Tuesday, September 6, 16 收盘recap

青影

Equity Market Recap
U.S. stocks closed Tuesday with small gains as the S&P 500 Index streak extended to 41 days without a move of 1% in either direction, as volatility remain non-existent. Today’s news was dominated by M&A activity, as “Merger Monday” was replaced with “Takeover Tuesday” given U.S. markets were closed for the Labor Day holiday yesterday (full run down of all the deals below). Weaker ISM service data also grabbed headlines, marking the third straight day U.S. data has disappointed the market, throwing cold water on the notion the FOMC will raise rates at its September meeting (in 2-weeks) despite tough talk from Fed officials the last few weeks. The weaker data sent the dollar reeling (posts largest one day drop in a month), while bonds jumped and yields dropped (weighing on financials, but lifting interest sensitive sectors). Apple holds its annual media day tomorrow (new product announcements expected), which could provide some volatility in the tech space, while several companies speak at investor meetings this week. Stocks recovered from earlier losses midday (in quiet trading again) as the Nasdaq traded to its best level since August 23rd (new all-time highs), while the S&P 500 Index and Dow Industrials came within a stone’s throw of touching its best all-time highs reached on August 15th
Note Congress is back from a seven-week recess with less than a month to prevent a government shutdown. With a little more than three weeks until the end of the fiscal year, and about two months remaining until Election Day, lawmakers must fund the federal government or watch as national parks close and federal employees are furloughed.

Economic Data
ISM Non-Manufacturing index falls to 51.4 from 55.5 the prior month and below the estimate of 54.9; segment breakdown: new orders fell to 51.4 from 60.3, while employment fell to 50.7 from 51.4; other points showed prices paid fell slightly to 51.8 from 51.9 and backlog of orders fell to 49.5 from 51.0
Labor market conditions fell in August by 0.7 index points, according to the Federal Reserve’s labor market conditions index; Labor market conditions rose by 1.3 index points in July

Commodities
Crude oil futures end higher after volatile session (high $46.53 to low $43.84); WTI crude settled at $44.83 per barrel, up nearly 40c, in a late morning reversal higher. New data showing a decline in crude-oil inventories at the US hub in Cushing, Okla., was one factor helping oil prices reduce morning losses. Data-tracking firm Genscape says crude in storage was 66.5M barrels on Friday, down 706k from a week earlier – DJ reported. That coupled with a decline in the dollar and reports yesterday of a Russia-Saudi energy cooperation agreement (though no formal production freeze announced), helped lifted prices midday.
Gold prices jumped on Tuesday, as precious metals benefitted from a sharp decline in the U.S. dollar. Gold futures advanced $27.30, or 2.1%, to settle at $1,354 an ounce, its highest level since Aug. 18th. The dollar fell following the ISM report (and continued weakness after slightly weaker jobs data Friday, and ISM manufacturing last Thursday), reducing expectations the Fed may hold off raising rates at its September meeting.

Currencies
The dollar fell broadly on the day; the U.S. dollar slid vs. other currencies (ending near the lows) following the drop in the ISM services index reading this morning. The greenback traded to lows around 102.01 vs. the yen –lowest in a week (overnight high 103.81), while the euro jumped to 1.126 highs (off earlier lows 1.1141), both posting gains of more than 1%. The British Pound trades above 1.34 vs. the dollar, its highest level since mid-July (but still well below the 1.47 level prior to the Brexit vote late June). The dollar index (DXY hits lowest since Aug 26th (94.79).

Bond Market
Bonds gained as yields fall to nearly 2-week low after weak services-sector data sent bonds surging, as the services side of the economy posts weakest growth in 6 years. Yield on the shorter end of the curve fell the most after a report showed that the services side of the U.S. economy grew in August at its slowest pace since 2010, suggesting the Federal Reserve might be forced to stand pat on interest rates in the near future. The yield on the 2-year note fell 6 bps to 0.734%, while the benchmark 10-year Treasury note fell over 5 bps to 1.543%, also a two-week low. Recently, the Treasury market saw a rise in bearishness, sparked by hawkish comments by Fed officials that suggested the central bank would make a move by the end of 2016.

Sector News Breakdown
Consumer
Retailers; URBN added to franchise picks list at Jefferies; MIK upgraded to outperform at Credit Suisse; BKS mentioned positively in Barron’s (ahead of earnings this week)
Wearables; 2Q Shipments of wearable devices 22.5M, up 26.1% YoY according to IDC while FIT Q2 wearable shipments 5.7M, up 28.7% YoY as mkt share rises to 25.4% from 24.9% YoY
Dollar stores; Goldman Sachs assume coverage on DLTR buy $101 tgt, FIVE neutral (from sell) and $42 tgt; DG downgraded to neutral from buy saying comp sales have slowed and expects a modest deceleration in earnings growth and further competitive pressures
Auto related; in auto parts, FDML to be acquired by IEP for $9.25 per share (up from prior offer of $8 per share back in June) http://goo.gl/8FtF0C ; tire producer GT was upgraded to buy at Deutsche Bank
Restaurants & Consumer Staples; MCD was a leader to the upside in the Dow Industrials despite Japan comps rising slowest in year; HLF a mover early after Carl Icahn added another 300K to current stake; TSN late Friday (along w/Koch Foods) was accused of chicken broiler price-fixing; Stephens removes SONC from their Best Idea (restaurant) and adds WEN; KR launches new line of affordable cage-free eggs

Energy
New data showing a decline in crude-oil inventories at the US hub in Cushing, Okla., is one factor helping oil prices reduce morning losses. Data-tracking firm Genscape says crude in storage was 66.5M barrels on Friday, down 706k from a week earlier – DJ reported
E&P sector news; CXO Sees 2016 production growth up 1%-3%, above prior view of 0%-2%; EOG acquires privately held Yates in transaction valued at $2.5B to boost Permian assets http://goo.gl/keex07 ; HES weakened as UBS notes XOM confirmed Skipjack exploration well offshore Guyana did not find commercial quantities of hydrocarbons
Alternative Power/Solar/Utilities; positive mention on REN at Northland as firm raised their price target from $12 to $35; utilities (UTY) performed well today, getting a lift on lower yields, which in turn helped lift interest rate sensitive sectors (those that pay good dividends)
MLPs/Pipelines; ENB and SE to combine in stock-for-stock merger transaction, which values Spectra Energy common stock at approximately $28B (values SE at $40.33). Spectra Energy shareholders will receive 0.984 shares of the combined company for each share of Spectra Energy common stock they own. http://goo.gl/Idp7Rt  
Refiner movers; Saudi Aramco and its U.S. refining joint-venture Motiva Enterprises lead the race to buy LYB Houston refinery, Reuters http://goo.gl/XmKNwY

Financials
Large Cap banks and regional banks were among the top laggards today, once again moving with the direction of interest rates/yields; as yields dropped on lowered expectations of a n-t rate hike (given weak ISM services), banks came for sale (WFC, JPM, BAC, C)
Insurance; Hurricane Hermine’s estimated $500M of insured losses and about $1B of economic losses means that the first hurricane to hit FL since 2005 will likely have a very modest impact on (re)insurers’ 3Q16 earnings and probably no impact at all on pricing, according to KBW (names like ALL, RGR, RE, PRE); ACGL was upgraded to buy at UBS
Lending and Finance; PYPL and MA struck an agreement for expansion of their long-standing partnership. Additionally, Visa (V) and PayPal also announced that Visa Checkout will be available as a payment option for Braintree merchants
REITs; several rating changes today; Oppenheimer upgraded data centers EQIX and CCI to outperforms – EQIX to outperform as they believe is a sustainable and defensible cloud pure play trading at a discount to traditional REITs and CCI on favorable fundamentals and near-term catalysts; REITs overall enjoy weak bond yields, lifting dividend paying sectors

Healthcare
Medical Devices, Equipment and Services; CPHD surges on report to be acquired by DHR for $53 per share/$4B deal (a 54% premium to Friday’s close) – lifted shares of EXAS, NVTA, GHDX early http://goo.gl/M60Tuk ; NAVB jumps as agrees to grant CAH 5-year warrants for up to 10M shares http://goo.gl/ly2fQh ; UBS downgraded life science tools, saying reward for life science & Dx tools, CROs and genomics sector is less favorable (downgraded CRL/VWR to sell…and PRAH/PRXL to neutral); DVA downgraded at Bank America as believe near term growth rates are likely to remain muted; ALR filed quarterly results after recent delay
Biotech movers; KPTI shares active as its selinexor shows similar efficacy to Darzalex in treatment-resistant multiple myeloma (safety profile was similar to earlier trials. Additional data will be presented later this year); DVAX bounces after falling 32% on Friday after FDA canceled regulatory meeting update on Heplisav-B; Jefferies upgraded GILD to buy continued confidence in the LT HIV franchise prospects and downgraded BIIB to hold saying shares now better reflecting the balance of fundamentals; SAGE gets FDA breakthrough therapy status for depression drug, mainly based on results from a Phase 2 study
Pharma/Managed care; CLCD shares spiked after meets both the primary and secondary goals in Phase 3 Samurai trial; TNXP plunges as lead product candidate TNX-102 SL fails late-stage study in fibromyalgia; CNC downgraded at Leerink predicated on its view of below consensus EPS achievability in 2017 (lowers estimates);
Generic/Specialty pharma; MYL shares (coming into today) have fallen -18% since 8/18 on negative Epipen headline overcompensating for any remaining NPV on a product likely to go generic by 2018E (which has weighed on generic sector) – today, the NY attorney general launched an antitrust investigation into the company on EpiPen; MNK was mentioned cautiously by GeoInvesting http://goo.gl/EezkhV  

Industrials & Materials
Heavy duty trucks; sector mixed after Volkswagen AG said it would take a minority stake in NAV, planning to invest $256M at $15.76 a share -- a 12% premium to Friday's closing price -- for a 16.6% stake in the company http://goo.gl/QK7T09 ; separately, ACT Research released their preliminary estimate for August Class 8 orders, falling 29% YoY to 14,200 but increased 37% MoM and was above Wells Fargo channel check 10K-13K (shares of CMI, PCAR, ALSN active today)
Chemicals; all about M&A for group today; Bayer AG said that its negotiations with MON had advanced, and it was now willing to offer more than $65B, upping its offer to $127.50 per share up from its previous offer of $125 per share http://goo.gl/PZynup ; China National Chemical Corp. has extended the tender offer to buy shares of SYT to November 8 (ChemChina announced its $43B takeover of Syngenta in February. http://goo.gl/CYRVKM
Aerospace and defense; Avolon Holdings, part of China's acquisitive HNA Group is nearing a deal to buy the aircraft leasing assets of U.S. lender CIT for between $3B-$4B, people familiar with the matter told Reuters http://goo.gl/BupYJu ; Airbus won $6.5B in orders from Vietnamese carriers

Technology, Media & Telecom
Internet; NFLX positive mention at Piper saying L-T international growth potential supports $122 PT (25% upside) and overweight rating; SCOR downgraded to neutral at SunTrust saying consensus “too high” while visibility into growth remains low; China ADR Internet names were jumping early BIDU, CTRP, SINA, BABA; AMZN trades to another new all-time high today; TWTR board of directors is set to meet this Thursday in San Francisco
Semiconductors; INTC upgraded to buy at Evercore/ISI and raise tgt to $45 from $38 as expects the underperformance to change as the company's Data Center Group segment accelerates to 10%+plus growth in the second half of 2016; MRVL mixed results/guidance as Q2 EPS beat (revs miss) but guides Q3 below consensus (though semis were mostly weaker)
Optical & Equipment movers; FNSR leads group higher as Stifel upgraded to buy as thinks that the outlook for demand for the company's 100G portfolio has improved, while worries about the competition facing the company's QSFP28 product are overdone (firm also raised tgt on OCLR to $10 from $7.50)
3D sector; shares of SSYS, DDD, VJET active (higher) after GE deal for two European 3-D printing companies. GE agreed to acquire two European 3-D printing companies for a combined $1.4 B. GE will buy Sweden’s Arcam AB and Germany’s SLM Solutions Group AG http://goo.gl/GZqh9I
Hardware & Software movers; shares of AAPL were active ahead of its annual media event tomorrow (new product launches expected); CRM said filed shelf to offer 1.18M shares for holders; CRTO slides after being downgraded by Susquehanna to neutral
Media & Telecom movers; DISH and TRCO reach retransmission agreement/end blackout; FOXA agrees to $20M settlement over Gretchen Carlson sexual harassment lawsuit; MSGN was upgraded to buy at Albert Fried; media in general was weaker, with media sector notable weakness - FOXA, DISCA, DIS, CBS, DISH, TWX all down

georgeyn

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shibainu

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