After Hours Summary: ADBE +5%, KBH +4% following earnings/guidance, SPSC +6%, FOXF +3% and COO +1% on S&P index news, MSFT +1.2% on dividend/buyback news... MSTX -80% Ph 3 trial updateAfter Hours Gainers:
Companies trading higher in after hours in reaction to earnings/guidance: ADBE +4.7%, KBH +4.2%, AIRG +4.2%, NUS +3.6% (reaches resolution with the SEC, which fully resolves the previously disclosed SEC investigation in its entirety; sees Q3 revs at high end or above prior guidance), FDX +2.2%, CAFD +0.3% (also 8point3 Energy Partners LP to acquire Sunpower's 49% stake in its 102-MW Henrietta Solar Project for about $134 mln)
Companies trading higher in after hours in reaction to news: USEG +10.1% (thinly traded, entered into an Earnings & Participation Agreement on a previously announced project with IronHorse Resources), CLVS +8.2% (continued strength following today's M&A chatter), SPSC +5.6% (to join S&P SmallCap 600), ADMS +5% (announces results of EASE LID 3, says the improvement in LID was statistically significant and confirmed safety and efficacy data from earlier pivotal trials), FOXF +2.5% (light volume - to join S&P SmallCap 600), KITE +1.6% (enters an exclusive, worldwide license with the NIH for intellectual property related to multiple T-cell receptor based product candidates for the treatment of tumors expressing mutated KRAS antigens), MSFT +1.2% (dividend increased 8 percent; $40 billion authorized for share repurchase), COO +0.9% (to join the S&P 500), UPS +0.6% (following FDX earnings), CAFD +0.3% (8point3 Energy Partners LP to acquire 49% stake in 102-MW Henrietta Solar Project for about $134 mln), AGN +0.2% (Allergan acquires Akarna Therapeutics for an up-front payment of $50 mln)
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: MSTX -79.7% (reports top-line results from Phase 3 study in sickle cell disease; study did not meet its primary efficacy endpoint; will hold a conference call tomorrow), MIRN -26.8% (to close the ongoing Phase 1 study of MRX34, its investigational microRNA therapy for multiple cancers), LEI -4.3% (ticking lower; files for 13,009,664 share common stock offering pursuant to the asset purchase agreement by selling stockholders), CDNA -3.5% (announces a proposed offering of common stock), COMM -0.9% (announces sale of 10 mln shares of common stock by affiliate of The Carlyle Group)
Closing Market Summary: Indices Advance Ahead of Central Bank DecisionsThe stock market ended the Tuesday affair on a flat note as investors favored a cautious approach ahead of policy statements from the Federal Reserve and Bank of Japan. The Nasdaq Composite (+0.1%) settled in-line with the Dow Jones Industrial Average (+0.1%) and slightly ahead of the S&P 500 (UNCH).
Equity indices advanced at the start of the session as investors mulled the potential rate hike implications of some weaker-than-expected housing data. Housing starts for August came in at a seasonally adjusted rate of 1.142 million (consensus 1.186 million) while building permits fell to 1.139 million (consensus 1.160 million). The data follows yesterday's above-consensus reading of the NAHB Housing Market Index for September (65;consensus 59).
The fed funds futures market ticked higher following the negative data, however, the move was likely related to some last-minute positioning. The implied probability of a rate hike at the September meeting rose to 18.0% from 12.0% in the prior session. Participants have heavily discounted the potential for a rate hike at this meeting, hoping to hear clues about the path of interest rate normalization in the central bank's guidance. Looking down the road, the odds of a rate hike at the December meeting rose to 60.7% from 53.9% on Monday.
The U.S. Dollar Index (96.00, +0.16, +0.17%) also enjoyed a modest bid as participants eyed the potential for a policy divergence trade. The Bank of Japan is scheduled to release its latest policy decision and a comprehensive assessment of its monetary policy this evening. It remains unclear how the central bank will proceed, but reports indicated earlier in the week that the BoJ may favor expanding its negative interest rate policy. The central bank will release its policy decision around 23:00 ET.
The benchmark index settled near the bottom of today's trading range after failing to clear resistance near the 2150/2153 price level. Five sectors finished in the green with financials (+0.1%), consumer staples (+0.2%), and health care (+0.4%) leading the advance. On the flipside, defensively-oriented real estate (-0.2%), telecom services (-0.2%) and utilities (-0.2%) led energy (-0.8%) on the bottom of the board.
The health care sector (+0.4%) outperformed as drug manufacturers and biotechnology names displayed relative strength. Biotechnology rallied after Allergan (AGN 238.67, -6.62) agreed to acquire Tobira Therapeutics (TBRA 38.91, +34.17) for an upfront payment of $28.35 per share. This constitutes a 498.0% premium from Tobira's prior closing price. The agreement also contains Contingent Value Rights that could increase total considerations up to $49.84 per share.
In the financial sector (+0.1%), banking names outperformed as Wells Fargo (WFC 46.56, +0.55) jumped 1.2%. The stock rallied after being upgraded to "Overweight" from "Equal-Weight" at Morgan Stanley. However, Wells Fargo finished off its best level of the day (47.20) as participants weighed heated commentary from the Senate Banking Committee. Senator Elizabeth Warren called for a more stringent investigation into the bank's sales practices.
Crude oil finished the session modestly higher after shaking early weakness. The energy component erased an early loss after reports indicated that Russia may back a one-year agreement to stabilize oil prices. WTI crude settled higher by 0.4% ($44.08/bbl; +$0.18). On a side note, the American Petroleum Institute is scheduled to release its weekly inventory report this evening while the Department of Energy will release its more influential inventory report tomorrow morning at 10:30 ET.
Treasuries ended on a higher note with the long end of the curve outperforming. The yield on the 2-yr note fell one basis point (0.77%) while the yield on the 10-yr note declined three basis points (1.69%).
Today's participation was below the recent average as fewer than 741 million shares changed hands on the NYSE floor.
Today's economic data was limited to Housing Starts and Building Permits for August:
- Housing starts in August declined 5.8% from July to a seasonally adjusted annual rate of 1.142 million (consensus 1.186 million).
- Building permits fell 0.4% from July to a seasonally adjusted annual rate of 1.139 million (consensus 1.160 million) due entirely to a 7.2% decline in permits for multi-unit dwellings.
Tomorrow's economic data will be limited to the weekly MBA Mortgage Index, which will be released at 7:00 ET. Meanwhile, the FOMC will release its September policy statement and rate decision at 14:00 ET.
- Russell 2000: +8.2% YTD
- S&P 500: +4.7% YTD
- Nasdaq: +4.7% YTD
- Dow Jones +4.1%
RTRS - ALTICE EXCHANGE OFFER FOR SFR SHARES TO BE POSTPONED BY AT LEAST TWO WEEKS DUE TO DELAY IN REGULATORY APPROVAL-SOURCE
Sika: not set in stone
Dispute over ownership has not dented operational performance
The Swiss have historically been adept at quietly making money while wars rage around them. That may explain the impressive performance of Sika in tense circumstances.
For almost two years, the producer of cement additives has been the subject of a stand-off between its directors and minority shareholders on one hand, and the Burkard family on the other. The family wants to sell its 16 per cent stake (which comes with 52 per cent voting rights) to French building products group Saint-Gobain without a general offer to all shareholders. Minorities have objected noisily. Yet the protracted stand-off over future ownership does not seem to have affected the company’s operational performance.
At a capital markets day on Tuesday, Sika reaffirmed its guidance for the current year and reiterated a strategy of organic expansion, cost control and bolt-on acquisitions that has served it well since inception in 2012. Sales have grown and operating margins have risen from 7.6 per cent in 2011 to 12 per cent in 2015. Analysts’ forecasts for this year’s earnings have risen by almost a quarter. The market has noticed. Since Saint-Gobain’s chief executive urged Sika’s board to “concentrate on running the company” rather than fighting the bid, the Swiss company’s shares have risen 56 per cent (in local currency terms). That compares to a 9.6 per cent gain in his own company’s stock.
Whether such performance would endure under Saint-Gobain’s tutelage is doubtful. The French company has pledged to maintain Sika’s stock market listing and offered reassurances to its employees. But more than 100 Sika managers have pledged to scorch the earth by resigning en masse if the takeover goes ahead.
The market shows few signs of concern at either prospect. It should do. Sika’s directors have so far thwarted the Burkard/Saint-Gobain deal by using a provision in the company’s articles of association to limit the Burkards’ voting rights to 5 per cent, a manoeuvre subject to legal challenge. If the court rules against Sika, little stands in the way of the deal completing. When it was first announced, Sika shares fell by a fifth. They could easily do so again.
