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Closing Market Summary: Stocks Tick Higher with Brexit and Yellen in Focus

The stock market ended the Tuesday affair on a flat note as fears regarding a potential Brexit remained in focus. Additional factors contributing towards today's trade included strengthening in the dollar, weakening in oil prices, largely in-line commentary from Fed Chair Janet Yellen, and sector leadership from heavily-weighted technology (+0.7%) and financials (+0.5%). The S&P 500 (+0.3%) ended its day ahead of the Dow Jones Industrial Average (+0.1%) and the Nasdaq Composite (+0.1%).

Equity indices opened on a higher note as investors weighed developments in the latest round of Brexit polling. European indices extended their recent winning streak as an ORB poll for the Telegraph showed that the "Remain" camp maintains a lead over the "Leave" faction. However, a Survation poll showed that the referendum remains highly contested with both camps polling within one percentage point of one another.

The benchmark index slipped from its opening high as investors weighed testimony from Fed Chair Janet Yellen. The central bank head struck a cautious tone, stating that uncertainties persist in her economic outlook. Specifically, Chair Yellen cited that improvements in the labor market have slowed while global developments need to be monitored. The commentary fell largely in-line with market expectations, mirroring similar remarks from last Wednesday's post-FOMC press conference.

The S&P 500 carved out a session high in the final ninety minutes of trade, but failed to clear technical resistance at the 2093 price level. As a result, the benchmark index ended its day off its best level as six sectors finished in the green. The commodity-sensitive energy (+1.1%) sector led telecom services (+0.7%), technology (+0.7%), and financials (+0.5%) while materials (-0.3%), health care (-0.3%), and consumer discretionary (-0.2%) ended in the back of the pack.

The heavily-weighted technology sector (+0.7%) demonstrated relative strength as Dow component Microsoft (MSFT 21.19, +1.12) outperformed. The name jumped 2.2% and finished at the top of the price-weighted index. Elsewhere, Western Digital (WDC 48.87, +1.26) gained 2.7% after announcing that it would collaborate with Hewlett Packard Enterprise (HPE 19.76, +0.38) and VMware (VMW 60.98, +0.21) on the production of rack servers. The PHLX Semiconductor Index (+0.3%) finished behind the broader sector while component Micron (MU 12.75, +0.42) outperformed.

In the financial sector (+0.5%), rate-sensitive real estate investment trusts outperformed as American Tower (AMT 109.44, +2.02) gained 1.9%. Elsewhere, Berkshire Hathaway (BRK.B 143.53, +1.86) advanced 1.3% while Wells Fargo (WFC 47.23, +0.30) and JPMorgan Chase (JPM 62.95, +0.58) led money center bank names.

Biotechnology underperformed in the health care space (-0.3%), evidenced by the 1.5% decline in the iShares Nasdaq Biotechnology ETF (IBB 254.79, -3.74). In the sub-group, Vertex Pharmaceuticals (VRTX 85.27, -1.45) and Celgene (CELG 96.86, -2.43) fell 1.7% and 2.5%, respectively.

The U.S. Dollar Index (94.12, +0.51) gained 0.5% as the pound, euro, and yen lost ground to the greenback. The sterling lost 0.5% against the buck (1.4617) while the euro declined 0.6% (1.1250) against the dollar. Separately, the dollar gained 0.9% against the safe haven yen (104.86). The uptick in the dollar weighed on commodities as WTI crude finished its pit session lower by 0.3% ($49.77/bbl; -$0.15).

The Treasury complex settled lower as the yield on the 10-yr note rose one basis point to 1.70%.

Today's volume was below the recent average as fewer than 831 million shares changed hands on the NYSE floor.

There was no economic data of note released today.

Tomorrow's data will include the weekly MBA Mortgage Index and the FHFA Housing Price Index, which will be released at 7:00 ET and 10:00 ET, respectively. Finally, Existing Home Sales for May (consensus 5.50 million) will cross the wires at 10:00 ET.

  • Nasdaq Composite -3.3% YTD 
  • Russell 2000 +1.6% YTD
  • S&P 500 +2.2% YTD
  • Dow Jones +2.3% YTD

(TechCrunch) Here are the FAA’s rules for commerical drone usage

The U.S. Federal Aviation Administration (FAA) today published its final operational rules for the commercial use of small drones weighing under 55 pounds. These rules will guide the first major expansion of commercial drones after the FAA’s earlier limited exemption process for commercial operators. The rule also establishes a process for licensing commercial drone pilots.

For the most part, the rules are a little bit more narrow than many had hoped. Under the new rules, pilots must always remain within visual line of sight of the drone — something that prohibits any kind of long-distance drone use, including even the most basic delivery drones. Commercial drones will also only be allowed to operate during daylight hours or civil twilight. Just like today, drones can’t operate over people who aren’t “directly participating in the operation.” As for other operational limits, the FAA decided to set the maximum altitude to 400 feet above ground (and not 500 feet, as most had hoped), with the exception that you are allowed to operate around a structure that is higher than 400 feet as long as you stay within 400 feet of that structure.

Also disallowed are any operations from a moving vehicle — unless you are in a “sparsely populated area.”

As for the pilots, the FAA mandates they get a remote pilot certificate or be under the supervision of somebody with a pilot certificate. To do so, they will have to pass a knowledge test and be at least 16 years old. New pilots will also have to be vetted by the TSA.

Reaction to the new rules have been mostly positive. “This is a watershed moment in how advanced technology can improve lives, as the Small UAS Rule allows companies, farmers, researchers and rescue services alike to explore how drones can let them do more at a lower cost and a lower risk,” said Brendan Schulman, DJI Vice President of Policy and Legal Affairs, for example.

The new rules will go into effect in late August.

FT : Watchdog urges investigation of entire VW board

Germany’s financial regulator has called on prosecutors to investigate the entire former management board of Volkswagen on suspicion of possible market manipulation.
The move comes with VW facing accusations from investors that it took too long to disclose to the markets that diesel vehicles had been equipped to cheat in emissions tests.
VW revealed last September it had used software-based “defeat devices” in up to 11m of its diesel vehicles, which served to understate emissions of hazardous nitrogen oxides in official laboratory tests.
But prosecutors in the northern German city of Braunschweig, near VW’s Wolfsburg headquarters, said on Monday there was evidence to suggest VW could have disclosed the potential damage arising from the emissions cheating earlier.
On that basis, the prosecutors said they had launched an investigation into Martin Winterkorn, VW’s former boss, and an unidentified second executive, into whether they had effectively manipulated markets — by delaying the release of information about the deception.
On Tuesday it emerged that BaFin, Germany’s financial watchdog, had called on the Braunschweig prosecutors to investigate the entire former management board — not just the two executives.
A person with knowledge of the matter said BaFin believed that it should be investigated whether the whole board should be held collectively responsible for how the cheating was communicated to markets. BaFin and VW declined to comment.
The news could prove embarrassing for VW chairman Hans Dieter Pötsch and its chief executive Matthias Mueller, who were both members of the management board when the diesel emissions scandal broke on September 18.
The affair triggered the biggest loss in VW’s 79-year history and its shares have fallen more than 20 per cent.
News of BaFin’s intervention comes as VW prepares for its annual meeting on Wednesday, when investors are expected to vent their anger over the emissions scandal and demand reform.
Several proxy advisers have recommended shareholders oppose a vote of confidence in the company’s supervisory and management boards.

Also this week law firm Quinn Emanuel said it had filed a lawsuit against VW on behalf of the California State Teachers’ Retirement System and other institutional investors over losses resulting from the drop in VW’s share price after the emissions scandal was disclosed.
“Companies must be held accountable when they engage in such widespread deliberate deceit which destroys shareholder value, damages their reputation and harms the public,” said Brian Bartow, general counsel for the Californian pension fund.
He added the action did not only seek to recover economic losses, but “ultimately, to implement much needed corporate governance reforms” at Volkswagen.
Other investors have questioned whether VW’s supervisory board has sufficient independence and authority to hold management to account. A majority of VW’s voting shares are controlled by the Porsche and Piëch families.