>>> US Close Dow+1.33% S&P+2.03% Nasdaq+2.66% Russell+2.34%

Closing Market Summary: Indices End Volatile Week Higher

The stock market ended a volatile week on a sharply higher note thanks to a broad-based rally. The tech-heavy Nasdaq (+2.7%) outperformed both the S&P 500 (+2.0%) and the Dow Jones Industrial Average (+1.3%). The Friday spike was fueled by factors like:

  • A rebound from near-term oversold conditions
  • Speculation regarding additional monetary easing in Europe and Japan; and
  • An extension of yesterday's rally in oil

Equities began 2016 on a difficult note. Eight of the ten sectors in the S&P 500 entered today's trading session showing losses on the week, but all ten sectors entered with month-to-date losses between 13.0% (materials) and 0.5% (utilities). The heavy selling pressure experienced since the beginning of 2016 represent the worst start to a new year and even with today's spike losses in the Nasdaq, Dow Jones Industrial Average, and S&P 500 range between 8.3% and 6.7%.

Global markets have grappled with growth concerns to begin the year, and overnight indices found some relief as speculation regarding continued easing measures from the Bank of Japan followed yesterday's remarks from European Central Bank President Mario Draghi who stated that the central bank "will need to review and therefore possibly reconsider" its monetary policy stance in March.

Crude oil has gotten off to an even worse start than equities, with WTI crude declining more than 20.0% at its lowest point. However, the energy component rallied overnight, building on its gain from yesterday, climbing more than 9.4%. WTI crude backed away from its high, but still advanced 8.5% to $32.05/bbl.

In front of the pack energy (+4.3%), technology (+2.8%), telecom service (+2.4%), and financials (+2.0%) outperformed while industrials (+0.8%), health care (+1.6%), consumer staples (+1.6%), and  consumer discretionary (+1.7%) trailed.

The top-performing energy sector was aided by oilfield services giant Schlumberger (SLB 65.20, +3.75), which climbed 6.1% after reporting a Q4 earnings beat on in-line revenue. The stock was also helped after the company announced a $10 billion dollar share buyback. Meanwhile, Dow components Chevron (CVX 83.54, +2.49) and Exxon Mobil (XOM 76.57, +2.47) slightly underperformed the broader sector with gains of 3.1% and 3.3%, respectively.

For its part, the top-weighted technology sector was led by large-cap constituent Apple (AAPL 101.42, +5.12), which advanced 5.3%. This followed bullish commentary from Piper Jaffray, who advised investors to purchase shares before the company's earnings release next week, citing a possible 50.0% upside on the stock. To be fair though, fellow tech large-caps Microsoft (MSFT 52.29, +1.81), Alphabet (GOOGL 745.46, +18.79), and Facebook (FB 97.94, +3.78) also attracted heavy buying interest with advances between 2.6% and 4.0%.

In the Dow Jones Transportation Average (+1.3%), rail giants Union Pacific (UNP 69.99, -1.01) and Norfolk Southern (NSC 68.59, -1.48) showed relative weakness posting the worst losses in the composite. The two companies fell 1.4% and 2.5%, respectively. On the other hand, the Kansas City Southern (KSU 67.41 +2.87) outperformed after reporting above consensus Q4 earnings of $1.23 per share. The stock rallied 4.5% to top the composite.

Elsewhere, the consumer discretionary space (+1.7%) ended its day near the bottom of the board. However, sector heavyweights Amazon (AMZN 596.38, +21.36) and Disney (DIS 96.90, +2.88) were able to climb off midweek lows to top the group. The two names gained 3.7% and 3.1%, respectively. Meanwhile, Starbucks (SBUX 59.17, +0.14) inched off its session low, ending just above its flat line after issuing below consensus Q2 guidance in its earnings report. During today's trade, Starbucks surrendered its 50-day moving today (59.38).

Treasuries spent their session climbing off their opening lows that were brought on by a rally in equities. The benchmark note settled just below its flat line with its yield rising one basis point to 2.05%. 

Market participation was true to recent form with more than a billion shares changing hands at the NYSE floor. Additionally, advancing issues at the NYSE outpaced decliners by nearly 9 to 1. 

On the economic front, today's data included the December Existing Home Sales and December's Leading Indicators.

  • Existing home sales surged 14.7% month-over-month in December to a seasonally adjusted annual rate of 5.46 million units from 4.76 million in November (consensus 5.12 million)
    • This was the largest monthly increase ever recorded.
    • December closed out the strongest year of existing home sales (5.26 million) since 2006 (6.48 million).
    • We wouldn't expect a repeat of such strong growth in January, partly because there is a scarcity of available inventory.
    • At the December sales pace, the inventory of unsold homes stood at a 3.9-month supply, which is the lowest since January 2005. A 6.0-month supply is typically maintained during normal periods of buying and selling.
    • The median existing home price for all housing types increased 7.6% year-over-year to $224,100, which marked the 46th consecutive month of year-over-year gains. The median existing single-family home price was up 8.0% to $226,000.
  • The Conference Board's Leading Economic Index declined 0.2% in December following an upwardly revised 0.5% increase (from 0.4%) for November (consensus -0.1%)
    • Notably, it was said in the release that the Leading Economic Index increased 0.7% in the second half of 2015, which was much slower than the 2.0% growth seen in the first half of the year.
    • The December downturn was paced by negative contributions from the ISM new orders index (-0.1) and building permits (-0.1), as well as average weekly initial claims (-0.07) and stock prices (-0.05).
    • Those areas offset a 0.22 percentage point contribution from the interest rate spread.
    • Separately, the Coincident Economic Index increased 0.1% in December while the Lagging Economic Index increased 0.2%.

There is no economic data on tap for Monday.

  • Russell 2000 -10.2% YTD
  • Nasdaq -8.3% YTD
  • Dow Jones -7.6% YTD
  • S&P 500 -6.7% YTD

FT : Kasper Rorsted brings intellectual curiosity to Adidas

Kasper Rorsted brings intellectual curiosity to Adidas

Dane revived Henkel during 8 years as chief executive

As end-of-term reports go, Kasper Rorsted’s is not too bad. When the news broke on Monday that the 53-year-old Dane was leaving Henkel to become the new boss at Adidas, Henkel lost €1bn of its market value. Adidas gained a similar amount.
It is not hard to see why. During his eight years as chief executive, Mr Rorsted has revivified Henkel, pushing up revenues, driving further into emerging markets and improving margins. Under his stewardship, the German consumer goods group’s market capitalisation quadrupled to more than €36bn.

Investors in Adidas — which has lost ground against its arch-rival Nike in the battle for domination of the global sportswear market — are hoping that Mr Rorsted can pull off the same trick again.
“He’s an optimizer, which is just what they need,” says one investor. “And he’s a doer. He’s not someone who spends ages sitting around strategising.”
On the face of it, the multilingual Mr Rorsted and the world’s second largest sportswear company are a good match. The dynamic manager — who played handball for Denmark’s national youth team — is a keen athlete, who skis frequently in winter, and starts each day with an hour of running or in the gym.
He is also a passionate fan of Bayern Munich, Germany’s most successful football team, which just happens to be sponsored — and part-owned — by his future employer.
Another bonus is that moving from Henkel’s home in Düsseldorf to Bavaria — Adidas is headquartered in Herzogenaurach — will bring Mr Rorsted closer to the family home in Munich, where his wife and the younger two of his four children are based.
Picking a chief executive from a different industry is not without risks, as many companies have found to their cost. But Mr Rorsted has managed to switch sectors before.
After studying in Copenhagen and at Harvard Business School, he spend his early career in technology. He did stints at Oracle and Compaq and became Hewlett-Packard’s managing director for Europe, the Middle East and Africa, before being let go by then chief executive Carly Fiorina.
The episode was a rare blip in a largely seamless rise. Within a month of leaving HP, Mr Rorsted had 11 job offers from tech companies — and one from Henkel. He took the latter’s offer, because he could see a clear path to the top job, and set about getting to know his new company.
His grand tours of Henkel’s businesses around the world as he sought to understand the industry became the stuff of company legend. On one trip he spent five weeks on the road in China; on another, six weeks in the US.
People who know him say the son of a university professor has huge intellectual curiosity. “At business reviews he’s like a machine,” says one colleague. “He just fires off question after question after question.”
Insiders at Henkel suspect that this intellectual restlessness may have spurred him to join Adidas. Outsiders see it as a natural move after eight years in charge, especially after Henkel’s interest in Procter & Gamble’s haircare business was trumped last summer by Coty’s bid for P&G’s beauty assets.
Five days on from the announcement of Mr Rorsted’s move, Henkel’s shares have largely recovered their lost ground. Adidas’s investors will be hoping that Mr Rorsted’s boost in their company’s shares is more enduring.

>>> Merck sees deal opportunities as biotech funding gets tighter

Merck sees deal opportunities as biotech funding gets tighter - RTRS


DAVOS, Switzerland, Jan 22 (Reuters) - U.S. drugmaker Merck & Co MRK.N is eager to do deals to bring in promising experimental medicines and believes a recent correction in biotechnology stocks should throw up new opportunities.

"Prices have come back somewhat. That is a positive thing," Chief Executive Kenneth Frazier told Reuters in Davos on Friday.

"In particular, some of the early-stage companies are struggling to get the next round of financing as people start to be a little less willing to pay for the promise of growth, so that gives us opportunities."

Frazier said he was looking for small and medium-sized "bolt-on" deals to bring in new drugs, although such transactions could still be sizeable.

"At our size, I would say a $10 billion or $20 billion deal would qualify as a bolt-on," he said in an interview on the sidelines of the World Economic Forum annual meeting.

With a strong balance sheet, Merck has plenty of room for manoeuvre when it comes to capital allocation, leading some analysts to speculate it might also step up share repurchases.

Frazier said finding value-creating acquisitions of external science ranked as his "number two" priority, coming behind funding for ongoing research but ahead of returning cash to shareholders.

Last year, Merck did a record number of deals, though most were on the small side. Its last major deal was an agreement to buy antibiotics specialist Cubist for more than $8 billion in December 2014.

Merck is not alone in chasing promising acquisitions. The wider healthcare sector saw its biggest deal-making streak ever in 2015, with global transactions totalling $673 billion, according to Thomson Reuters data.

The downturn in biotech stocks has been driven in part by fears among investors of a political backlash against high drug prices.

Frazier said much of the anger surrounding the issue had been sparked by "a few bad actors" exploiting market failures to extract excessive profits. But he acknowledged there were also wider concerns about the affordability of medicines.

"Right now we are in the middle of a presidential election season and the rhetoric level is pretty high," he said.

"But I do think people in Congress hear from their constituents at home about the challenges they have with paying for their drugs and so I think there will be pressure to do something."