Closing Market Summary: Indices Trade Lower on Growth ConcernsThe major averages ended their midweek session sharply lower with the tech-heavy Nasdaq (-3.4%) trailing the S&P 500 (-2.5%). Equity indices surrendered their opening gains amid continued growth concerns that also pressured crude oil from its overnight high. Including today's tumble, the benchmark index has surrendered 7.5% since the beginning of 2016 while the Nasdaq has slid 9.6%.
Overnight, oil advanced from yesterday's low with better than expected December trade data from China contributing to the advance. China's trade report showed a surplus of $60.1 billion versus the expected $51.3 billion. Despite the beat, this represented the sixth consecutive month of year-over-year declines in exports. While this was not good enough to boost China's Shanghai Composite (-2.4%), it was sufficient in helping the battered commodity rally.
At the beginning of our trading day, oil was up more than 3.0%, contributing to early strength in equities. The energy-component would lose momentum shortly after the open once the weekly EIA gasoline inventories showed a build of 8.438 million barrels. WTI crude showed a loss of 1.1% before ending its pit session unchanged at $30.43/bbl. On a related note, crude inventories rose 0.243 million barrels compared to an expected increase of 2.504 million barrels.
Another reminder of the persistent growth concerns came from rail company CSX (CSX 22.35, -1.35), which issued lower 2016 guidance when it reported Q4 earnings after yesterday's close. The company cited global and industrial slow down trends that would affect their core business, leading to an expected decline in year-over-year earnings. The transports reeled from this guidance, evidenced by the 3.7% decline in the Dow Jones Transportation Average which is now down 10.5% on the year. Fellow rail company Norfolk Southern (NSC 71.44, -4.49) suffered a 5.9% decline while Avis (CAR 27.19, -2.11) posted the worst loss in the index, falling 7.2%.
Sectors like, consumer discretionary (-3.4%), health care (-2.9%), technology (-2.8%), financials (-2.6%), and industrials (-2.3%) paced the retreat while utilities (UNCH), telecom services (-1.1%), consumer staples (-1.7%), and energy (-1.8%) outperformed.
Once again, today's retreat saw the biggest losses among names that enjoyed strength in 2015. To that point, discretionary component Netflix (NFLX 106.56, -10.02) sank 8.6% following a report from ITG Research which revised revenue estimates for the company, citing domestic subscriber weakness. Elsewhere in the space, Amazon (AMZN 581.81, -36.08) declined 5.8%.
Switching to the technology space, large-cap constituents Facebook (FB 95.44, -3.93) and Alphabet (GOOGL 719.57, -25.77) showed relative weakness with respective declines of 4.0% and 3.5%. Fellow large-caps Microsoft (MSFT 51.64, -1.14) and Apple (AAPL 97.39, -2.57) fared better than the sector, but could not stay out of the red. Elsewhere in the space, the high-beta chipmakers underperformed, evidenced by the 3.1% decline in the PHLX Semiconductor Index.
Looking at the health care space, biotechnology showed relative weakness with a decline of 5.4% in the iShares Nasdaq Biotechnology ETF (IBB 280.14, -16.06).
Treasuries ended their day near their highs with the yield on the 10-yr note lower by four basis points at 2.07%.
Trading volume remained heavy with more than a billion shares changing hands at the NYSE floor once again.
Today's economic data included the MBA Mortgage Index, the December Treasury Budget, and the Federal Reserve;s January Beige Book.
- The MBA Mortgage Index showed a seasonally adjusted increase of 21.3% in mortgage applications.
- The December Treasury Budget showed a deficit of $14.4 billion.
- The Treasury data are not seasonally adjusted, so the December deficit cannot be compared to the November deficit of $64.6 billion.
- Total receipts in December were $349.6 billion while total outlays were $364.1 billion.
- Receipts were $14.3 billion more than December 2014 receipts while total outlays were $30.6 billion more than December 2014.
- The yearly deficit increased by $16.3 billion to $477.8 billion.
Tomorrow, weekly initial claims (consensus 275k) and December import/export prices will be released at 8:30 ET.
- Russell 2000 -11.1% YTD
- Nasdaq -9.6% YTD
- S&P 500 -7.5%
- Dow Jones -7.3%
oMT NA to issue 137.9M in new ordinary shares after conversion of outstanding 6% Mandatorily Convertible Subordinated Notes due 15 January 2016
On 15 January 2016 of 137,967,116 new ordinary shares of the Company (the "New Shares") upon conversion of the 88,182,131 outstanding 6% Mandatorily Convertible Subordinated Notes due 15 January 2016 (the "Notes"). Following this issuance, the share capital of the Company will amount to EUR 7,453,441,006.98 represented by 1,803,359,338 Shares.For the 1,817,869
Notes previously converted at the option of their holders, the Company has delivered a total of 2,275,026 treasury shares.
GoPro - Guides Q4 R$435M v $513Me; Guides FY15 R$1.6B v $1.7B; Cuts 7% of workforce
- Fourth quarter revenue reflects lower than anticipated sales of its capture devices due to slower than expected sell through at retailers, particularly in the first half of the quarter. Fourth quarter revenue includes a $21M reduction for price protection related charges resulting from the HERO4 Session repricing in December. Non-GAAP gross margin for the fourth quarter of 2015, excluding the impact of price protection and a charge of between $30M and $35M to cost of revenue for excess purchase order commitments, excess inventory, and obsolete tooling is anticipated to be between 44.5% and 45.5%. Non-GAAP gross margin for the fourth quarter of 2015 is anticipated to be between 34.5% and 35.5%. Non-GAAP operating expenses for the fourth quarter of 2015 are estimated to be between $150.0M and $152.5M. Cash, cash equivalents and marketable securities at December 31, 2015 totaled approximately $475M.
- Zander Lurie Appointed to GoPro Board
Zander has resigned from his role as Senior Vice President of GoPro Entertainment and has been appointed to serve on GoPro's board of directors. Mr. Lurie has deep experience working with Internet-based business models across digital and traditional media. At GoPro Entertainment, he built a team dedicated to pursuing new formats and revenue streams from user-generated content and the Company's large cache of digital entertainment. Prior to GoPro, he served as an executive at CBS Corp. which he joined with the acquisition of CNET Networks where he served as CFO and head of Corporate Development. Mr. Lurie began his career in the technology investment banking group at J. P. Morgan where he led equity transactions and mergers and acquisitions in the Internet sector.
- Reallocation of Resources
Over the past two years, GoPro's headcount has grown by more than 50% annually, to more than 1,500 employees at the end of 2015. To better align resources to key growth initiatives, GoPro has implemented a reduction in its workforce of approximately 7 percent. The Company estimates it will incur approximately $5M to $10M of restructuring expenses in the first quarter of 2016, substantially all of which will be severance costs.
US SEC reviews high-yield funds following Third Ave blowup
Jan 13 U.S. securities regulators launched a review of potential liquidity risks posed by high-yield bond fund managers in the aftermath of the collapse of Third Avenue's junk bond fund in December, according to a document seen by Reuters and people familiar with the matter.
The Dec. 9 collapse of Third Avenue's Focused Credit Fund marked the biggest mutual fund failure since the 2007-2009 financial crisis. It was sparked after heavy losses in the junk bond sector left the fund unable to meet a wave of demands by investors to withdraw their money.
The event has heightened regulators' concerns about how mutual funds manage their liquidity risks and the impact that such disruptions can have, both on fund shareholders and the broader marketplace.
Within weeks of the Third Avenue event, examiners at the Securities and Exchange Commission sent detailed requests to mutual funds and exchange-traded funds seeking information about how they price less liquid securities, and whether certain parties have ever challenged those prices, according to a copy of a letter sent by the SEC and viewed by Reuters.
The SEC specifically requested daily internal illiquidity calculations from Aug. 31 through Dec. 15.
It also asked for a list of large fund shareholders, daily inflow and outflow data and any disclosures concerning "liquidity, quality of portfolio composition and/or redemption activity for each fund."
In an unusual move, the SEC gave fund managers just 24 hours to turn over a little more than half of the requested materials from its December letters, according to people familiar with the agency's request. The funds were then given one additional week to submit the remaining documents.
"I think that SEC examiners are better now at reacting quickly to these problem situations," said Norm Champ, who previously oversaw the division at the SEC that regulates funds.
An SEC spokeswoman declined to comment on the exam into high-yield bond funds. The sources familiar with the review spoke to Reuters anonymously because SEC exams are not public.
According to a Reuters analysis, at least one-fifth of the roughly $789 million of Third Avenue's Focused Credit Fund was composed of illiquid assets, or securities that don't have a market price because they trade infrequently.
When Third Avenue was unable to find buyers, it was forced to suspend a flood of redemptions and liquidate the fund.
The collapse has raised fresh questions over whether there are enough protections in place to buffer the marketplace in the event a fund is forced to unwind, and whether tougher rules are needed to protect investors from liquidity market risks.
The SEC has been trying to reduce such risks by proposing new rules in September, which call for mutual funds and exchange-traded funds to classify the liquidity of their portfolios and periodically review liquidity risks, among other things.
The agency also said earlier this week that its examiners plan to more closely scrutinize mutual funds, ETFs and private funds that are exposed to illiquid securities.
Sagent Pharmaceuticals Inc, a U.S. generic life sciences company focusing on injectable drugs, is considering a sale of the company as part of an exploration of strategic alternatives, according to people familiar with the matter.
Sagent is working with investment bank Perella Weinberg Partners, which has reached out to other companies and private equity firms to solicit interest in a possible deal, the people said this week.
The sources cautioned that a transaction is not certain. They asked not to be identified because the sale process is confidential. Sagent did not reply to a request for comment, while Perella Weinberg declined to comment.
A deal would mark another instance of a small generics company seeking a sale in the face of increased pressure from payers, as drug companies increasingly need scale to negotiate more favorable contracts.
Sagent's stock price has declined dramatically in the past two years, tumbling by more than 60 percent since the middle of 2014. The company's market capitalization is a little more than $200 million.
In December, Schaumburg, Illinois-based Sagent announced plans to divest its Chinese unit, which it acquired in 2013 after purchasing the remaining half of a joint venture with Chengdu Kanghong Pharma.