TheChek News Flow

Closing Market Summary: Cyclical Sectors Lead Stocks Higher

The stock market began the week on a higher note with the Nasdaq Composite (+1.0%) showing relative strength on Monday. The tech-heavy index settled ahead of the S&P 500 (+0.6%), but both marked their highs during the initial hour, spending the afternoon inside narrow ranges.

Equity indices enjoyed an upbeat start, rising alongside European stocks, even though the results of the constitutional reform referendum in Italy will invite political uncertainty going forward. On Sunday, Italian citizens voted 59-41 to reject a proposal that would have reformed the country's Senate. Prime Minister Matteo Renzi offered his resignation, but Italian President Sergio Mattarella reportedly asked Mr. Renzi to delay his departure until after the approval of a budget for 2017. It is currently unclear what impact the results of the referendum will have on rescue plans for Banca Monte dei Paschi di Siena.

Italian stocks erased the bulk of their losses by the close while European sovereign debt retreated with Italy's 10-yr yield spiking nine basis points to 2.00%.

U.S. Treasuries also faced selling during the European session, but trends reversed shortly after focus shifted to the North American session. Treasuries spent the day in a slow climb off their lows with the 10-yr note ending flat. The benchmark yield settled at 2.39% while selling in the 2-yr note pushed up its yield two basis points to 1.12%.

Five of six cyclical sectors displayed relative strength from the start, which kept the benchmark index well above its flat line throughout the day. Sectors like financials (+1.2%) and consumer discretionary (+1.0%) rebounded from Friday's underperformance while energy (+0.7%) posted a solid gain even though crude oil reversed into the close. The energy component surrendered a 1.0% gain to settle higher by 0.2% at $51.79/bbl. Oil continued sliding in electronic trade and showed a 1.1% decline ($51.10/bbl) as the stock market closed for the day. The late afternoon decline unfolded even though the U.S. Dollar Index (100.13, -0.64) fell 0.6%.

The top-weighted technology sector (+1.0%) also had a strong showing with chipmakers displaying broad strength that sent the PHLX Semiconductor Index higher by 1.2%. This contributed to the relative strength in the Nasdaq Composite while biotechnology provided another measure of support, but the iShares Nasdaq Biotechnology ETF (IBB 271.93, +1.47) narrowed its gain to 0.5% by the close. Biotech names fared better than the health care sector, which shed 0.2%.

Like health care, the industrial space (-0.1%) lagged throughout the day, keeping the S&P 500 below its opening high. Dow components Caterpillar (CAT 94.45, -0.69) and General Electric (GE 31.11, -0.23) weighed, falling near 0.7% apiece. Airlines also pressured the sector with Alaska Air (ALK 83.12, -1.71) and Southwest Airlines (LUV 47.07, -0.84) ending with respective losses of 2.0% and 1.8%. Other transport stocks held up better, sending the Dow Jones Transportation Average higher by 0.4%.

Today's participation was just below average as 915 million shares changed hands at the NYSE floor.

Economic data was limited to ISM Services:

• The ISM Services Index rose to 57.2 in November from 54.8 in October while the consensus expected an increase to 55.6
  • This report marked a 12-month high for the series, reaching levels from October 2015

Tomorrow, Q3 Productivity (consensus 3.3%), Unit Labor Costs (consensus 0.2%), and October Trade Balance (consensus -$41.80 billion) will be released at 8:30 ET while October Factory Orders consensus 2.5%) will cross the wires at 10:00 ET.

• Russell 2000 +17.7% YTD
• Dow Jones Industrial Average +10.3% YTD
• S&P 500 +7.9% YTD
• Nasdaq Composite +6.0% YTD

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: COUP +6.6%, BOBE +5.6% (also continues to evaluate all options to create shareholder value and is working with J.P. Morgan to review and evaluate potential opportunities for value creation; no formal timeline for the completion of the review), KMI +1.4% (expects to generate $4.46 bln of distributable cash flow for 2017)

Companies trading higher in after hours in reaction to news: TXMD +18.5% (announces 'positive' top-line results from its pivotal phase 3 Replenish Trial of TX-001HR; trial met primary endpoints), ACHN +4.5% (light volume; announces data presented at American Society of Hematology Meeting demonstrate potential advantages of factor D inhibition for the treatment of complement alternative pathway-mediated diseases), NVLS +2.9% (CFO discloses the purchase of 24K shares), SIEN +2.7% (confirms receipt of FDA pre-market supplement approval for four new breast implant styles in both shaped and round as well as additional profile and sizing options for nine existing implant offerings), BLCM +2.1% (presents clinical results to date of BPX-501 pediatric program and provides regulatory update)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: N/A

Companies trading lower in after hours in reaction to news: SB -13.3% (to offer common stock), LXRX -8.7% (announces top-line results today from a Phase 2 clinical study of sotagliflozin conducted by Lexicon in collaboration with JDRF), SBSI -8.6% (announces an underwritten public offering of approx. $60 mln of its common stock), FET -5.2% (announces a registered underwritten public offering by the co & certain funds affiliated with SCF Partners and Tinicum; 3.5 mln shares are being offered by the co and 3.5 mln shares are being offered by the selling stockholders), TEVA -4% (names Dipankar Bhattacharjee as President and CEO, Global Generic Medicines Group, effective today; reaffirms FY16 forecast), ASUR -3.7% (announces public offering of common stock), RCII -3% (CFO Guy Constant resigns), STWD -2.8% (commences 17.8 mln common stock offering)