The Market at 11:00AM ET
| Nasdaq: +32.39…
| S&P: +8.56…
NASDAQ Vol: 594 mln…
NYSE Vol: 204 mln…
Moving the Market
People's Bank of China cuts key loan and deposit rates by 25 bps each to 5.35% and 2.50%, respectively
M&A activity in technology and health care sectors
Weak PCE price data in personal income and Spending report supports case for Fed to be patient in raising fed funds rate
Sector Watch 11:00AM ET
Strong: health care, consumer discretionary, technology, industrials, financial
Weak: utilities, energy, telecom services
[BRIEFING.COM] This morning's action has been accented with a bullish bias so far as the cash market quickly distanced itself from a sluggish futures market.
The headline of the day for the stock market to this point is that the Nasdaq Composite hit the 5,000 mark again -- 15 years after it last saw that level. The strength in the semiconductor space (SOX Index +2.3%) has underpinned today's advance along with continued gains for Apple
(AAPL 129.48, +1.02), which saw Morgan Stanley up its price target today to $160 from $133.
Another development drawing attention is the resilience of oil prices to selling pressure. After slipping below $49.00/bbl earlier today, WTI crude prices have rebounded and are now up 0.8% at $50.16/bbl.
Separately, there is a good bit of weakness in the Treasury market today as the entire curve has been hit with selling interest. That's an interesting move insomuch as today's batch of economic data played into the idea that the Fed can be patient in raising the fed funds rate. The weak price action versus the strength in the stock market is apt to drive conclusions that some rebalancing is taking place on this first trading day of March.
- The dollar index has been slowly climbing higher in recent trade, which appears to be helping weigh on precious metals
- Apr WTI crude oil was in the red all day and fell as low as $48.71/barrel, but in recent trade WTI oil received some buying interest and just rallied to a new HoD of $50.42/barrel
- Apr crude is now +0.9% at $50.22/barrel
- Apr natural gas futures have been in the red all day so far too, but recovered losses in recent trade.
- Apr NG is now +0.4% at $2.74/MMBtu
- Apr gold traded as high as $1223.00/oz in the early part of overnight trading, but has since pared back its gains and is now -0.1% at $1211.60/oz
- May silver is currently +0.04% at $16.57/oz, while May copper is at +0.3% at $2.70/lb
[BRIEFING.COM] The cash market is showing more vitality in the early-going than the futures market suggested it might.
Quality leadership from the consumer discretionary (+0.8%), health care (+0.6%), industrials (+0.5%),financial (+0.4%), and information technology (+0.4%) sectors, all of which are heavily weighted in the S&P 500, has helped drive things.
Aside from the merger activity in the semiconductor space, it was also announced today that Hewlett-Packard
(HPQ 34.87, +0.03) is going to acquire Aruba Networks
(ARUN 24.41, -0.40) in a $2.7 bln cash deal (this was rumored last week) and that Cardinal Health
(CAH 90.07, +2.08) will acquire Cordis from Johnson & Johnson
(JNJ 103.04, +0.53) for $1.99 bln in cash.
Separately, it was reported at the top of the hour that the ISM Index for February declined to 52.9 from 53.5 while the Briefing.com consensus expected the reading to dip to 53.0. That compared to a revised 55.1 reading (from preliminary 54.3) in the February market PMI report. Construction Spending, meanwhile, decreased 1.1% month-over-month in January, while the Briefing.com consensus expected an increase of 0.2%.
[BRIEFING.COM] There was a modest uptick for the major indices at the start of trading, with strength in the semiconductor space helping to boost the broader market.
That strength has flowed from NXP Semiconductor's
(NXPI 97.07, +12.18) $11.8 billion acquisition of Freescale Semiconductor
(FSL 39.50, +3.39). Both companies are components in the Philadelphia Semiconductor Index ("SOX" Index), which is up 1.4% in early action.
Areas of early weakness include energy (-1.1%), which following oil prices (-1.1% at $49.23/bbl) lower, and utilities (-0.9%), which remain on the defensive following a terrible February in which the sector dropped 7.0%.
[BRIEFING.COM] S&P futures vs fair value: -2.50. Nasdaq futures vs fair value: +7.80.
The futures market continues to operate in a sluggish mode this morning despite some seemingly positive catalysts to get it jumpstarted, namely the rate cut in China, a spate of M&A activity in the U.S., and a weakish Personal Income and Spending report that supported the argument for the Fed to hold off raising the fed funds rate.
The stock market is of course coming off a very strong month in February, so it's possible that it is expecting a period of consolidation following the strong move.
[BRIEFING.COM] S&P futures vs fair value: flat. Nasdaq futures vs fair value: +9.25.
January personal income increased 0.3%, while the Briefing.com consensus expected an uptick of 0.4%. Meanwhile, personal spending decreased 0.2%, while the consensus expected a decrease of 0.1%.
PCE prices were down 0.5%. Core PCE prices, which exclude food and energy, were up 0.1% while the Briefing.com consensus expected a reading of 0.2%.
[BRIEFING.COM] S&P futures vs fair value: -0.30. Nasdaq futures vs fair value: +8.50.
U.S. equity futures are relatively flat and are trading close to fair value despite the news that the People's Bank of China cut its key interest rate by 25 basis points to 5.35% and word of a multi-billion M&A deal in the semiconductor space.
Personal Income/Spending and PCE prices for January will be reported at 08:30 a.m. ET. Construction spending data for January and the February ISM Index will follow at 10:00 a.m. ET.
In U.S. corporate news:
- NXP Semiconductors (NXPI): trading up 12% after announcing it will acquire Freescale Semiconductor (FSL) for $11.8 billion in cash and stock (or $16.7 billion including Freescale's net debt)
- Mitel (MITL): buying Mavenir Systems (MVNR) for approximately $560 million in cash and stock ($17.94 per share)
- Lumber Liquidators (LL): Down 24% in pre-market action following a critical '60 Minutes' piece on the company
Major markets in Asia ended Monday higher, bolstered by the news that the People's Bank of China cut its loan and deposit interest rates by 25 bps each to 5.35% and 2.50%, respectively
- Economic data:
- Q4 Capital Spending +2.8% year-over-year (expected +4.1%; prior +5.5%)
- February Manufacturing PMI 51.6 (expected 51.5; prior 51.5)
- Official PMI 49.9 (expected 49.7; prior 49.8)
- HSBC Manufacturing PMI 50.7 (expected 50.1; prior 50.1)
- January HIA New Home Sales +1.8% month-over-month (prior -1.9%)
- Q4 Business Inventories -0.8% month-over-month (expected +0.1%; prior +1.2%)
- Q4 Company Gross Profits -0.2% quarter-over-quarter (expected +0.3%; prior -0.4%)
- February HSBC Markit Manufacturing PMI 51.2 (prior 52.9)
- February HSBC Manufacturing PMI 47.5 (prior 48.5)
- February inflation -0.4% month-over-month (expected 0.1%; prior -0.2%); +6.3% year-over-year (expected 6.7%; prior 7.0%)
- February Core inflation +5.0% year-over-year (expected 5.0%; prior 5.0%)
- South Korea
- February trade balance KRW7.70 billion (expected KRW6.20 billion; prior KRW 5.40 billion)
- Exports -3.4% year-over-year (expected -1.8%; prior -0.7%)
- Imports -19.6% year-over-year (expected -11.7%; prior -11.0%)
- January Current Account 6.94 bln (prior 7.02 bln)
- January Industrial Production -3.7% month-over-month (expected -0.1%; prior +3.4%); +1.8% year-over-year (expected +0.4%; prior +1.1%)
- Retail Sales -3.1% month-over-month (prior +1.5%)
- January Service Sector Output -0.4% month-over-month (prior 0.0%)
- February HSBC Manufacturing PMI 51.1 (expected 51.0; prior 51.1)
- Equity markets
- Japan's Nikkei added 0.2% on the back of relative strength in the communications (+1.0%), consumer cyclical (+0.6%), and technology (+0.5%) sectors and news that Japan's public pension fund was an active purchaser of domestic shares in the fourth quarter. Top gainers included Sekisui House Ltd. (+3.3%), Dentsu (+3.1%), and Kawasaki Heavy Industries (+3.0%). Kuraray Co. (-3.5%), Taisei Corp. (-3.3%), and Hokoetsu Kishu Paper (-3.0%) were the biggest percentage decliners.
- Hong Kong's Hang Seng jumped 0.3%, helped by strength in the consumer non-cyclical (+0.7%), diversified (+0.6%), and financial (+0.2%) sectors. AIA Group (+3.7%), Cheung Kong Holdings (+1.9%), and China Shenhua Energy (+1.7%) sat atop the list of winners while Bank of East Asia (-3.3%) paced declining issues.
- China's Shanghai Composite advanced 0.8%, bolstered by the PBOC's rate cut announcement. All sectors advanced with the technology (+3.0%), consumer cyclical (+1.4%), and industrial (+1.2%) sectors leading the way. Shanghai Zi Jiang Enterprises (+10.1%) and Wenfeng Great World Chain Development Corp. (+10.0%) were the biggest percentage gainers while Inner Mongolia Yitai Coal Co (-3.4%) and China Railway Erju Co (-3.2%) were the biggest percentage decliners.
- India's Sensex increased 0.3%, led by its consumer non-cyclical (+1.5%) and financial (+1.5%) sectors. Axis Bank Ltd. (+5.7%), Cipla Ltd./India (+5.1%), and Bharat Heavy Electricals (+4.4%) scored the largest percentage gains. Conversely, ITC Ltd. (-5.0%), Bajaj Auto Ltd, (-3.7%), and Hero MotoCorp (-2.2%) were the biggest laggards.
- Australia's S&P/ASX 200 finished Monday with a 0.5% gain ahead of Tuesday's Reserve Bank of Australia policy meeting, which many participants think will produce another interest rate cut. The utilities (+1.9%), REIT (+1.6%), and Gold (+1.4%) sectors provided leadership on Monday. Rio Tinto (+1.9%) was a notable gainer.
- Regional advancers: South Korea +0.6%, Singapore +0.03%, Indonesia +0.5%, Philippines +0.6%
- Regional decliners: Taiwan -0.2%, Malaysia -0.2%, Thailand -0.3%, Vietnam -0.3%
- USD/CNY +0.1% at 6.2737
- USD/INR +0.5 % at 61.927
- USD/JPY +0.2% at 119.80
European indexes are trading modestly lower today. The DAX and FTSE took out recent highs in the early action but have recently given up the early gains and are now trading roughly unchanged. The CAC lags the rest of the region, down 0.7%. Regional PMIs dominated the news flow out across the pond, with only France missing its preliminary mark, coming it at 47.6 vs 47.7 prior. Italy posted stronger than expected macro data employment data, with the Jan Unemployment Rate hitting 12.6%, 30bps better than consensus.
- Economic Data (not mentioned above)
- Italy Feb Manufacturing PMI 51.9 vs 50.1e
- Italy Annual GDP -0.4% vs -0.4%e
- Eurozone Manuf PMI 51.0 vs 51.1e
- UK Feb Manuf PMI 54.1 vs 53.4e
- Eurozone Core CPI +0.6% vs +0.6%e
- Eurozone Unemp Rate 11.2% vs +11.4%e
- Equity Markets
- Germany's DAX is trading in minor negative territory (down 0.1%) with Financials bucking the broader average, up 0.5%. Thyssenkrup (TYEKF) and BMW (BAMXY) are among the leaders, posting gains of nearly 1% each. Siemens (SIEGY) is weighing on the index, with the heavy weight trading nearly 1% lower on the day.
- France's CAC (-0.7%) is trading lower, taking a hit with the weaker than expected PMI. Vivendi is trading lower by 5% following earnings released on Friday after the close. Credit Ag (CRARY) is bucking the trend, trading higher with the rest of the financials in the region, up 0.6% thus far.
- The UK's FTSE is trading 0.1% lower. Weighing on the index is the Energy Sector (-1.9%), which is taking its cue from lower oil prices this morning. Again, bucking the broader market are financials (+0.3%) with the likes of Barclays (+1.4%) and RBS (+1.9%) trading with solid gains for the session.
- EURUSD +0.4% at 1.1235
- GBPUSD -0.2% at 1.5394
- USDCHF +0.2% at 0.9552
[BRIEFING.COM] S&P futures vs fair value: +0.80. Nasdaq futures vs fair value: +8.50.
. Hang Seng
[BRIEFING.COM] The stock market capped a quiet week with a subdued Friday session. However, it is worth noting that the range-bound week followed sharp gains registered earlier this month. The S&P 500 shed 0.3% on Friday to narrow its February gain to 5.5% while the Nasdaq Composite (-0.5%) underperformed today, but climbed 7.1% since the end of January.
Equity indices spent the bulk of the session near their flat lines before a wave of profit-taking during the final 90 minutes sent the indices to fresh session lows. Eight of ten sectors finished the day in the red, but only one sector-utilities (-0.1%)-registered a February loss. The rate-sensitive group fell 7.0% during the month as higher yields made Treasuries more attractive.
The technology sector (-0.5%) finished the day at the bottom of the leaderboard, but still added 7.9% for the month. Similar to the sector, the top-weighted component-Apple (AAPL 128.48, -1.94)-endured some profit taking following a big run in February. Shares of AAPL fell 1.5% today, but still ended the month higher by 9.7%.
Elsewhere, the energy sector lost 0.4% to narrow its February gain to 3.5% even though crude oil settled on its high. The energy component spiked 3.3% to $49.76/bbl, adding nearly 10.0% for the month. WTI crude surged off its afternoon low even after the Baker Hughes rig count registered its 12th consecutive decline (-43) to 1267.
Meanwhile, the remaining cyclical sectors finished closer to their respective flat lines. For instance, the discretionary sector (-0.1%) ended slightly lower with many apparel retailers enjoying gains after Gap (GPS 41.60, +1.23) reported a one-cent beat, announced a $1 billion buyback, and boosted its dividend by 5.0%, which overshadowed below-consensus guidance. Peer J.C. Penney (JCP 8.50, -0.62) headed in the opposite direction, falling 6.8%, after missing earnings estimates.
The countercyclical side looked a bit better today with consumer staples (+0.4%) and telecom services (+0.3%) registering modest gains while the aforementioned utilities sector (-0.1%) and health care (-0.5%) settled in the red.
Consumer staples rallied behind Coca-Cola (KO 43.30, +0.84) and Monster Beverage (MNST 141.12, +16.38) after the latter reported better than expected results. On the flip side, Herbalife (HLF 31.01, -3.81) tumbled 10.9% after its disappointing revenue and cautious guidance overshadowed a bottom-line beat.
Treasuries registered modest gains with the 10-yr yield slipping three basis points to 2.00%. Despite today's advance, the 10-yr note ended February in the red with its yield 32 basis points above where it ended January. For its part, the Dollar Index (95.33, +0.03) eked out a slim gain on Friday and finished the month higher by 0.4%.
Although the final week of February was relatively quiet on the international front, that could change in a hurry. Yesterday evening, Kathimerini reported that Greece is due to pay EUR1.60 billion to the IMF next month, but it is uncertain whether the country will be able to make the payment on time. The IMF is scheduled to receive the first installment in the amount of EUR310 million on Friday, March 6.
Economic data included Q4 GDP, Chicago PMI, Michigan Sentiment Index, and Pending Home Sales:
- Fourth quarter GDP was revised down to 2.2% in the second estimate from 2.6% in the advance estimate after increasing 5.0% in Q3
- The Briefing.com consensus expected a revision down to 2.1%
- Despite the downward revision, the GDP report actually reveals slightly better economic trends in the second estimate. Nearly all of the revision resulted from weaker inventory growth -- $88.40 billion vs. $113.10 billion in the advance release. Excluding inventories, real final sales were revised up to 2.1% from an originally reported 1.8%
- The University of Michigan Consumer Sentiment Index was revised up to 95.4 in the final February reading from 93.6 while the Briefing.com consensus expected a revision up to 94.0
- Even after the revisions, the Consumer Sentiment Index is still down from 98.1 in January
- The Chicago PMI declined to 45.8 in February from 59.4 while the Briefing.com consensus expected a drop to 58.0
- This was the first reported contraction in the Chicago region since April 2013 and the largest contraction since the index dropped to 42.7 in July 2009
- Readings throughout the report were abysmal, and every index, with the exception of supplier deliveries (58.3 from 54.9), contracted in February
- Pending home sales for January rose 1.7% while the Briefing.com consensus expected an increase of 2.4%
On Monday, Personal Income/Spending and Core PCE Prices for January will be reported at 8:30 ET while Construction Spending for January and February ISM Index will be released at 10:00 ET.
Week in Review: S&P 500 Locked in Sideways Action
- Nasdaq Composite +4.8% YTD
- Russell 2000 +2.4% YTD
- S&P 500 +2.2% YTD
- Dow Jones Industrial Average +1.7% YTD
The major averages began the week on a sleepy note with the S&P 500 ending flat after spending the day in a seven-point range while the Nasdaq (+0.1%) finished a little ahead of the benchmark index. Participants stuck to the sidelines ahead of Tuesday's semiannual testimony on monetary policy. Six of ten sectors registered losses with all six cyclical sectors ending in the red. Most notably, the energy sector (-0.4%) slumped to the bottom of the leaderboard at the start, exerting pressure on the market throughout the day. The group lagged as crude oil fell 2.5% to $49.56/bbl. The energy component saw a brief afternoon spike into the $50.00/bbl area after Nigeria's oil minister said the sharp slide in crude prices could lead to an emergency OPEC meeting. WTI crude returned to its afternoon low after OPEC refuted the report, announcing no plans for an emergency meeting at this time.
Equity indices endured another quiet session on Tuesday before a late afternoon rally sent the S&P 500 (+0.3%) to a new record high. The price-weighted Dow (+0.5%) outperformed while the Nasdaq Composite (+0.1%) and Russell 2000 (+0.1%) struggled to keep up. Trading volume was well below average with fewer than 700 million shares changing hands at the NYSE floor. The key indices spent the bulk of the day near their flat lines, seeing little reaction to Fed Chair Janet Yellen's testimony on monetary policy before the Senate Banking Committee. Chair Yellen reiterated the Fed's intent to remain patient before raising rates, due to weak wage growth and low inflation. In addition, Ms. Yellen indicated the Fed will change its forward guidance prior to hiking rates, and that change to the outlook will clear the way for a potential hike in any particular meeting that follows. Although the testimony had little impact on equities, Treasuries spiked with the 10-yr yield sliding eight basis points to 1.98% as bond traders showed little concern for a rate hike in the near term.
The stock market ended the midweek session on a flat note after spending the trading day in a narrow range. The S&P 500 shed 0.1% while the Nasdaq (-0.02%) registered its first loss since February 9. Once again, the session featured below-average activity with only 687 million shares changing hands at the NYSE floor. Equities faced some selling pressure at the start with the top-weighted technology sector (-0.7%) responsible for the early weakness. Specifically, Hewlett-Packard (HPQ) pressured the sector after reporting uninspiring results for the quarter. The former Dow component plunged 9.9% after its one-cent beat was overshadowed by a 4.7% year-over-year decline in revenue and below-consensus guidance. Despite the opening weakness, the market was able to reclaim its early loss by midday, but renewed selling in the tech sector sent equity indices to fresh lows during the afternoon. The largest stock by weight-Apple (AAPL )-fell 2.6% to lead the afternoon pullback.
The market endured another range-bound session on Thursday with the S&P 500 shedding 0.1% after respecting a seven-point range. The Dow (-0.1%) and S&P 500 began the day under pressure due to noteworthy weakness in the energy sector (-1.8%). Meanwhile, most other cyclical groups also began in the red while technology (+0.7%) outperformed throughout the day and kept the Nasdaq (+0.4%) in the green. The top-weighted technology sector received support from some of its largest components by weight like Apple (AAPL), Google (GOOGL), and Facebook (FB). The three names gained between 1.1% and 2.2% with Apple climbing into the green after announcing a press event on March 9 where the company is expected to launch its wristwatch.