Closing Market Summary: Apple Boosts Stock Market on WednesdayPockets of strength kept the S&P 500 near its flat line on Wednesday despite investors' lack of buying conviction. The S&P 500 finished flat while the Nasdaq (+0.5%) and Dow Jones industrial Average (+0.1%) ended modestly higher thanks to a huge move in shares of Apple (AAPL 129.92, +8.57, +7.1%) following its fiscal first quarter earnings report, which was replete with record revenues, earnings, and iPhone sales.
Wednesday's session opened with a lot of optimism as market participants reacted favorably to Apple's earnings results; however, investors soon lost conviction and the major indices soon relinquished most, if not all, of their opening gains.
The inability to maintain a bullish bias in the wake of Apple's report was regarded as a disappointing development that weighed on investor sentiment. At the same time, market participants were grappling with some inflation concerns and some rate-hike edginess in front of the FOMC policy decision at 2:00 p.m. ET after the ADP Employment Change and Manufacturing ISM Index reports for January checked in stronger than expected.
The aforementioned reports supported the notion that economic growth looks poised to accelerate in 2017 -- a view that in turn fueled a belief that higher inflation will accompany that growth. That outlook manifested itself in a weak Treasury market and a strengthening dollar, yet those respective moves were tempered following the release of the FOMC's policy directive.
The FOMC voted unanimously to maintain the current fed funds target range at 0.50%-0.75%, as expected. By and large, there was little change in the wording of the directive from the December meeting. There was some concern ahead of its release that it might have a hawkish-sounding angle to it, but the fact that it was little changed took a little of the rate-hike edge off the market.
That edge was rooted in the thinking that the directive's language might contain some signaling that the FOMC is leaning to a rate hike in March, which the fed funds futures market currently does not expect.
In any event, buying efforts in the dollar subsided and selling efforts in the Treasury market tapered off after the release of the directive. The 2-yr note yield, which is sensitive to changes in the fed funds rate, dropped from 1.25% to 1.21% after the FOMC decision. The benchmark 10-yr yield for its part closed relatively flat, up one basis point at 2.48%.
For sector standings, technology finished near the top of the day's leaderboard amid the spike in Apple's stock and a positive showing from chipmakers. The PHLX Semiconductor Index finished 1.7% higher following Advanced Micro Devices's (AMD 12.06, +1.69) upbeat earning report. The company closed Wednesday's session 16.3% higher.
The heavily-weighted financial sector (unch) also closed the day higher, along with materials (+0.6%), and health care (+0.7%). The health care space rallied on Anthem's (ANTM 160.79, +6.65) better than expected quarterly earnings report and an uptick from the biotechnology industry. The iShares Nasdaq Biotechnology ETF (IBB 280.42, +2.35) finished higher for the second day in a row, adding 0.9%.
At the bottom of the leaderboard was utilities (-1.7%), which suffered from the uptick in interest rates and the negative response to the earnings report from Dominion Resources (D 71.85, -4.43, -5.8%). The lightly-weighted telecom services (-0.7%) and real estate (-1.1%) sectors also finished lower, extending their losses for the week to 1.1% and 0.9%, respectively.
Today's economic data included the FOMC Rate Decision, January ISM Index, January ADP Employment Change, December Construction Spending, and the weekly MBA Mortgage Index:
- The FOMC voted unanimously to maintain the fed funds target range at 0.50%-0.75%.
- The ISM Index for January rose to 56.0 from a revised reading of 54.5 in December (from 54.7) while the consensus expected an uptick to 55.0.
- The key takeaway from the report is that helps validates the market's upbeat assumptions about economic growth accelerating in 2017.
- The ADP National Employment Report showed an increase of 246,000 in January (consensus 165,000) while the December reading was revised lower to 151,000 from 153,000.
- The Construction Spending report for December showed a 0.2% decrease while the consensus expected an increase of 0.2%.
- The key takeaway from the report is that private construction spending was up for the third straight month. The value of this report for the market, though, is negligible since it is a dated report, the output of which was already imputed in the fourth quarter GDP report last week.
- The weekly MBA Mortgage Index declined 3.2% to follow last week's 4.0% increase.
Tomorrow's economic data will include January Challenger Job Cuts at 7:30 am ET, Initial Claims (consensus 250k) at 8:30 am ET, and fourth quarter Productivity (consensus 1.0%) also at 8:30 am.
- Russell 2000 +0.2% YTD
- Dow Jones Industrial Average +0.7% YTD
- S&P 500 1.8% YTD
- Nasdaq Composite 4.8% YTD
--> +18,7% @ 82,50 vs 69,50
Reckitt Benckiser is in talks to buy Mead Johnson (MJN) in deal that could be worth more than $15B - DJ
February 1, 2017 6:02 pm
Reckitt Benckiser is in talks to buy Mead Johnson (NYSE: MJN) in deal that could be worth more than $15B - DJ
Greece’s Deadlocked Debt Talks Unnerve Investors
Yield on some Greek debt soars
Investors are dumping Greek bonds, fearing that Athens will be unable to pay debt that comes due this summer.
The selloff comes as the Greek government is again at a standstill in negotiations with its creditors in the eurozone and at the International Monetary Fund. Athens needs to break the deadlock and secure more aid before about €6 billion ($6.46 billion) in debt has to be repaid in July.
Complicating matters is the scheduled IMF board meeting next week and a lack of clarity over what position the U.S.--which has the largest vote at the fund—will take under the Trump administration.
The yield on one piece of Greece’s July debt owed to private creditors has more than doubled in the past few days to more than 15%, according to Tradeweb data, from less than 6% last week, a level that even then was consistent with a highly risky security. The rising yield—rising bond yields mean falling prices—is a sign that investors view a much higher probability of default.
The trigger-happy nature of investors in the Greek bond market has intensified the selloff. “A big part of trading volume in the Greek market comes from active accounts that follow the news flow,” said Argyrios Gkonis, an analyst at Axia Ventures.
The deadlock over Greece’s debt is familiar.
The IMF says Greece’s debt is too high for it to receive more aid in the form of loans. Eurozone creditors, led by Germany, won’t commit to major debt relief. Greece itself is resistant to more budget cuts. Germany says it won’t continue to help Greece without the IMF alongside.
The atmosphere worsened after a statement on Tuesday by a member of parliament from the ruling Syriza party that a debate over Greece membership in the euro shouldn’t be a taboo. Quitting the euro would likely lead to substantial losses for holders of euro-denominated Greek debt.
“I believe there has to be a political and national discussion the likes of which hasn't taken place during the last seven years,” said Nikos Xydakis, a former minister in the Syriza government, though he later clarified his comments by restating his support for Greece’s eurozone membership.
Still, his comments followed reports on German media earlier this week that suggested the German government is warming to the idea of Greece abandoning the euro, the so-called Grexit.
Tension around Greece’s financial position has been building for some time. Ratings firm Moody’s Investors Service said in December that a delay in closing the review of Greece’s bailout program “increases the risks that repayments to bondholders due in July 2017 may be missed.” The bailout review is pending.
“Greece doesn’t have the liquidity [to repay the bond], so it will need financing from the program,” said Axia Venture’s Mr. Gkonis.
European officials are scheduled to meet next week, and if no headway in negotiations is made then, talks could stall until after the Dutch elections, Deutsche Bank said in a note to investors this week. Voters in the Netherlands are scheduled to go to the polls on March 15.
Greece and its creditors have run up against deadlines many times in the seven year bailout, and bond yields have soared and sunk as negotiations stalled and restarted. Greece defaulted once on private creditors, in 2012.
Facebook said to plan set-top box app as a new venue for its video content
Facebook is working on a video-focused app aimed at set-top boxes including Apple TV (and different entirely from its existing offering on Roku, which is essentially a variation on its current mobile app), according to a new report from the Wall Street Journal. The plans focus on helping turn Facebook’s wellspring of video content into a destination on a platform that’s almost exclusively aimed at delivering video, in a bid to help it better tap into budgets that are currently going towards traditional TV advertising.
The report also reiterates claims we’ve seen before that Facebook is looking to license quality original video content, similar to how Netflix and Amazon will often pick up the exclusive rights to shows for distribution on their own platforms. That would be a big draw for a dedicated video app, and help bring in audiences that might not necessarily join in if all that was available was user-generated content. Premium content means more premium ad dollars, too, which according to this report does seem to be the goal for Facebook with this endeavor.
It also sounds like there would be opportunity here for Facebook to use this as a means to further its ambitions as a live video source, since users could broadcast to the TV app. Twitter uses its own Apple TV app as an endpoint for its live programming experiments in partnership with media companies and sports leagues, so this could indeed prove fruitful in helping it expand that part of its video strategy, too.
Of course, this would also make Facebook look even more like a media company than it already does, which would put renewed energy into the debate around its responsibilities there and general role in disseminating information. But YouTube is already well on its way to being a broad replacement for traditional cable and satellite video delivery, so it would make sense for Facebook to press on with its own efforts to stake out some of that territory, and a dedicated app for set-top boxes including Apple TV and Android TV devices would be a relatively low-cost way to do that.
We reached out to Facebook, but they had not responded as of publication time.
German carmaker Daimler (DAIGn.DE) plans to build its new electric vehicles in existing Mercedes plants by integrating them with serial production of cars with combustion engines, the group said.
"In this way, we are taking advantage of the opportunities offered by electric mobility and are significantly limiting the required investment," Mercedes-Benz Cars production chief Markus Schaefer said on Wednesday.
Daimler has said its Mercedes-Benz and Smart brands planned to launch more than 10 electric cars by 2025, with zero-emission vehicles accounting for 15 to 25 percent of Mercedes sales.
It has already said that it would build the first model under its new EQ electric vehicle brand in the northern German city of Bremen, and on Wednesday it made Sindelfingen the second plant designated to join the electric cars push.
Daimler plans to invest up to 10 billion euros ($10.8 billion) in the development of electric vehicles, and labor representatives have been pushing for a large part of that investment to be made in the carmaker's home country.
The group said on Wednesday its factories in Germany's Bremen, Rastatt and Sindelfingen as well as its Smart model plant in Hambach, France, would be competence centers for its electric vehicle production.
Labor representatives welcomed the move as it gives existing German plants a stake in the shift to electric vehicles.
"It must be clear that the jobs are safe despite all the challenges," works council chief Michael Brecht said.
Daimler has agreed to keep on 125 temporary workers at its Sindelfingen plant, its biggest German factory with 25,000 workers, for another year and make it a center for car electronics.
In return, workers' representatives have agreed to discuss more flexible working hours.
EQT Bids for European Car Park Operator Q-Park
Q-Park expects proliferation of self-driving cars and increasing urbanization will increase demand for its services
EQT Holdings AB, a private equity firm founded by Sweden’s billionaire Wallenberg family, is among bidders for Q-Park NV, one of Europe’s largest car park operators, according to people familiar with the situation.
Q-Park has more than 835,000 parking spaces and 2,500 employees from the U.K. to Belgium. The Netherlands based company had €809 million ($868 million) of sales and earned a net profit of €90.9 million for 2015, after reporting a loss the previous year. It is owned by a group of mainly Dutch insurance companies and pension funds. The shareholders have started a sale process, Sacha Oerlemans, a Q-Park spokeswoman, said in an interview.
J.P. Morgan Chase & Co. is advising on the sale. If the sale process is successful, Q-Park would be among the largest European private equity deals in 2017, bankers working on the transaction said.
Q-Park expects that the proliferation of self-driving cars and increasing urbanization will increase demand for its services. “We anticipate that our parking facilities can form an essential and practical part of autonomous mobility,” the company said in its annual report for 2015. It anticipates a “completely self-driving ecosystem” by 2050.
Private-equity firms use a combination of their own funds and bank loans to buy companies. They try to boost sales and profits before selling companies on, typically within five years, aiming to earn a multiple of the equity they invested. EQT was founded in 1994 and has raised €31 billion to invest in companies. EQT’s past investments include Thule Group, a maker of rooftop boxes for cars, and European hotel chain Scandic.
Private equity firms have had mixed success with European car park operators. 3i Group Plc and Cinven Ltd., both London-based private equity firms, made profits from investments in the U.K.’s National Car Parks. French private equity firm Eurazeo struggled with its €885 million acquisition of German parking company Apcoa in 2007. Lenders later took control of Apcoa after the company struggled with its debts.
Gapping down
In reaction to disappointing earnings/guidance:
In reaction to disappointing earnings/guidance:
- BBOX -13.9%, BOOT -10.6%, MANH -7.7%, PBI -5.8%, BABY -5.2%, JCI -4.5%, MTCH -4.4%, (also sells non-dating business The Princeton Review to ST Unitas)
- ARAY -4.3%, TNAV -3.4%, ADP -3%, D -3%, UNVR -2.7%, (announces the sale of 15,000,000 shares of common stock by selling shareholders; sees Q4 EPS $0.23-0.27 vs $0.10 Capital IQ Consensus Estimate; revs $1.8-1.85 bln vs $1.90 bln Capital IQ Consensus Estimate )
- ILMN -2.4%, BBVA -2.3%, KTCC -1.8%, EA -1.7%, MDC -1.4%, MO -1.3%, NEU -1.2%, MSTR -1.1%, CACC -1.1%, OMN -1.1%, PPL -1%
Other news:
- CATB -65.6% (Catabasis Pharmaceuticals announces top-line safety and efficacy results for Part B of the MoveDMD trial of edasalonexent (CAT-1004) for the treatment of Duchenne muscular dystrophy)
- SGYP -12% (prices 20,325,204 common stock offering at $6.15/share)
- CCJ -10.6% (announces that Tokyo Electric Power Company Holdings has issued a termination notice for a uranium supply contract with Cameco)
- GALE -10.3% (Galena Biopharma announces Pres/CEO Mark W. Schwartz will resign effective today and the evaluation of strategic alternatives)
- UNVR -2.7% (prices previously announced public offering of 15,000,000 shares of Univar's common stock by selling shareholders at $29.00/share)
- MCRN -2.4% (prices offering of 12 mln shares of common stock by selling shareholders at $16.25 per share)
- SN -2% (prices 10 mln shares of common stock at $12.50 per share)
- FHB -1.1% (prices secondary offering of 25 mln shares by selling shareholders at $32.00 per share)
- TMHC -0.8% (prices offering of 10 mln shares of common stock at $19.00 per share)
Analyst comments:
- MBLY -3.6% (downgraded to Equal-Weight from Overweight at Morgan Stanley)
- NCMI -2.8% (downgraded to Underperform at Credit Suisse)
- GLW -1.7% (downgraded to Mkt Perform from Outperform at Bernstein)
- IMAX -0.6% (downgraded to Neutral from Outperform at Credit Suisse)