After Hours Summary: FBIO +47% on NEJM article on glioblastoma case study.... NVDA -1.1% continues pull back in after hours following today's Citron report/Andrew Left Fast Money appearanceAfter Hours Gainers:
- FBIO +46.7% (MB-101 for the treatment of glioblastoma was highlighted in the New England Journal of Medicine)
- KATE +0.8% (continued strength)
- PHH +0.5% and NRZ +0.4% (PHH Corp to sell entire portfolio of mortgage servicing rights to New Residential Investment-excluding the Ginnie Mae)
After Hours Losers:
Companies trading lower in after hours in reaction to earnings/guidance:
- VII -8.1% (thinly traded and ticking lower - filed to delay Form 10-K, disclosed preliminary FY16 results)
Companies trading lower in after hours in reaction to news:
- ALR -1.2% (ticking lower; Alere provides update on Arriva Medical billing privileges for Diabetes Testing Supplies; Arriva has filed an appeal - decision expected within three month)
- NVDA -1.1% (continues pull back in after hours -- Citron released report intraday and Andrew Left appeared on Fast Money after the close)
Asia Mid-Session Market Update: Nikkei falls over 1% amid Yen short-covering; South Korea lowers GDP targets
***US Session Highlights***
- Stock markets reversed course today with a bout of profit taking as the year comes to a close; lack of new data and a strengthening US dollar all converging to weigh on market valuations. The S&P dropped 20 points to close at a 12-day low of 2249.92.The DJIA also followed suit with a slightly smaller loss with a drop of 33 points to close the day at 19,833.68.
- US Pending Home Sales M/M showed an unexpected decline of 2.5%, with a forecast of +0.5%, with a prior increase of 0.1%. Sales on Y/Y were also down by 0.4% after last month's +1.8%.
- The US dollar continued to rally today against most currencies, Majors and Minors. In a boost for importers, the DXY reaching levels not seen in 14 years.
***US markets on close: Dow -0.6%, S&P500 -0.8%, Nasdaq -0.9%***
- Best Sector in S&P500: Basic Materials
- Worst Sector in S&P500: Utilities/Industrials
- Biggest gainers: COH +2.2%; AGN +1.7%; STZ +0.9%
- Biggest losers: NVDA -6.8%; CHK -4.7%; MNK -4.1%
- At the close: VIX 13.0 (+1.0pts); Treasuries: 2-yr 1.25% (-1bps), 10-yr 2.51% (-6bps), 30-yr 3.08% (-6bps)
***US movers afterhours***
- FBIO: Publishes case study on MB-101 (IL13Ra2-specific CAR T cells) for recurrent glioblastoma that demonstrates MB-101 achieved complete remission in patient; +42.8% afterhours
- PHH: Enters into sale and subservicing agreements for its entire non-GNMA mortgage servicing rights portfolio for total proceeds of ~$912M; +0.5% afterhours
- S: US President elect Trump: Sprint to hire 5,000 positions in the US; satellite startup OneWeb to hire 3,000 workers in US; -0.7% after hours
***Key economic data***
- (KR) SOUTH KOREA NOV INDUSTRIAL PRODUCTION M/M: 3.4% V 0.8%E; Y/Y: 4.8% V 1.5%E
- (KR) SOUTH KOREA NOV CYCLICAL LEADING INDEX CHANGE: 0.0 V 0.1 PRIOR
- (KR) South Korea Jan Business Manufacturing Survey: 71 v 72 prior; Non-Manufacturing Survey: 72 v 72 prior
- (KR) South Korea Nov Department Store Sales Y/Y: -2.8% v 6.0% prior; Discount Store Sales Y/Y: -6.1% v +0.9% prior
***Asia Session Notable Observations, Speakers and Press***
- Asia indices mixed with Nikkei225 the biggest loser; Tokyo stocks tracking much stronger Yen on overall USD retreat that followed disappointing US Pending Home sales data in US hours. US Treasury yields fell, particularly on the long-end of the curve, while USD/JPY came within an earshot of 2-week lows around 116.55.
- PBoC board member Fan Gang advocates for implementation of a property and capital gains taxes to ease widening wealth gap; MOFCOM (Commerce Ministry) spokesperson Shen worried about the impact of future Fed rate hikes in their impact on global financial markets, but less so over hikes weighing on China trade and FDI.
- BOJ summary of opinions from most recent meeting warns against expecting a big boost to inflation from weaker JPY, though also notes core CPI may still accelerate; Also cautions the Trump rally may fizzle and produce a considerable market adjustment.
- As speculated, South Korea Finance Ministry lowers 2016 GDP target to 2.6% from 2.8%; Lowers 2017 GDP target to 2.6% from 3.0%; Fin Min Yoo says 2017 fiscal policies may turn more expansionary, while BOK is reported to hold accommodative monetary policy as private spending and construction slowdown overshadow recovery in exports.
***Asian Equity Indices/Futures (23:30ET)***
- Nikkei -1.5%, Hang Seng -0.1%, Shanghai Composite +0.2%, ASX200 +0.1%, Kospi flat
- Equity Futures: S&P500 flat; Nasdaq flat, Dax flat, FTSE100 +0.1%
***FX ranges/Commodities/Fixed Income (23:30ET)***
- EUR 1.0408-1.0458; JPY 116.55-117.24; AUD 0.7174-0.7212; NZD 0.6915-0.6940
- Feb Gold +0.8% at 1,150/oz; Feb Crude Oil -0.5% at $53.80/brl; Mar Copper +0.5% at $2.52/lb
- (US) Weekly API Oil Inventories: Crude: +4.2M v -4.2M prior
- (CN) PBOC to inject combined CNY100B in 7-day, 14-day and 28-day reverse repo operation vs. CNY100B prior
- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.9497 V 6.9495 PRIOR
***Asia equities / Notables / movers by sector***
- Industrials: Takata Corp. 7312.JP +16.5% (speculation of settling criminal case with DOJ)
- Technology: Sharp Corp 6753.JP +0.4% (to book one-time gain); Toshiba Corporation 6502.JP -16.9% (Moody's and S&P cuts rating); Sinosoft Technology Group 1297.HK -17.2% (to resume trading following shortseller report); BlueFocus Communication Group Co 300058.CN +10.0% (earnings guidance); Inventec Corp 2356.TW +1.2% (Mega Securities raised to buy)
- Materials: Peace Map Holding 402.HK % (profit warning); Shin-Etsu Chemical Co 4063.JP % (raise wafer prices); Northern Star NST.AU +4.8%, Evolution Mining EVN.AU +5.0% (Gold extends rally)
- Healthcare: Hanmi Pharmaceutical Co. 128940.KR -8.4% (to return payment to Sanofi); Askul Corp.2678.JP -4.7% (Mitsubishi cuts to equalweight)
Closing Market Summary: Stocks Slip Amid Broad Weakness
The stock market spent the entire midweek session in a daylong retreat, which sent the S&P 500 lower by 0.8%. The benchmark index settled behind the Nasdaq Composite (-0.9%) and the Russell 2000 (-1.1%).
Once again, today's trading volume was below average with just 735 million shares changing hands at the NYSE floor.
Stocks slipped out of the gate and continued showing modest losses throughout the morning. With little upward pressure on the market, the losses were extended in afternoon action as just about every sector slid to fresh session lows. Growth-sensitive energy (-1.0%), materials (-1.0%), and financials (-1.0%) settled at the bottom of the leaderboard with energy slumping despite an intraday gain in crude oil. The energy component settled higher by 0.2% at $54.01/bbl after being up 0.9% in early afternoon action.
Most of the remaining cyclical sectors finished with comparable losses. The technology sector (-0.9%) ended just behind the broader market while chipmakers lagged. The PHLX Semiconductor Index fell 1.9% with NVIDIA (NVDA 109.25, -8.07) diving 6.9% to erase yesterday's surge. The stock faced selling pressure throughout the day after an analyst note cautioned that the stock may have a tough time following this year's performance. Shares of NVIDIA have nearly tripled since the end of last year.
Company-specific news was scarce today, but the Wall StreetJournal reported that Kate Spade (KATE 17.86, +3.35) is exploring a sale. Shares of KATE spiked 23.1% into the neighborhood of highs from November. The news had a limited impact on retailers as the SPDR S&P Retail ETF (XRT 44.37, -0.54) lost 1.2%.
Treasuries ended at their best levels of the day after climbing into the afternoon. The 10-yr yield fell five basis points to 2.51%.
Tomorrow, weekly Initial Claims (consensus 263K) and November International Trade in Goods will be reported at 8:30 ET.
- Russell 2000 +19.9% YTD
- Dow Jones Industrial Average +13.8% YTD
- S&P 500 +10.1% YTD
- Nasdaq Composite +8.6% YTD
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Intercept Pharma (ICPT) Gains as Novartis (NVS) Said Interested in Bid
Intercept Pharma (NASDAQ: ICPT) is gaining 5% mid-day on word Novartis (NYSE: NVS) is interested in a takeover of the company in a deal that could be announced in the mid-January, according to a source. In the past, Gilead Sciences (NASDAQ: GILD) was also said to be interested.
The company wasn't available to comment at the time of this publication.
Engineer Weir considers moving production to UK after Brexit
Weaker pound a factor in decision whether to make more industrial equipment in Yorkshire
Weir, the engineer, is examining whether to move production of some equipment from overseas to the UK to benefit from the weaker pound.
The UK company’s Todmorden foundry in West Yorkshire casts metal components for heavy-duty pumps found in mines in countries including Chile, Finland and Russia, as well as in Canada’s tar sands.
Before the UK’s EU referendum, the site in the Calder Valley had already benefited from its status as one of the most cost-effective facilities run by the FTSE 250 group, with a significant manufacturing workload transferred there this year.
Jon Stanton, chief executive, said the lower exchange rate following the vote for Brexit would figure in calculations about whether more should follow.
“At the moment, it is all about how the demand profile develops from a European and global perspective. That will dictate how we potentially move some production there,” he told the Financial Times.
“The weakening of sterling makes [the Todmorden] facility potentially more competitive and that will be a consideration as we think about production allocation.”
Weir, which also makes pumps and valves for the energy industry, operates foundries in Australia, Brazil, Chile Malaysia and South Africa as well as the UK.
The prospect of manufacturing being “reshored” to Britain would be a boost from Brexit. While the pound’s devaluation — it is down 10.5 per cent against a basket of trade-weighted currencies since the referendum result — should make British goods more competitive, so far the impact on the sector appears mixed.
Factory order books were at their most full for 20 months in the three months to December, according to a survey by the CBI employers’ organisation. But the Office for National Statistics said there was only limited evidence that currency depreciation had boosted exports.
Mr Stanton said a sustained weaker pound would make Britain a “relatively more attractive” place to invest, balanced against any possible trade tariffs under a final Brexit settlement.
But he stressed this was not immediately shaping Weir’s decisions: “At the moment I’m not saying I need to put more capital into the UK relative to anywhere else”.
In his first formal interview since taking the helm in October after six years as finance director, he said his strategy would be one of “evolution rather than revolution”.
This suggests a continuation of the path set out by Keith Cochrane, his predecessor who continued the company’s expansion in part through a series of acquisitions.
After benefiting from the boom in global energy and mining production, the Scotland-based group has grappled with a downturn in both of its main markets in the past few years, as customers have slashed investment in response to the collapse in commodity prices.
This is particularly pronounced in Weir’s oil and gas division, which is the largest provider of frac pumps to the North American shale industry. Group sales fell by more than a fifth in 2015 to £1.92bn, and the company recently warned profits would be lower than previously expected this year.
The downturn has also hit UK-listed peers such as IMI, Smiths Group and Rotork, which also supply the oil and gas sector.
Even so, Weir’s management has been credited by analysts for navigating the storm with harsh cost-cutting measures, such as reducing its workforce by more than 10 per cent and closing plants.
Mr Stanton said there were “signs of recovery” in Weir’s markets. The US oil rig count has risen, crude prices were “more supportive” and miners’ profit margins had increased with the rebound in commodity prices, he said.
Investors seem to be pricing in an eventual upturn. Weir’s share price has rallied 87 per cent this year, placing it among the top 10 performing stocks in the mid-cap index. But, trading at around £19, the shares remain below a peak of £28 before the crude price crash in 2014.
Some City analysts have queried whether the company’s collection of businesses needs refining. Weir’s third and smallest division provides flow control systems such as valves for industry.
Harry Philips, analyst at Peel Hunt, said: “Can a portfolio contain two businesses [minerals and oil and gas] with such incredibly different cyclical profiles in an efficient manner? People would like to see . . . that core assumption retested”.
Weir said it was on track to meet a target of £100m from disposals this year. Asked whether there would be further sales next year, Mr Stanton said he did not “see anything in the wings”.
Takata Nears Settling U.S. Criminal Probe Over Defective Air Bags
Company and Justice Department aim to settle case by early 2017, sources say
Takata Corp. is nearing a settlement with federal prosecutors to resolve allegations of criminal wrongdoing in the Japanese automotive supplier’s handling of rupture-prone air bags linked to numerous deaths and injuries, said people familiar with the discussions, with an agreement expected early next year.
Takata’s lawyers and U.S. Justice Department officials are discussing the prospect of the company pleading guilty to criminal misconduct as part of the settlement, the people said. The two sides are aiming to settle a criminal case against Takata as soon as January, though the timing could slip, the people said.
Takata is expected to pay a financial penalty of up to $1 billion to settle the case developed by federal prosecutors, though the final figure could be in the high hundreds of millions of dollars, the people said.
The Japanese company faces significant financial pressures from an onslaught of recalled air bags. Under settlement terms being discussed, Takata is expected to pay some of the financial penalty up front and the rest over a number of years, the people said. The total financial penalty isn’t likely to eclipse $1 billion, they said.
Prosecutors are weighing charging Takata with wire fraud after determining the company likely made misleading statements and concealed information about air bags that can explode and spray shrapnel in vehicle cabins, a safety problem linked to 11 deaths and 184 injuries in the U.S., the people said.
One focus of the criminal probe centers on Takata providing misleading testing reports to customers including Honda Motor Co., the people said. Takata has acknowledged the lapses, while adding the discrepancies weren’t tied to later air-bag ruptures.
The expected settlement of a criminal case would mark one bookend to an unprecedented safety crisis gripping Takata, regulators, motorists and nearly all car companies across the globe.
In the U.S. alone, 19 auto makers are recalling 42 million vehicles with nearly 70 million Takata air bags that risk rupturing. The crisis represents the largest automotive safety recall in U.S. history and has sparked widespread litigation and government probes.
The Justice Department and other government agencies are racing to complete long-running corporate investigations before Inauguration Day. The practice, common in an administration’s waning days, reflects top officials’ eagerness to finish work before leaving their perches and some uncertainty over how the incoming Trump administration will approach open cases.
Two European banks agreed last week to pay $12.5 billion in cash and help to consumers to resolve financial crisis-era investigations into the banks’ selling of mortgage securities. Volkswagen AG earlier this month agreed to a second civil settlement with the Justice Department over emissions-cheating claims, though discussions to resolve a related criminal probe are likely to languish into the next administration, according to people familiar with the matter. Volkswagen, which has admitted to the emissions cheating and promised to make amends, has said it is cooperating with U.S. officials.
For Takata, a settlement that further cements future financial liabilities would likely help smooth negotiations with suppliers bidding for control of the Japanese company to put it on surer footing. Takata is expected to reach a deal with a rival supplier next year and eventually seek bankruptcy protection to address mushrooming recall costs and help clear a path for a takeover, people familiar with the matter have said.
Takata earlier admitted to failing to alert regulators within five days of uncovering safety defects as legally required, according to a November 2015 civil settlement with the National Highway Traffic Safety Administration. The agency found Takata several times produced testing reports with “selective, incomplete or inaccurate data” and failed to “clarify inaccurate information” provided to regulators during a January 2012 presentation, according to settlement documents.
With the expected Justice Department settlement, Takata is likely to agree to an independent monitor who will audit the company’s safety practices, the people familiar with the matter said. It isn’t clear whether that monitor would be separate or the same as one assigned to Takata in the previous settlement with regulators.
Auto makers so far have recalled 29 million vehicles with 46 million Takata air bags, according to regulators. As of Dec. 2, roughly 12.5 million air bags have been fixed.
U.S. regulators this month increased pressure on Takata and auto makers to address the rupture-prone air bags, setting new deadlines for recalling and fixing millions of the devices. A government order parcels the air bags into a dozen priority groups based on their risk of exploding and requires auto makers to launch recalls by certain dates and complete them within 2½ years.
Air bags at the greatest risk of rupturing are older and have had prolonged exposure to heat and humidity that can destabilize the chemical compound used to inflate the devices. That prioritizes air bags in humid climes such as Texas and Florida.
Gapping downIn reaction to earnings/guidance: LIVE -0.7% (light volume).
European financial related names showing weakness: DB -2.4%, BCS -1.4%, CS -0.8% (ticking lower)
In the news:
- ANTH -57.7% (announces top line results of the SOLUTION clinical study in cystic fibrosis patients with exocrine pancreatic insufficiency; study 'narrowly missed' CFA non-inferiority margin of the primary modified Intent to Treat analysis)
- QCOM -1.5% (Korea Fair Trade Commission found certain of its business practices violate Korean competition law and intends to issue a corrective order relating to the specific practices at issue and impose an administrative fine of approx. $865 mln)
- ACAD -0.3% (continued weakness)
- HTZ -0.2% (Glenview Capital lowers passive stake)
Analyst comments: GME -1.7% (indicated lower following Piper comments suggesting sluggish initial holiday sales and comps decline)