Closing Market Summary: Stocks Slide Amid Rising Yieldsv
The stock market ended the Tuesday session on a sharply lower note following a daylong retreat that was paced by the Nasdaq Composite (-1.6%). For its part, the S&P 500 lost 1.2% with all ten sectors ending in the red.
The Tuesday selloff in U.S. equities followed an overnight session that featured a 4.1% drop in China's Shanghai Composite after some equity brokers increased their margin requirements, which led to forced selling. Furthermore, markets across Europe also struggled with Germany's DAX diving 2.5% amid spiking yields. To that point, Germany's 10-yr bund yield surged 13 basis points to 0.52% after hovering near 0.16% as recently as last week while Italy's 10-yr yield soared 34 basis points to 1.83%.
Rising interest rates were not unique to Europe as the U.S. 10-yr note registered its sixth consecutive decline, sending its yield higher by three basis points to 2.17%. The benchmark yield hit its highest level since early March and spent the day near its 200-day moving average, representing the first appearance near that level in more than a year.
To be sure, U.S. and European yields remain at depressed levels, but that masks the sharp pace at which rates have been increasing as of late. In turn, the sharp rally in yields has made equities less attractive versus Treasuries, which was on full display today with the rate-sensitive utilities sector (-2.3%) leading the stock market lower. Including the decline, the utilities sector is down 7.4% for the year.
Other countercyclical groups ended a bit closer to their flat lines with the health care sector (-1.2%) settling in-line with the broader market even as biotechnology displayed relative weakness. The iShares Nasdaq Biotechnology ETF (IBB 338.00, -7.19) fell 2.1%, distancing itself from the 50-day moving average (349.00), which provided resistance yesterday.
Biotechnology contributed to the underperformance of the Nasdaq while the technology sector (-1.6%) also pressured the index. Large cap names like Apple (AAPL 125.80, -2.90) and Google (GOOGL 543.04, -9.80) both lost near 2.0% while Microsoft (MSFT 47.60, -0.64) climbed off its low after Bloomberg reported the company is interested in Salesforce.com (CRM 72.75, +1.15). Microsoft ended lower by 1.3% while Salesforce.com gained 1.6%.
Similar to technology, the industrial sector (-1.3%) underperformed while consumer discretionary (-1.0%), financials (-0.8%), energy (-1.1%), and materials (-1.1%) ended just ahead of the S&P 500.
Notably, the energy sector spent the bulk of the day in positive territory thanks to crude oil, which rose 2.5% to $60.38/bbl., making its first appearance above $60/bbl since December.
Today's participation was ahead of recent averages with more than 770 million shares changing hands at the NYSE floor.
Economic data was limited to Trade Balance and ISM Services:Tomorrow, the weekly MBA Mortgage Index will be released at 7:00 ET while April ADP Employment Change (Consensus 189K) and Q1 Productivity/Unit Labor Cost Data will be released at 8:15 ET and 8:30 ET, respectively.
- The U.S. trade deficit widened to $51.40 billion in March from an upwardly revised $35.90 billion (from $35.40 billion) in February while the consensus expected an increase to $40.00 billion
- The BEA assumed a March trade deficit of roughly $48.50 billion in the advance Q1 2015 GDP report, but the actual deficit was much larger than expected and will likely lead to a downward revision to GDP growth
- The goods deficit increased to $70.60 billion in March from $55.70 billion, a gain of $14.90 billion, while the services surplus declined by $600 million to $19.20 billion in March
- The spike in the trade deficit shouldn't be too concerning, considering the West Coast port strike caused a pileup of containerships that needed to be unloaded. As dockworkers returned, imports that normally would have come in February were unloaded in March
- The ISM Non-manufacturing Index increased to 57.8 in April from 56.5 in March while the consensus expected a decrease to 56.3
- Production activities improved as the related index increased to 61.6 in April from 57.5 in March
- Nasdaq Composite +4.3% YTD
- S&P 500 +1.5% YTD
- Russell 2000 +1.0% YTD
- Dow Jones Industrial Average +0.6% YTD
Mylan Profit Misses Analysts’ Estimates on Dollar’s Strength (1)
2015-05-05 20:13:40.873 GMT
(Updates with trading in fourth paragraph.)
By Caroline Chen
(Bloomberg) -- Mylan NV, the drugmaker involved in a three-
way takeover fight, reported quarterly profit that missed
analysts’ estimates as the strength of the U.S. dollar cut into
sales abroad.
First-quarter profit excluding certain items was 70 cents a
share, the company said in a statement Tuesday. Analysts had
estimated 71 cents on average, according to data compiled by
Bloomberg. Revenue rose 15 percent to $1.87 billion. Analysts
had predicted $2.05 billion on average.
Mylan, which gets most of its revenue from generic drugs,
has made several unsolicited takeover overtures to Perrigo Co.,
a company that generates about half of its sales from consumer
health-care products. Perrigo has rejected those offers. At the
same time, Mylan is fending off an unwanted acquisition attempt
by Israel’s Teva Pharmaceutical Industries Ltd. Mylan has said
that it wants to stay independent and that a combination with
Teva would face antitrust hurdles.
Mylan, which is run from Canonsburg, Pennsylvania, fell
less than 1 percent in late trading.
Teva had offered $40.1 billion for Mylan last month, or $82
a share in cash and stock. The deal would create a generics
powerhouse with more than $27 billion in annual revenue and re-
establish Teva as the leader in the industry.
Mylan, which offered $32.7 billion in cash and stock in its
latest attempt to acquire Perrigo, found itself rebuffed as its
target said the offer undervalued the company. Teva’s bid for
Mylan was contingent on it ending its pursuit of Perrigo.
For Related News and Information:
Top Stories: TOP<GO>
--With assistance from Niamh Ring in New York.
To contact the reporter on this story:
Caroline Chen in San Francisco at +1-415-617-7211 or
cchen509@bloomberg.net
To contact the editors responsible for this story:
Crayton Harrison at +1-212-617-6145 or
tharrison5@bloomberg.net
Drew Armstrong, Niamh Ring
2015-05-05 20:13:40.873 GMT
(Updates with trading in fourth paragraph.)
By Caroline Chen
(Bloomberg) -- Mylan NV, the drugmaker involved in a three-
way takeover fight, reported quarterly profit that missed
analysts’ estimates as the strength of the U.S. dollar cut into
sales abroad.
First-quarter profit excluding certain items was 70 cents a
share, the company said in a statement Tuesday. Analysts had
estimated 71 cents on average, according to data compiled by
Bloomberg. Revenue rose 15 percent to $1.87 billion. Analysts
had predicted $2.05 billion on average.
Mylan, which gets most of its revenue from generic drugs,
has made several unsolicited takeover overtures to Perrigo Co.,
a company that generates about half of its sales from consumer
health-care products. Perrigo has rejected those offers. At the
same time, Mylan is fending off an unwanted acquisition attempt
by Israel’s Teva Pharmaceutical Industries Ltd. Mylan has said
that it wants to stay independent and that a combination with
Teva would face antitrust hurdles.
Mylan, which is run from Canonsburg, Pennsylvania, fell
less than 1 percent in late trading.
Teva had offered $40.1 billion for Mylan last month, or $82
a share in cash and stock. The deal would create a generics
powerhouse with more than $27 billion in annual revenue and re-
establish Teva as the leader in the industry.
Mylan, which offered $32.7 billion in cash and stock in its
latest attempt to acquire Perrigo, found itself rebuffed as its
target said the offer undervalued the company. Teva’s bid for
Mylan was contingent on it ending its pursuit of Perrigo.
For Related News and Information:
Top Stories: TOP<GO>
--With assistance from Niamh Ring in New York.
To contact the reporter on this story:
Caroline Chen in San Francisco at +1-415-617-7211 or
cchen509@bloomberg.net
To contact the editors responsible for this story:
Crayton Harrison at +1-212-617-6145 or
tharrison5@bloomberg.net
Drew Armstrong, Niamh Ring
Microsoft Is Said to Evaluate Possible Bid for Salesforce.com
2015-05-05 18:57:03.372 GMT
By Alex Sherman, Dina Bass and Matthew Campbell
(Bloomberg) -- Microsoft Corp. is evaluating a bid for
Salesforce.com Inc., after the cloud software provider was
approached by another would-be buyer, people with knowledge of
the matter said.
Salesforce, which has a market value of $47 billion, is
working with two investment banks to determine a response to
approaches, two of the people said. The San Francisco-based
company’s options could include rebuffing any buyer, or working
out a sale, people with knowledge of the matter told Bloomberg
last week.
Microsoft isn’t in talks with Salesforce, and no deal is
imminent, the people said. Still, Redmond, Washington-based
Microsoft has long expected it might compete for Salesforce if
it was for sale, one of the people said. Another company was in
talks with Salesforce as recently as April, spurring Microsoft’s
actions, two people said.
For any buyer, Salesforce offers a leading position in
customer relationship management, or CRM, software, as well as
cloud computing -- the delivery of business software and
services via the Internet.
Microsoft and Salesforce reached an agreement last year to
make the companies’ software work better together. Microsoft,
which sells its own customer-management software, lags behind
Salesforce. Last week Microsoft set a goal of reaching a $20
billion revenue run rate for its commercial cloud business by
the fiscal year ending June 30, 2018.
Tony Imperati, a spokesman for Microsoft, and Chi Hea Cho,
a spokeswoman for Salesforce, declined to comment.
Oracle Corp. Chief Executive Officer Safra Catz said last
week an acquisition of Salesforce would create disruption in the
software market. She declined to comment on whether Oracle was
interested in buying Salesforce.
Salesforce was involved in strategic-alliance discussions
with SAP SE last year, people with knowledge of the matter said
last week. SAP said it’s not considering a bid for Salesforce.
For Related News and Information:
SAP, Oracle Lead Contenders in Would-Be Salesforce Pursuit
Salesforce Seen as Attractive, If Pricey, Target for Cloud Push
Top Deal Stories:DTOP<GO>
--With assistance from Beth Jinks and Jack Clark in San
Francisco.
To contact the reporters on this story:
Alex Sherman in New York at +1-212-617-8278 or
asherman6@bloomberg.net;
Dina Bass in Seattle at +1-206-262-4143 or
dbass2@bloomberg.net;
Matthew Campbell in London at +44-20-3525-8684 or
mcampbell39@bloomberg.net
To contact the editors responsible for this story:
Mohammed Hadi at +1-212-617-2914 or
mhadi1@bloomberg.net;
Jillian Ward at +1-415-617-7261 or
jward56@bloomberg.net
Elizabeth Wollman
2015-05-05 18:57:03.372 GMT
By Alex Sherman, Dina Bass and Matthew Campbell
(Bloomberg) -- Microsoft Corp. is evaluating a bid for
Salesforce.com Inc., after the cloud software provider was
approached by another would-be buyer, people with knowledge of
the matter said.
Salesforce, which has a market value of $47 billion, is
working with two investment banks to determine a response to
approaches, two of the people said. The San Francisco-based
company’s options could include rebuffing any buyer, or working
out a sale, people with knowledge of the matter told Bloomberg
last week.
Microsoft isn’t in talks with Salesforce, and no deal is
imminent, the people said. Still, Redmond, Washington-based
Microsoft has long expected it might compete for Salesforce if
it was for sale, one of the people said. Another company was in
talks with Salesforce as recently as April, spurring Microsoft’s
actions, two people said.
For any buyer, Salesforce offers a leading position in
customer relationship management, or CRM, software, as well as
cloud computing -- the delivery of business software and
services via the Internet.
Microsoft and Salesforce reached an agreement last year to
make the companies’ software work better together. Microsoft,
which sells its own customer-management software, lags behind
Salesforce. Last week Microsoft set a goal of reaching a $20
billion revenue run rate for its commercial cloud business by
the fiscal year ending June 30, 2018.
Tony Imperati, a spokesman for Microsoft, and Chi Hea Cho,
a spokeswoman for Salesforce, declined to comment.
Oracle Corp. Chief Executive Officer Safra Catz said last
week an acquisition of Salesforce would create disruption in the
software market. She declined to comment on whether Oracle was
interested in buying Salesforce.
Salesforce was involved in strategic-alliance discussions
with SAP SE last year, people with knowledge of the matter said
last week. SAP said it’s not considering a bid for Salesforce.
For Related News and Information:
SAP, Oracle Lead Contenders in Would-Be Salesforce Pursuit
Salesforce Seen as Attractive, If Pricey, Target for Cloud Push
Top Deal Stories:DTOP<GO>
--With assistance from Beth Jinks and Jack Clark in San
Francisco.
To contact the reporters on this story:
Alex Sherman in New York at +1-212-617-8278 or
asherman6@bloomberg.net;
Dina Bass in Seattle at +1-206-262-4143 or
dbass2@bloomberg.net;
Matthew Campbell in London at +44-20-3525-8684 or
mcampbell39@bloomberg.net
To contact the editors responsible for this story:
Mohammed Hadi at +1-212-617-2914 or
mhadi1@bloomberg.net;
Jillian Ward at +1-415-617-7261 or
jward56@bloomberg.net
Elizabeth Wollman
Paper Companies’ Bid to Reduce Tax Bills Curtailed in IRS Rule
2015-05-05 15:19:08.701 GMT
By Richard Rubin
(Bloomberg) -- Packaging companies including International
Paper Co. and Rock-Tenn Co. won’t be able to separate their
containerboard operations into tax-advantaged vehicles, under
rules proposed Tuesday by the IRS.
The rules include a narrow definition of the timber-related
activities that can be housed inside a master limited
partnership, which doesn’t pay corporate-level taxes in the U.S.
That language limits paper companies’ ability to mimic the tax
structure used by oil pipelines.
Under the new IRS rule, processing of timber includes
making sawdust, untreated lumber and woodchips. The tax break is
unavailable once chemicals or foreign substances are added and
it’s turned into paper, pulp and plywood.
“This is something that no one really expected,” said
Robert Willens, a tax consultant in New York. “This is the
biggest surprise by far, the narrow definition of processing and
the fact that it certainly by any reading of this it certainly
eliminates the possibility of putting containerboard activities
into an MLP.”
Shares of Rock-Tenn declined as much as 3.37 percent before
reaching $61.63 at 11:04 a.m., down 2.94 percent. Shares of
International Paper declined as much as 4.71 percent, before
reaching $51.55 at 11:05 a.m., down 4.08 percent.
“The proposed regulations are largely consistent with the
rulings the IRS has issued in the past, with some exceptions,”
the IRS said in a statement. “Where the new guidance interprets
the law more narrowly than in the past, Treasury and IRS believe
the regulations more accurately reflect congressional intent.”
Last month, Mark Sutton, the CEO of International Paper,
said the company was analyzing the potential move to an MLP
structure and waiting for the IRS rules.
For Related News and Information:
Top Stories:TOP<GO>
News about the IRS: NI IRS <GO>
U.S. Federal Budget: BUDG <GO>
Tax News: NI TAX <GO>
To contact the reporter on this story:
Richard Rubin in Washington at +1-202-654-7307 or
rrubin12@bloomberg.net
To contact the editors responsible for this story:
Jodi Schneider at +1-202-654-7362 or
jschneider50@bloomberg.net
Laurie Asseo
2015-05-05 15:19:08.701 GMT
By Richard Rubin
(Bloomberg) -- Packaging companies including International
Paper Co. and Rock-Tenn Co. won’t be able to separate their
containerboard operations into tax-advantaged vehicles, under
rules proposed Tuesday by the IRS.
The rules include a narrow definition of the timber-related
activities that can be housed inside a master limited
partnership, which doesn’t pay corporate-level taxes in the U.S.
That language limits paper companies’ ability to mimic the tax
structure used by oil pipelines.
Under the new IRS rule, processing of timber includes
making sawdust, untreated lumber and woodchips. The tax break is
unavailable once chemicals or foreign substances are added and
it’s turned into paper, pulp and plywood.
“This is something that no one really expected,” said
Robert Willens, a tax consultant in New York. “This is the
biggest surprise by far, the narrow definition of processing and
the fact that it certainly by any reading of this it certainly
eliminates the possibility of putting containerboard activities
into an MLP.”
Shares of Rock-Tenn declined as much as 3.37 percent before
reaching $61.63 at 11:04 a.m., down 2.94 percent. Shares of
International Paper declined as much as 4.71 percent, before
reaching $51.55 at 11:05 a.m., down 4.08 percent.
“The proposed regulations are largely consistent with the
rulings the IRS has issued in the past, with some exceptions,”
the IRS said in a statement. “Where the new guidance interprets
the law more narrowly than in the past, Treasury and IRS believe
the regulations more accurately reflect congressional intent.”
Last month, Mark Sutton, the CEO of International Paper,
said the company was analyzing the potential move to an MLP
structure and waiting for the IRS rules.
For Related News and Information:
Top Stories:TOP<GO>
News about the IRS: NI IRS <GO>
U.S. Federal Budget: BUDG <GO>
Tax News: NI TAX <GO>
To contact the reporter on this story:
Richard Rubin in Washington at +1-202-654-7307 or
rrubin12@bloomberg.net
To contact the editors responsible for this story:
Jodi Schneider at +1-202-654-7362 or
jschneider50@bloomberg.net
Laurie Asseo
TWTR Hearing activist investor chatter- Speculation circulating that Icahn could get involved and try to push a merger with Google
*NOKIA MAY KEEP HERE MAP UNIT, WAS 'RIGHT TIME' FOR ASSESSEMENT
Gapping up
In reaction to strong earnings/guidance: ATEN +17.8%, IM +16.3%, NLS +16.2%, ABMD +15.1%, ELNK +12.4%, CHUY +11.7%, ECOM +9.8%, (also Names David Spitz Chief Executive Officer and Scot Wingo Executive Chairman), AMRI +7.4%, UBS +7.1%, EFOI +7.1%, NLNK +7%, SSE +6.7%, CRTO +5.8%, TXRH +5.3%, MERU +4.5%, EL +4.5%, MNK +4.4%, DENN +4.1%, ININ +4.1%, NUVA +3.8%, TCPI +3.7%, LMNX +3.6%, CYNO +3.5%, CKEC +3.2%, CTT +3.1%, MATX +3%, SALE +2.9%, THC +2.1%, IDTI +2.1%, CGNX +1.9%, AEGR +1.8%, HCP +1.8%, BLMN +1.7%, OZM +1.5%, ZTS +1.4%, DISCA +1.4%, DISCA +1.4%, LPX +1.2%, GTN +1.1%, H +1.1%, VMC +1%, CDE +0.9%, ALLT +0.9%, APC +0.8%, PLOW +0.8%, PCOM +0.8%, NTI +0.8%, HW +0.8%, AFSI +0.8%
Select oil/gas related names showing strength with WTI up ~2% pre-mkt: EXXI +5.7%, OAS +2.2%, SDRL +1.9%, RIG +1.7%, XOM +0.8%, CVX +0.8%
Other news: PTBI +45.1% (Soros Fund Management disclosed 5.17% passive stake in 13G filing), GLNG +17.1% (Ophir Energy plc appoints Golar as midstream partner for Fortuna FLNG project in Equatorial Guinea), ECOM +9.8% (named David Spitz CEO and Scot Wingo Executive Chairman effective today; co also reported earnings), JAH +4.4% (following yesterday's positive mention by Pershing Square's Ackman), ISIS +3.4% (favorably commentary on Monday's Mad Money), ZIOP +2.4% (announces the initiation of a Phase 1 study of Ad-RTS-hIL-12 plus veledimex), BCO +2.1% ( Starboard Value discloses 8.2% active stake in 13D filing), ARWR +2% (announced that it completed dosing volunteers and will begin dosing patients in its on-going Phase 1 study of ARC-AAT), BNFT +1.8% (announced the signing of a reseller agreement with SAP), ISSI +1.6% (Starboard Value increased active stake to 11.5% from 9.9% in amended 13D filing)
Analyst comments: CONN +8% (upgraded to Outperform from Perform at Oppenheimer), TSLA +3.5% (initiated with a Buy at Jefferies; tgt $350), NFLX +2.2% (upgraded to Buy at BofA/Merrill), ALU +2.1% (upgraded to Buy from Neutral at Citigroup), ASEI +2.1% (upgraded to Buy at The Benchmark Company), SAFM +1.9% (upgraded to Overweight from Equal Weight at a boutique firm), ARRS +1.8% (upgraded to Buy from Neutral at Goldman), CYNI +1.7% (upgraded to Neutral from Underweight at JP Morgan), JBLU +1.4% (upgraded to Overweight from Neutral at JP Morgan), ETN +1.2% (upgraded to Overweight from Neutral at JP Morgan)
Gapping down
In reaction to disappointing earnings/guidance: PRIM -47.5%, QLYS -23.9%, ACRX -23.8%, (provides Zalviso regulatory update; notes its request for a Type B meeting with the FDA was denied), CVLT -13.2%, ONDK -9.6%, EOX -7.7%, SGY -7.6%, EIGI -7.5%, URG -5.4%, XNCR -5.2%, RGR -4.4%, PTCT -4.3%, KLIC -4.3%, EMR -4.2%, INVN -3.9%, SNHY -3.7%, PQ -3.4%, KMT -3.2%, OTTR -2.7%, MCEP -2.6%, MDU -2.6%, BALT -2.1%, ANIP -2.1%, LSCC -1.8%, HSBC -1.8%, EIGI -1.3%
M&A news: AVP -0.8% (having trouble finding a buyer, according to NY Post)
Other news: ACRX -23.8% (co's request for a meeting with the FDA was denied; FDA reiterated that an additional clinical study will be required for Zalviso), HELI -3.5% (announced appointment of Lee Eckert as successor CFO, effective July 16, 2015), ACHC -2.7% (announces a proposed offering of 4.5 mln shares of common stock ), MYCC -1.8% (announces secondary offering of 11 mln shares of common stock by a selling shareholder ), VRSK -1.5% (announces a proposed $675 mln offering of common stock ), EGLE -1.2% (disclosed departure of COO Alexis P. Zoullas)
Analyst comments: LUX -4.1% (downgraded to Mkt Perform from Outperform at Raymond James), GNW -2.8% (downgraded to Underweight from Equal-Weight at Morgan Stanley), AOL -2.7% (downgraded to Sell from Neutral at Goldman), STM -1.7% (downgraded to Neutral from Buy at BofA/Merrill), BIDU -1.6% (downgraded to Neutral from Overweight at JP Morgan), VECO -1.3% (downgraded to Outperform from Buy at Credit Agricole), MFRM -1.1% (downgraded to Neutral from Overweight at Piper Jaffray), MSI -0.7% (downgraded to Sell from Neutral at Goldman)
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Portfolio Ticker Matches: SCANX
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