After Hours Summary: DECK +4%, GOOG +4%, AMZN +2% on earnings/guidance... HIG -11%, FTNT -10%, EXPE -6.5%, WDC -6%, WYNN -6% on earnings/guidance, OTA / casino names lowerAfter Hours Gainers:
Companies trading higher in after hours in reaction to earnings/guidance: TSRI +27.2% (thinly traded), CVEO +11.7% (light volume), LYV +11%, SNMX +10.9% (also discloses an extension of its collaborative research, development, commercialization and license agreement with PepsiCo), MOBL +9.7% (ticking higher), CLD +9.1%, YRCW +9%, ACTG +8.1%, PXLW +7.7%, GIMO +7.3%, GNMK +7.2%, STMP +6.4%, DLNG +6.1%, AVHI +5.8% (ticking higher), BCOV +5.7%, PCCC +4.9%, LPLA +4.9%, CBL +4.7%, DECK +4%, GOOG +3.9%, BGS +3.2%, CATM +3.1%, ELLI +3%, CY +2.5%, TLGT +2.3%, AMZN +2.1%, ARII +1.4%, IM +1.1% (ticking higher), UVE +0.6%
Companies trading higher in after hours in reaction to news: P +2.4% (Corvex Management affirms 9.95% active stake, discloses FCC petition), TERP +2% (light volume-TerraForm Power planning to launch a formal auction in September to sell itself, according to Bloomberg), GE +0.4% (following insider buy disclosure - Chairman / CEO Immelt disclosed the purchase of 50K shares at $31.45/share)
After Hours Losers:
Companies trading lower in after hours in reaction to earnings/guidance: EHTH -14.7%, SFS -13.8%, CAA -10.8% (ticking lower), HIG -10.7%, FTNT -10.2%, CYBE -10.1%, SRCL -9.5% (also discloses that various prior financial statements should no longer be relied upon due to errors in the timing of recognition of certain loss reserves), MDCA -8%, RCKY -7.3% (light volume), EXPE -6.5%, WDC -6.3%, WYNN -6.1%, EMN -5.5%, EYES -5.3% (also announced plans to distribute the Argus II Retinal Prosthesis System in Taiwan through exclusive agreement with Orient Europharma and in Iran through Arshia Gostar Darman), QSII -5.1%, ISIL -2.6%, COLM -2.5%, AUY -2% (also announces sale of Mercedes mine in Mexico), SYNA -1.8%, BIDU -1%
Companies trading lower in after hours in reaction to news: QTNT -16.3% (commences an underwritten public offering of its ordinary shares for an undisclosed amount), TRIP -2.2% and PCLN -2% (following EXPE earnings)
Select casino / gaming names are lower following WYNN earnings: LVS -2.4%, MPEL -1.6%, MGM -0.9%
Closing Market Summary: Stocks Little Changed Ahead of Bank of Japan Policy StatementThe major averages ended Thursday's session with some fight, but ultimately closed the day mixed and with modest changes. The Nasdaq (+0.4%) outperformed on the back of Facebook's (FB 125.00, +1.66) glowing earnings report and some dealmaking that included Oracle (ORCL 41.19, +0.26) acquiring NetSuite (N 108.41, +16.84) for $9.3 billion in cash.
Overall, there was an air of hesitation in the air ahead of some key happenings, including earnings reports from Amazon.com (AMZN 752.61, +15.94) and Alphabet (GOOG 745.91, +4.14) after Thursday's close, a policy decision from the Bank of Japan, and the stress test results from the European Banking Authority on Friday.
Other limiting factors included the continued slide in oil prices, underlying frustration with the Fed's uncertain policy outlook, a cautious-sounding outlook from Ford (F 12.71, -1.13), and a nagging sense the market may be due for a consolidation phase after its strong run off the June 27 post-Brexit low. Even so, sellers didn't show a lot of conviction today as the market continued to exhibit an inclination to buy on dips versus selling on strength.
Equities began the day on a choppy note, responding to a plethora of quarterly earnings reports and yesterday's policy statement from the Federal Open Market Committee. The Fed voted to maintain its key policy rate, but left its larger policy intentions open ended.
On the earnings front, technology (+0.4%) heavyweight Facebook blew past analysts' estimates for the quarter while Ford disappointed investors with its bottom-line result and a warning regarding its full-year outlook.
The major averages went on the defensive in early action, weighed down by a retreat in oil futures. WTI crude fell from the $42.00/bbl price level at the start of the session and slipped to the $41.10/bbl area shortly before midday.
The S&P 500 retreated to the 2160 area where it found support and clawed its way back from there before seeing a slight dip into the close.
The heavily-weighted financial (+0.2%) and technology (+0.2%) sectors helped lead the afternoon reversal. Six sectors ended above the flat line, with the consumer staples sector (+0.5%) logging the biggest advance. The telecom services (-0.7%), energy (-0.2%), materials (-0.1%), and health care (-0.04%) sectors ended in negative territory.
The relative strength in the consumer staples sector was fueled by Anheuser-Busch InBev (BUD 125.92, +3.98), which rallied 3.3% ahead of tomorrow morning's earning release. The stock also benefited from reports that indicated that major shareholders of SABMiller PLC (SBMRY 57.55, +1.30) approve of Anheuser-Busch InBev's revised takeover offer for the company. Separately, Molson Coors Brewing (TAP 97.75, +4.62) gained 5.0% as its stands to acquire SABMiller PLC's interest in MillerCoors in the transaction.
In the consumer discretionary space, Amazon.com outperformed ahead of this evening's earnings report. Elsewhere, Dow component Home Depot (HD 137.96, +1.65) topped the price-weighted index while automakers underperformed alongside Ford.
The U.S. Dollar Index (96.69, -0.36) ended modestly lower as the euro and the commodity-currencies gained ground against the buck. The euro/dollar pair finished higher by 0.2% (1.1077) while the greenback lost 0.2% against the Canadian dollar (1.3158). The dollar/yen pair finished flat (105.40) ahead of tomorrow's policy statement from the Bank of Japan.
Treasuries finished on a mixed note. The short-end of the Treasury curve saw some modest buying interest while the long end lagged. The yield on the 10-yr note finished higher by one basis point at 1.50%.
Today's trading volume was in-line with the recent average as more than 853 million shares changed hands on the NYSE floor
Today's economic data included weekly initial claims and International Trade in Goods for June:
- Initial claims for the week ending July 23 increased by 14,000 to 266,000 (consensus 260,000).
- Overall, there is nothing in this report that will make the market anxious about a weakening in labor market conditions.
- There were no special factors influencing the claims reading, which remained below 300,000 for the 73rd straight week.
- The four-week moving average for initial claims dropped by 1,000 to 256,500.
- Continuing claims for the week ending July 16 were 2.139 million, up 7,000 from the prior week.
- The four-week moving average for continuing claims decreased by 7,000 to 2.135 million, which is the lowest average since November 11, 2000.
- June International Trade in Goods showed a deficit of $63.30 billion, compared to the May deficit of $60.59 billion.
Tomorrow's economic data will include the advance estimate for Q2 GDP (consensus +2.6%), which will cross the wires at 8:30 ET. The Chicago PMI for July (consensus 54.0) and the final reading of the University of Michigan Consumer Sentiment Survey for July (consensus 90.0) will be released at 9:45 ET and 10:00 ET, respectively.
- Russell 2000 +7.3% YTD
- S&P 500 +6.2 % YTD
- Dow Jones +5.9 % YTD
- Nasdaq +3.0% YTD
Amazon beats on the top and botton line; guides Q3 revs in-line
Reports Q2 (Jun) earnings of $1.78 per share, $0.66 better than the Capital IQ Consensus of $1.12; revenues rose 31.1% year/year to $30.4 bln vs the $29.57 bln Capital IQ Consensus and $28.0-30.5 bln guidance.
Operating income $1.3 bln vs. $375-975 mln guidance and $900 mln estimate.
North American sales +28% to $16.52 bln; operating income +102% to $702 mln.
International sales +29% to $9.8 bln; op. income ($135) mln.
AWS sales +58% to $2.9 bln; operating income +126% to $718 mln.
Co issues in-line guidance for Q3, sees Q3 revs of $31.0-33.5 bln vs. $31.66 bln Capital IQ Consensus; operating income is expected to be between $50 million and $650 million vs. $800 mln est, compared with $406 million in third quarter 2015.
Alphabet prelim Q2 $8.42 vs $8.04 Capital IQ Consensus Estimate; revs $21.5 bln vs $20.77 bln Capital IQ Consensus Estimate
Alphabet- Paid Clicks and Cost Per Clicks Aggregate paid clicks Y/Y
* Aggregate Paid Clicks Q2 +29%;-Q1 +29%;Q4 +31%; Q3 +23%.
- Paid Clicks on Google websites- Q2 +37%;Q1 +38%; Q4 +40%; Q3 +35%.
- Paid clicks on member sites- Q2 0%;Q1 +2%; Q4 +2%; Q3 -5%.
* Aggregate cost per click- Q2 -7%; Q1 -9%; Q4 -13%; Q3 -11%
- CPC on Google sites- Q2 -9%;Q1 -12%; Q4 -16%; Q3 -16%.
- CPC on member sites- Q1 -8%; -8%; Q4 -8%; Q3 -4%.
Amazon Q2 operating income $1.3 vs. $375-975 mln guidance and $900 mln estiamte; rev $30.4 bln vs. $28-30.5 bln guidance and $29.6 bln CIQ Consensus;
Amazon sees Q3 operating income of $50 million and $650 million mln vs ~$800 mln estimate; revs $31.0 billion and $33.5 billion bln vs $31.7 bln consensus
This guidance assumes, among other things, that no additional business acquisitions, investments, restructurings, or legal settlements are concluded.
Third Avenue Weighs Sale of High-Yield Fund That Halted Redemptions in December
New York firm taps Houlihan Lokey to shop Focused Credit Fund
Third Avenue Management LLC is weighing a sale of its high-yield mutual fund, whose meltdown spooked investors and fueled a selloff in the junk-bond market late last year.
The New York firm tapped investment bank Houlihan Lokey Inc. to shop its Third Avenue Focused Credit Fund, which had assets of $592 million as of June 30, according to people familiar with the matter. Proceeds from a sale would go to the fund’s investors, who lost the ability to withdraw money when the firm halted redemptions in December.
The firm also is exploring a deal under which another asset manager would team with it in managing a chunk of the fund’s assets, which could repay some of the money owed investors while offering a buyer control over some of the portfolio, the people said. Any deal would be subject to approval by the fund’s investors and the Securities and Exchange Commission, they added.
A sale could help remedy a painful saga for investors in the fund, which offered the freedom to cash out at any time alongside the potential rewards of betting on risky companies’ debt. That combination proved untenable late last year, when heavy selling in junk bonds fueled a rush to the exits among investors.
To avoid a fire sale of the fund’s assets, Third Avenue locked up investor money. The move, nearly unheard of for a mutual fund, shocked the market and left a black mark on Third Avenue, an investment firm founded by renowned value investor Marty Whitman.
The meltdown led to the dismissal of longtime Third Avenue executive David Barse, who was escorted out of the building after the firm’s management committee rejected his plan to sell the fund’s assets to private-equity firm Fortress Investment Group LLC, The Wall Street Journal reported.
The episode sparked broader fears about the health of the market for risky debt. Some banks and assets managers have argued that credit-market liquidity has deteriorated since the financial crisis due to new rules limiting banks’ traditional role facilitating trading in mutual funds, exchange-traded funds and similar products.
The Third Avenue incident prompted the SEC to conduct emergency examinations of about 80 mutual and exchange-traded funds that invest in high-yield bonds, bank loans and other risky, hard-to-sell assets. The regulator concluded that other funds didn’t pose the same risks as the Third Avenue fund, the Journal reported.
Junk bonds have since rebounded, with the Barclays U.S. corporate high-yield index returning 9% this year through June. The Third Avenue credit fund, which contains harder-to-trade assets than those held by many of its peers, is down 0.8% during the same period, according to its most recent fact sheet.
Since it halted redemptions, the fund has been selling assets and has made two distributions to investors. It is possible that by selling a chunk or all of the fund at once, it could appeal to buyers looking to acquire large positions at once or who want to get into the mutual fund business.
It is unclear what price the fund might fetch. The portfolio contains about $100 million in cash and a mix of public and private debt and equity investments, some of which are closely held and rarely or never trade publicly, according to people familiar with the fund. As a result, bidders might quibble with the firm’s valuation of the assets.
The fund has attracted interest from asset managers that traffic in high-yield and distressed debt, the people said. As part of a deal, the fund’s existing portfolio managers could continue to oversee its assets, they added.
- 28-Jul-2016 18:05:57 - MORGAN STANLEY, UNICREDIT AND INTESA SANPAOLO REBUFF PROPOSAL TO GUARANTEE MONTE DEI PASCHI'S PROPOSED 5 BILLION EURO CASH CALL - SOURCE
- 28-Jul-2016 18:05:58 - BANKING CONSORTIUM FOR CASH CALL EXPECTED TO INCLUDE MEDIOBANCA, JPMORGAN, CITIGROUP, BANK OF AMERICA, DEUTSCHE BANK AND CREDIT SUISSE, BUT MORE BANKS NEEDED - SOURCE
Three banks opt out of Monte dei Paschi's proposed 5 bln euro cash call - source - Reuters News
28-Jul-2016 18:08:16
By Pamela Barbaglia
LONDON, July 28 (Reuters) - Morgan Stanley MS.N and Italian lenders UniCredit CRDI.MI and Intesa SanPaolo ISP.MI have rebuffed a proposal by Italy's third-largest lender, Banca Monte dei Paschi di Siena BMPS.MI, to back its proposed 5 billion euro ($5.54 billion) cash call, a source familiar with the matter told Reuters.
The troubled lender is trying to pull together a banking consortium to guarantee its proposed capital increase in the next 24 hours so it has a plan in place by the time the results of the European bank stress tests are released on Friday evening. (Full Story)
Banking sources say the tests will show the bank has insufficient capital to withstand an economic downturn.
It has so far received interest from Citigroup C.N, Bank of America BAC.N, Deutsche Bank DBKGn.DE and Credit Suisse CSGN.S, the source said.
The consortium will also include Mediobanca MDBI.MI and JPMorgan JPM.N who are acting as global coordinators for the proposed capital hike, the source said.
Other banks including Societe Generale SOGN.PA, UBS UBSG.S and Nomura are currently being contacted in a bid to share the cost of the proposed transaction which is said to involve Monte dei Paschi issuing stock at between 0.5 and 0.6 percent of its tangible book value, the source said.
"As things stand now, the consortium is weak," the source said. "More banks need to come onboard."
Another source, who is close to the Tuscan lender, said Monte dei Paschi is expected to release the guidelines of its rescue plan on Friday and is confident of reaching a pre-agreement with a sufficient number of banks "in due time."
Monte dei Paschi, Mediobanca, JPMorgan, UniCredit and Intesa declined to comment. The other banks were not immediately available for comment.
SABMiller-AB InBev: Don’t Bet on a Breakup
The world’s two largest brewers will probably still tie the knot
The beer has turned cloudy at the bottom of the bottle, but investors should drink up anyway.
When Anheuser-Busch InBev was offering £44 a share for SABMiller, shares in the U.K.-listed brewer traded above the bid price. Since ABI raised its offer to £45 Tuesday, the shares have fallen below £43.
This oddity follows an outburst of noise casting the long-awaited megamerger in doubt. Its most vocal opponent is Aberdeen Asset Management. It doesn’t like the two-tier structure, which involves a tax-efficient cash-and-unlisted-shares package for the largest two shareholders and a cash-only offer for the rest. For all the guff about governance, the real problem is that the Brexit vote devalued the pound, making the all-cash offer less attractive than the one that includes the unlisted shares.
But chances are the deal will still go through this year. And if that’s the case, there is a fairly low-risk 5% to be made by buying SAB shares now.
Aberdeen is the only investor that has publicly denounced the deal, and it owns just 1.17% of the company. Even if the two big shareholders are barred from voting on the cash-only component of the offer, as Aberdeen wants, it will hold less than 2% of the votes. That compares to a probable 25% threshold for overturning the merger. So it will need a lot of allies.
Activist hedge funds such as Elliott have also been pushing for a higher price. Tuesday’s £1 increase is underwhelming, but it is also explicitly final under U.K. takeover rules. Now activists have every interest in preserving the deal, without which brokerage Evercore estimates SABMiller’s share value at roughly £35. Elliott, which bought more SAB shares yesterday, is unlikely to second Aberdeen’s claim that it would be “more than happy” to remain a long-term shareholder.
On this occasion it makes sense to buy the doubt.