Closing Market Summary: Energy Lags While Financials Break Winning StreakThe major averages ended an upbeat week on a lower note as a week-long rally in the heavily-weighted financial sector (-0.3%) came to an end. Other focal points for today's trade included some below-consensus domestic economic data, a slide in crude oil, and the underperformance of the heavily-weighted technology (-0.5%) space. The Nasdaq Composite (-0.2%) ended its day in-line with the Dow Jones Industrial Average (-0.2%) and behind the S&P 500 (-0.1%).
Equities stumbled at the start of the session as implications from some above-consensus economic data out of China weighed on expectations for continued easing from the People's Bank of China. Meanwhile, economic readings at home did little to bolster investors' risk appetite as Industrial Production (-0.6%; consensus +0.0%) for March, Capacity Utilization (74.8%; consensus 75.5%) for March, and the preliminary University of Michigan Consumer Sentiment Survey (89.7; consensus 92.0) for April all missed expectations.
A downturn in crude oil also pressured the broader market as the energy component pared gains ahead of this weekend's summit between oil producers in Doha, Qatar. OPEC and non-OPEC members will meet to discuss a possible production cap agreement meant to combat the ongoing supply glut. To be fair though, expectations for an agreement are mixed and the impact of such an agreement is difficult to gauge. WTI crude ended its day lower by 2.5% at $40.40/bbl, but gained 1.6% since last Friday.
The major averages carved out fresh lows in the afternoon after heavily-weighted technology (-0.5%) joined energy (-1.3%), financials (-0.3%), and health care (UNCH) on the bottom of the leaderboard.
The economically-sensitive financial sector (-0.3%) spent its day pulling back from larger weekly gains. On that note, money center banks broke their recent winning streak as Bank of America (BAC 14.00, -0.14) and JPMorgan Chase (JPM 61.87, -0.72) ended the day with losses of 1.0% and 1.2%, respectively. Elsewhere, Citigroup (C 44.92, -0.06) reported a bottom-line beat in the first quarter, but surrendered a 3.5% gain to end beneath its flat line. However, Citigroup ended the week higher by 11.0%, compared to a 4.0% gain in the broader sector.
In the heavily-weighted financial sector (-0.5%), large cap constituent Apple (AAPL 109.85, -2.25) slipped 2.0% after Nikkei reported that the company will extend its iPhone production cut into the second quarter. Elsewhere, the PHLX Semiconductor Index (-0.9%) finished lower as suppliers for the smartphone underperformed.
Six sectors ended the day above their flat lines with utilities (+0.7%), consumer staples (+0.6%), materials (+0.4%), and consumer discretionary (+0.3%) outperforming.
Retailers outperformed in the consumer discretionary space (+0.3%), evidenced by the 0.8% gain in the SPDR S&P Retail ETF (XRT 45.34, +0.35). The sub-group was rebounding from larger losses in the prior week. To that point, the ETF gained 3.4% on a week to date basis, after sliding 4.7% following last week's disappointing same-store sales readings.
The Treasury complex ended its day off its high as the safe haven group pulled back when equities trimmed their loss in the final hour. The yield on the 10-yr note finished at 1.75% (-4 bps). This represents a decline of three basis points from last Friday's settlement.
Today's participation was above the recent average as more than one billion shares have changed hands on the NYSE floor. The increased participation was due to April options expiration.
Today's economic data included Empire Manufacturing for April, Industrial Production and Capacity Utilization for March, and the preliminary University of Michigan Consumer Sentiment Survey for April:
- The Empire Manufacturing Survey jumped to 9.6 for April from 0.6 for March. The dividing line between expansion and contraction is 0.0.
- The April reading is the highest in more than a year and was led by increases in the new orders, prices paid, and prices received indexes. Notably, the six-month outlook improved for the third month in a row.
- The Industrial Production and Capacity Utilization report for March disappointed with total production down 0.6% (consensus 0.0%) and total industry capacity utilization at just 74.8% (consensus 75.5%). One can glean from this report that first quarter GDP isn't going to be anything special.
- March was the second straight month that industrial production declined 0.6% after February was revised down from an originally reported 0.5% decline. On a year-over-year basis, industrial production is down 2.0%.
- A significant portion of the decrease in March can be traced to the indexes for mining and utilities, which fell 2.9% and 1.2%, respectively. The drop in mining output was the largest since September 2008.
- Manufacturing output was down 0.3% following a downwardly revised 0.1% decline (from +0.1%) in February. The production of durables was down 0.4% in March while the output of nondurable manufacturing edged lower following a 0.5% decrease in February.
- The Federal Reserve released its annual revision to the index of industrial production and capacity utilization on April 1. With the revision, the February reading for capacity utilization, which was previously reported to be 76.7%, was revised to 75.4%. It was marked down again to 75.3% with the March report.
- The manufacturing capacity utilization rate of 75.1% is 3.4 percentage points below its long-run average; meanwhile, the utilization rate of 73.7% for both mining and utilities is the lowest over the histories for each of those series.
- The preliminary reading for the University of Michigan Consumer Sentiment Survey for April dropped to 89.7 (consensus 92.0) from 91.0 in March and 95.9 in the same period a year ago.
- The lower reading for April marks the fourth straight monthly decline. Notably, the downturn was driven more by the Index of Consumer Expectations, which fell to 79.6 from 81.5, than it was by the Current Economic Conditions Index, which dipped to 105.4 from 105.6.
- The report summary indicates that consumers reported a slowdown in expected wage gains, weakening inflation adjusted income expectations, and growing concerns that slowing economic growth would reduce the pace of job creation.
- Based on the indication from the data, it was said that inflation-adjusted personal consumption expenditures will increase 2.5% in 2016.
Monday's economic data will be limited to the NAHB Housing Market Index for April (consensus 59).
- Nasdaq Composite -1.4%
- Russell 2000 -0.4% YTD
- S&P 500: +1.8% YTD
- Dow Jones +2.7%
ECB's Draghi: Governing Council will continue to do whatever is needed to pursue price stability objective - comments to IMFC
- euro area economy is on a path of gradual recovery
- outlook for euro area growth remains faced with uncertainty
- do not see any broad-based evidence of excesses in the behavior of banks or other financial institutions and valuations of euro area asset prices
- inflation in the euro area is likely to display slightly negative rates in coming months before picking up later in 2016
Hearing vague takeover chatter circulating - Disney rumored as potential suitor
Hearing chatter circulating that ValueAct could disclose activist stake - Source TradeTheNews.com
Cablevision sale about to get city approval
New York City has accepted that it cannot stop Altice from buying Cablevision, a source close to the situation told The Post.
The city has recently determined that former Mayor Michael Bloomberg gave away its authority in cable mergers to the state, the source said.
The Netherlands-based business met in the last few weeks with Mayor de Blasio’s counsel Maya Wiley to hammer out a deal, the source said.
An Altice meeting is planned in coming days with Public Advocate Letitia James, the source said.
City approval may be coming at its May 9 Department of Information Technology meeting.
The State’s Department of Public Service Commission is set to approve the deal later in May, as is the Federal Communications Commission.
James has publicly questioned the November $18 billion deal alleging it will leave the company with too much debt.
“The new Cablevision will lack the capital to make robust investments in much needed broadband infrastructure, or enhance customer service.”
Cablevision presently serves 2 million Bronx customers, and 1.4 million in Brooklyn.
While Altice’s deal is nearing city approval, its French cable company, Numericable-SFR, agreement to buy some of Bouygues Telecom’s assets fell through earlier this month causing Altice’s shares to drop by more than 10 percent.
Altice has agreed to pay $34.90 in cash for Cablevision. The target’s shares closed Thursday at $32.95.
Wiley told The Post, “The City’s review and approval authority over the Altice-Cablevision merger is clear.”
“We want to make sure … a change in ownership does not mean that New Yorkers are shortchanged on quality of service, quality of infrastructure, consumer protection and jobs.”
Cinven sells residual stake in Altice
European private equity firm Cinven today announces that it fully realised its investment in Numericable with the sale of its remaining shareholding in Altice N.V. ("Altice") on 1 March 2016. This residual holding in Altice was a result of Cinven rolling part of its remaining stake in Numericable into Altice, the listed international media and telecom group and main shareholder of Numericable.
In 2005 and 2006, Cinven acquired 70% of Numericable, investing alongside Patrick Drahi's Altice, which owned the remaining 30%, for an enterprise value of EUR 528m. Following numerous acquisitions and transformational changes to the business, Numericable today has an enterprise value of around EUR 30bn.
This realisation is the culmination of an 11 year investment during which Cinven backed Patrick Drahi and Numericable to build it into the second largest French telecom group. As a result and in summary, Cinven has returned EUR 2.2bn to investors, representing a net capital gain of EUR 1.7bn, an internal rate of return (IRR) of 157% and a money multiple of 4.7 times.
Cinven's realisation strategy involved:
-- several recapitalisations and refinancings of the Group, including through the issuance of high yield bonds;
-- the partial sale of a 38% stake in Numericable to Carlyle in March 2008;
-- a highly successful IPO of Numericable on the NYSE Euronext Paris in November 2013, oversubscribed by over 10 times at the top end of the indicative price range;
-- the disposal of its remaining Numericable shareholding partly for cash and partly through a roll-over into Altice shares; and
-- the sell-down of its Altice shares.
Post IPO, Numericable and Altice generated total shareholder returns of 202% and 102%, respectively, from their IPOs to 1 March 2016.