential piece of information--AAPL's latest earnings report--looming.

Sector standings reflected the wait-and-see strategy with eight of eleven settling within 0.3% of their flat lines. The top-weighted technology space (+0.3%) showed relative strength despite the underperformance of chipmakers, which pushed the PHLX Semiconductor Index lower by 1.1%. Advanced Micro Devices (AMD 10.30, -3.32) led the semiconductor retreat, plunging 24.4%, despite reporting in-line earnings and revenues. However, it's important to keep in mind that AMD surged 295.1% in 2016.

Like technology, the health care sector (+0.3%) exhibited relative strength. Within the sector, Merck (MRK 62.70, +0.32) and Pfizer (PFE 33.61, -0.17) beat earnings estimates, but their top-line results differed; MRK reported better than expected revenues while PFE missed its mark.

Airlines helped the industrial sector (+0.5%) finish atop the day's leaderboard, rallying around Delta Air Lines' (DAL 47.83, +2.43) 1.0% year-over-year increase in passenger revenue (PRASM) for the month of April. Cummins (CMI 160.56, +9.23) also contributed to the cause, adding 6.1%, after reporting better than expected earnings/revenues and providing upbeat guidance. The consumer discretionary (+0.2%), materials (+0.2%), utilities (+0.3%), and real estate (+0.1%) spaces also closed in positive territory.

On the flip side, the energy sector (-0.5%) was influenced negatively by crude oil's 2.5% decline. The energy component was weak throughout Tuesday's session, but widened its loss considerably in the afternoon ahead of the weekly crude inventory report from the American Petroleum Institute, which will be released today at 16:30 ET. 

The consumer staples group also exhibited relative weakness, losing 0.6%. CVS Health (CVS 79.00, -2.96) weighed on the sector, dropping 3.6%, despite beating bottom-line estimates. The remaining sectors--financials (unch) and telecom services (-0.1%)--finished just a tick below their unchanged marks.

In the bond market, unequally distributed buying flattened the yield curve. The 10-yr yield finished three basis points lower at 2.28% while the 2-yr yield (1.27%) lost only one. Meanwhile, gold settled slightly higher, up 0.1% at $1,256.80/ozt, while the U.S. Dollar Index (98.84, -0.14) finished with a loss of 0.1%.

Investors did not receive any economic data on Monday, but auto and truck sales for the month of April were released throughout the day. The results were largely disappointing with American automakers General Motors (GM 33.20, -1.00) and Ford (F 10.92, -0.50) reporting declines of 6.0% and 7.2%, respectively.

Tomorrow, investors will receive several economic reports, including the weekly MBA Mortgage Applications Index at 7:00 ET, April ADP Employment Change (consensus 170,000) at 8:15 ET, April ISM Services (consensus 55.8) at 10:00 ET, and the FOMC rate decision at 14:00 ET.

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  • Russell 2000 +3.1% YTD