Closing Market Summary: Stocks End Upbeat Week on Flat Note
The S&P 500 could not avoid its third consecutive decline on Friday as rising rate hike expectations weighed on equities. To be fair, the benchmark index missed a green close by 0.74 points while the Dow (+0.3%) and Nasdaq Composite (+0.4%) erased their opening losses.Equities stumbled at the start after the October Employment report easily surpassed expectations, thus increasing the likelihood of a fed funds rate hike at the December policy meeting to 69.8% from yesterday's 58.1%. Specifically, October nonfarm payrolls came in at 271,000 while the consensus expected a reading of 181,000. Also of note, hourly earnings rose 0.4% while the consensus expected an uptick of 0.2%.
Once the report crossed the wires, investors rushed into the greenback while Treasuries and equity futures retreated. The Dollar Index (99.14, +1.21) held its ground to end the day higher by 1.2% near levels last seen in mid-April. As for Treasuries, the 10-yr note finished near its low with the benchmark yield rising ten basis points to 2.33%, representing the highest settlement since late July.
Similar to Treasuries, equities slumped in immediate reaction to the report, but unlike Treasuries, the stock market staged a rebound off its opening lows. Six sectors ended the day with losses while financials (+1.1%) and technology (+0.4%) outperformed throughout the day, helping the market return into the neighborhood of its flat line by the closing bell.
The financial sector rallied due to the rising probability of a December rate hike, extending this week's gain to 2.5%, which put the sector ahead of its peers. Meanwhile, the top-weighted tech space spent the day near its flat line with broad strength in the chipmaker space overshadowing a mixed performance from large cap sector components. To that point, the PHLX Semiconductor Index surged 2.6% with Skyworks (SWKS 85.99, +5.71) and NVIDIA (NVDA 31.55, +3.84) soaring 7.1% and 13.9%, respectively, in reaction to better than expected results.
On the downside, countercyclical sectors faced the most aggressive selling with consumer staples (-1.1%), telecom services (-0.7%), and utilities (-3.6%) ending at the bottom of the leaderboard. That being said, the energy sector (-0.4%) also finished among the laggards despite showing considerable strength earlier this week. The growth-sensitive group narrowed its weekly gain to 1.1% while crude oil surrendered 2.0% on Friday, ending the week lower by 4.8% at $44.29/bbl.
Today's participation was well ahead of average with more than 975 million shares changing hands at the NYSE floor.
Taking another look at today's employment data:
- Nonfarm payrolls increased by 271,000 ( consensus 181,000)
- September nonfarm payrolls revised to 137,000 from 142,000
- Private sector payrolls increased by 268,000 ( consensus 160,000)
- September private sector payrolls revised to 149,000 from 118,000
- Unemployment rate slipped to 5.0% (consensus 5.1%) from 5.1% in September
- The U6 unemployment rate, which accounts for the total unemployed plus persons marginally attached to the labor force and the underemployed, was 9.8% versus 10.0% in September
- Average hourly earnings increased 0.4% (Consensus 0.2%) after being unchanged in September
- Over the last 12 months, average hourly earnings have risen 2.5% versus 2.3% in September, representing the highest year-over-year rate since July 2009
- The labor force participation rate held at 62.4% for the second month in a row
On a separate note, the Consumer Credit report for September showed an increase of $28.90 billion while the consensus expected growth of $18.00 billion. It is worth noting that the September reading represented the biggest jump in non-revolving credit since July 2011.
Monday's session will be free of economic data.
- Nasdaq Composite +8.5% YTD
- S&P 500 +1.8% YTD
- Dow Jones Industrial Average +0.3% YTD
- Russell 2000 -0.4% YTD
* We are downgrading our rating to Underperform with a new €80 target price (vs €70) following the recent share rally (3m +35%) for three reasons:
(1) Even with a c5% EPS upgrade to 2015 and 2016 forecasts, on 23x 2016 PER valuations look stretched given modest M-T growth,
(2) In the face of adverse FX movements there is little clarity as to how Adidas will achieve flat margin guidance in 2016,
(3) We believe it is increasingly likely that the replacement for CEO Herbert Hainer will be an internal appointment,
and the perception of a near-term change in strategy and execution is much reduced.
Julius Baer: grinning and bearing it
Asia is vital to the wealth manager’s revenue growth. It is right not to hold back
The mood music is hardly auspicious. China’s economic growth is slowing, the renminbi devaluation and emerging market turmoil are still raw. Yet on the day that luxury goods group Richemont reported lower watch sales to retailers in Asia, another Swiss company that plies its trade in that well-heeled arena — wealth manager Julius Baer — boldly talked of expansion in China.
It is right to be bold. The bank’s boss, Boris Collardi, is merely bucking a gloomy narrative. The latent promise in China and Asian markets is not lost on him or his rivals. Much bigger Swiss wealth manager UBS is well-established in Asia’s growth markets. Credit Suisse wants to boost its share there. It is no surprise that Mr Collardi tells Bloomberg he is up for direct stakes or further partnerships in China.
Is three a crowd, or is there room for the Swiss trio? Julius Baer thinks there is: in-house figures point to the wealth of rich clients in China rising to $8.25tn by 2020, from $4.8tn this year. Its investors seem to agree: as a pure-play wealth manager it trades on more than 4 times tangible book value (wealth manager-cum-investment bank UBS is on 1.5 times). Shares in emerging market fund managers such as Aberdeen Asset Management and Ashmore may have sold off, but Julius Baer’s have weathered both the sell-off and the Swiss franc shock better.
Last month the bank said the market turbulence had not had a “meaningful impact” on its Asian franchise. Clients domiciled in Asia, which Julius Baer calls its “second home”, still account for almost a quarter of total AUM.
Julius Baer can be more agile than its big rivals. Its acquisition of Merrill Lynch’s non-US wealth management business has strengthened its Asian toehold. And it has enough capital wiggle room for bolt-on deals — or a bigger payout. Faced with so-so growth in developed markets, Asia is vital to Julius Baer’s revenue growth. It is right not to hold back
Business Insider: A startup backed by Bill Gates wants to start using the controversial gene-editing tool CRISPR in people by 2017
This startup wants to start using controversial CRISPR gene-editing technology in people by 2017
In a talk at MIT Technology Reviews' EmTech conference Wednesday night, Editas Medicine's CEO Katrine Bosley explained how her company would begin to bring the gene editing technology CRISPR into human testing.
CRISPR-Cas9 is a tool that has allowed scientists — at least in tests in animals and non-viable human embryos — to swap a particular, potentially faulty gene with another, potentially healthy one.
So far, CRISPR has not been used for gene editing in people (except in non-viable human embryos), meaning Editas' 2017 trial would be the first time CRISPR is ever used in humans.
Many diseases, like Huntington's Disease and Cystic Fibrosis (CF), are caused by small tweaks, or mutations, in our genes. Genetic screening, a process that analyzes both parents genes to help them learn what genetic disorders their future offspring might have, can help them make choices about family planning. Screening isn't completely effective in preventing genetic diseases in children, though a 2008 report showed that the state of Massachusetts was able to reduce the number of babies born with CF by 50% over four years, compared to the previous four-year period. Aside from screening, however, there are no cures for these conditions. Editas, along with other biotechnology companies, want to use CRISPR as a way to potentially create some.
Before that happens, Bosley said Editas is starting its research on a rare eye disorder called Leber congenital amaurosis (LCA). The condition mainly affects the retina, a layer at the back of the eyeball that picks up light and sends that info to the brain, where it's translated into images. Starting at infancy, people with LCA have a hard time seeing anything other than large, bright shapes.
Bosley didn't specify the age of people with LCA in the trial, but it'll likely be done in adults using what she described as a gene-therapy-like treatment. To date, no gene therapies have yet been approved in the US, though one to treat another form of LCA has had promising results in late-stage trials.
Why does Editas want to try CRISPR for this condition?
There are a number of reasons why Editas is starting with this disease. For one, it's easy to target. The treatment (which involves injecting people with modified viruses carrying the CRISPR technology that will go in and repair the faulty DNA) can be injected directly into the retina and, in this case, used to delete the portion of the CEP290 gene that's responsible for the disease. Plus, because it's so closely tied to vision, it will be easy to see how successful or unsuccessful the treatment is.
But like any experimental treatment, this one comes with some caveats. First, LCA affects only about 3,000 people in the US, and just 20% of those have the type that Editas' treatment addresses, Jean Bennet, the Director of Advanced Retinal and Ocular Therapeutics at the University of Pennsylvania, told MIT Technology Review. That means that even if it proves successful, it'll likely be very expensive to treat. And launching studies to treat more widespread diseases could still be more than a few years off.
Editas is a startup based in Cambridge, Massachusetts. In August, it raised $120 million from investors including Bill Gates to fund research like the kind being done with LCA, which Bosley told Forbes would be enough to keep the company running for at least three years.