Closing Market Summary: Stocks Register Nice Bounce-Back PerformanceInvestors 'bought the dip' on Thursday as the major averages enjoyed a bounce-back performance following the stock market's worst one-day decline in eight months just 24 hours earlier. The S&P 500 (+0.4%) settled below its 50-day moving average (2,369) after some selling in the final minutes left the index in the middle of the day's trading range. The Nasdaq (+0.7%) and the Dow (+0.3%) closed on opposite sides of the benchmark index.
The equity market opened Thursday's session slightly lower but quickly recovered, climbing into positive territory on the back of a solid performance from the semiconductor and biotechnology industries. These two industries were watched closely throughout the day as a gauge of investor sentiment since they often exhibit leadership in up markets given their growth characteristics. Both the PHLX Semiconductor Index and the iShares Nasdaq Biotechnology ETF (IBB 292.27, +3.68) kept their bullish tones until the closing bell, adding 1.9% and 1.3%, respectively.
The opening move higher was followed by sideways action into the afternoon, followed by a second push led by the financial sector (+0.3%). There was no clear catalyst for the move, but it took place shortly after the U.S. Dollar Index (97.71, +0.37) spiked to a fresh session high at the expense of the pound (1.2944). Speculation that Brazil's President Michel Temer would resign following charges of corruption were also circulating at this time, however, Mr. Temer later said that he will not be stepping down. The iShares MSCI Brazil Capped ETF (EWZ 32.75, -6.39) plunged 16.3% while the iShares MSCI Emerging Markets ETF (EEM 40.29, -0.68) lost 1.7%.
However, the endless squabble in Washington kept a lid on the day's bullish sentiment. Yesterday's New York Times article, which highlighted a potential obstruction of justice move by President Trump, was followed by another concerning report that Trump campaign officials might have had at least 18 undisclosed contacts with Russian officials leading up to, and after, the U.S. presidential election. To be clear, the real concern for investors isn't so much the headlines themselves, rather, it's the notion that President Trump's pro-growth agenda items (i.e. tax reform, deregulation, and infrastructure spending) might not come to fruition as quickly as envisioned (i.e. before the end of the year) or perhaps at all.
Treasury Secretary Steven Mnuchin also made his way into today's news flow, stating that the Trump administration did not support the break up of big banks. In the past, President Trump has floated the idea of reinstating a '21st century' version of the Glass-Steagall Act, which was originally aimed at separating commercial and investment banking. However, the president has not taken a clear stance on the issue. The financial sector slipped to the bottom of the sector standings on the heels of Mr. Mnuchin's comments, but it regained its legs to lead the afternoon rally.
In U.S. corporate news, Wal-Mart (WMT 77.54, +2.42) jumped 3.2% after beating bottom line estimates. Conversely, Cisco Systems (CSCO 31.38, -2.44) tumbled 7.2% after disappointing revenue guidance overshadowed better than expected earnings. The results had a muted impact on the broader sectors. Consumer staples (+0.1%) finished behind the broader market despite WMT's solid performance while technology (+0.6%) outperformed in the face of CSCO's plunge.
In the end, nine of eleven sectors finished in positive territory with nearly all groups posting gains between 0.1% and 0.6%. The energy sector (-0.1%) settled at the bottom of the leaderboard, despite crude oil climbing 0.7% to $49.26/bbl, while the lightly-weighted telecom services group (+1.2%) finished at the top.
U.S. Treasuries ended Thursday relatively flat with the benchmark 10-yr yield (2.23%) adding one basis point. The CBOE Volatility Index (VIX 14.63, -0.96, -6.2%) reflected the improvement in risk tolerance, dropping one point.
On the data front, investors received several economic reports on Thursday, including Initial Claims, the Philadelphia Fed Index for May, and April Leading Indicators:
- The latest weekly initial jobless claims count totaled 232,000 while the consensus expected a reading of 240,000. Today's tally was below the unrevised prior week count of 236,000. As for continuing claims, they declined to 1.898 million from the revised count of 1.920 million (from 1.918 million).
- The key takeaway from this report is that it covered the period in which the employment survey was conducted for the May employment report, so it will foster an expectation for another month of strong nonfarm payrolls growth.
- The Philadelphia Fed Survey for May rose to 38.8 from an unrevised 22.0 in April while economists polled by had expected a reading of 18.5.
- The key takeaway from the report is that firms continue to expect growth, yet the optimism surrounding that growth outlook has faded, evidenced by the drop in the diffusion index for future general activity from 45.4 to 38.4, which was the second consecutive decline.
- The Conference Board's Leading Indicators report for April increased 0.3% (consensus 0.4%) after moving higher by a revised 0.3% in March (from 0.4%).
- The key takeaway from the report is that the strengths among the leading indicators have remained widespread.
Investors will not receive any economic data on Friday.
- Nasdaq Composite +12.5% YTD
- S&P 500 +5.7% YTD
- Dow Jones Industrial Average +4.6% YTD
- Russell 2000 +0.3% YTD
*MNUCHIN COMMENTS ON WHAT WOULD HAPPEN IF BIG BANK FAILED
Depuis quelques mois, c'est la guerre de la data dans les télécoms. Orange, SFR, Bouygues Telecom et Free ont tous gonflé la quantité de données incluse dans leurs forfaits 4G sans augmenter les prix. Tous cherchent à capter de nouveaux clients. Free offre la 4G en illimité aux abonnés Freebox (15,99 euros par mois). SFR a répliqué en lançant une offre Family avec data illimitée pour 17,99 euros (27,99 euros après un an).
Jusqu'ici, le prix des forfaits était un vrai critère concurrentiel, désormais, la data en est un autre. Peut-être que le consommateur, par la data alléché, va se ruer sur ces forfaits très bon marché. Mais le vrai risque, c'est que trop de data, tue la data. En offrant trop de données dans les forfaits, on laisse à penser que la data n'a pas de valeur.
Or, derrière ces capacités accrues offertes au consommateur, il y a le coût du déploiement d'un réseau qui se chiffre en milliards pour les opérateurs télécoms. « L'impact principal, c'est que les opérateurs télécoms hypothèquent complètement leurs revenus futurs », commente Sylvain Chevallier, associé chez BearingPoint. On aurait pu imaginer qu'ils arrivent à se refaire une santé en faisant payer la data au consommateur. »
Le forfait illimité devient la règle
« Il n'y a pas de raison de monétiser les données car le coût de production de la data baisse », relève cependant un acteur des télécoms. De son côté, Oddo pointe que « l'évolution technologique permet d'offrir des offres plus abondantes tout en maîtrisant ses investissements : Ericsson indiquait au Congrès mondial du Mobile à Barcelone que le coût marginal de production du Go commençait à tomber à 0,1 dollar en 4G, contre 10 dollars initialement en 3G. »
L'illimité devient donc la règle, mais les détenteurs de forfaits 4G, eux, ne consomment qu'environ 4,5 Go de data par mois. Ce chiffre devrait néanmoins progresser fortement dans les années à venir. Les analystes de Raymond James s'attendent ainsi à ce que cela double dans les deux-trois ans, à 10 Go par mois.
L'obligation d'investir
Cela pose, en tout cas, une vraie question sur les investissements dans les réseaux. Car tous ne sont pas forcément dimensionnés pour des débits énormes. Si l'utilisateur se met à consommer plus, les opérateurs vont donc devoir investir davantage dans leurs infrastructures, alors qu'ils n'ont pas réussi à gagner plus avec la 4G.
Pour Bouygues, qui n'a pas la capacité d'investir autant que ses concurrents, cela pourrait être douloureux. Pour Free aussi, qui a un public de geeks, et qui est soucieux de conserver son image d'opérateur offrant les meilleurs plans du marché. La semaine dernière, Toshiroo, l'un de ses abonnés, a publié sur Twitter une consommation data de 1,58 téraoctet, du jamais-vu !
La 5G va être illimitée
« Un réseau est très rarement à sa capacité maximum, donc l'illimité permet de mieux le remplir. Il n'y a pas besoin d'investir plus pour en doubler la capacité », relativise l'acteur des télécoms cité plus haut. Le raisonnement est valable tant que la consommation de data n'explose pas de manière exponentielle... Pour SFR, par exemple, qui a amélioré la qualité de son réseau : « comme il a perdu beaucoup de clients, finalement, cela ne coûte pas si cher que cela à l'opérateur si ses clients consomment beaucoup plus de données, en tout cas à court terme », selon Sylvain Chevallier.
Chez Orange, l'équation est différente. L'opérateur historique a le label du meilleur réseau décerné par l'Arcep et s'il veut conserver ce rang, il va devoir continuer à investir de manière soutenue, peut-être plus que ce qu'il a fait jusqu'à présent, pour suivre l'évolution de l'usage de ses clients. Mais c'est probablement le sens de l'histoire. La 5G, attendue en France entre 2020 et 2022, « va être éminemment illimitée, alors autant anticiper », assume l'acteur des télécoms.
Comac and Bombardier in talks over jet programme
Options include Chinese investing in Canadian group’s commercial aerospace arm
China’s Comac and Bombardier have held talks about a deal that could inject new life into the passenger jet programme that mired the Canadian company in debt, several people familiar with the discussions said.
Comac is working with at least one bank on a tie-up that could involve China’s state-owned aircraft manufacturer making an investment in Bombardier’s commercial aerospace arm or taking a stake in the CSeries 100-150 seater passenger jet programme.
“Everything is on the table,” said a person with knowledge of the discussions.
The companies are understood to have been in discussions about a deal for some time, although no decision is imminent, the person said.
Comac did not respond to a request for comment. Bombardier also declined to comment.
The Canadian company, which has received nearly $3bn in publicly funded cash injections over the past two years, is exploring a similar industrial tie-up with Siemens for its rail business. An attempt in 2015 to rescue the costly CSeries programme by injecting it into a joint venture with Airbus collapsed in acrimony.
The Chinese approach to one of Canada’s most-prized industrial assets comes after at least one other government-controlled Chinese company launched talks with the group, which have since ended.
Bombardier has sought partners in its aerospace and transport divisions to mitigate the unexpectedly high costs of bringing its CSeries passenger jet into service, with the programme running billions over budget.
The jet is widely acknowledged to be highly efficient but it has struggled in recent months to win big new orders with both Boeing and Airbus cutting prices on their smallest aircraft.
The company is also facing a complaint by Boeing to US trade authorities over the pricing of its small single-aisle jet, which could result in hefty tariffs and damage its appeal to the US market.
In recent weeks Comac has launched a test flight of its first short-haul commercial passenger aircraft aimed at competing with Airbus and Boeing. But the C919 is still mainly an assembly of parts from other foreign manufacturers.
Based on older-generation technology, and not yet certified by western aviation safety authorities, it is not expected to win many orders with airlines outside China in the near term.
Access to the CSeries programme and its new-generation aircraft technology would boost the development of Comac’s decades-long haul toward becoming an aviation giant.
Comac and Bombardier have been close for years. In 2012, the companies signed an agreement to find commonalities between the C919 and Bombardier’s CSeries to reduce training and maintenance costs.
The companies have floated the idea of co-operating to compete against Boeing and Airbus. Bombardier has also advised Comac on its smaller regional jet, the ARJ-21, which went into commercial operation last year following years of delay.
Comac is not the first Chinese group to pursue Bombardier. Avic, the state aerospace and defence group from which Comac was formed a decade ago, has held direct discussions with Bombardier in recent years, said one person involved in the talks.
Avic explored taking a stake in and a deal for control of the Canadian group but the discussions did not reach an advanced stage, partially due to leadership changes at Avic, the person said.
Regulatory problems also surfaced at the time “and there were concerns over how that would be navigated”, the person said. The apprehension probably stemmed from Avic’s deep ties to the Chinese military.
Comac was spun out of Avic in 2008 and Avic remains a significant shareholder in the company. Comac’s operations focus on civil aviation and it was unclear whether a potential deal between the two companies would be beset with similar problems.
Comac’s trajectory to the global market has been turbulent. The C919, the test flight of which came years behind schedule, is also 10-15 years behind the rest of the industry. Despite those problems, China is expected to become the world’s biggest aviation market by 2024. C919 already has 500 orders from Chinese airlines.