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FactSet StreetAccount Summary - U.S. market recap: Dow (1.45%), S&P (1.30%), Nasdaq (1.03%), Russell 2000 (2.08%)

Jan 30, 2015

Synopsis:

    • US equities closed lower Friday. Trading was choppy as the theme of elevated intra-day volatility continued. Similar to recent sessions, there was no obvious catalyst for the weakness. The US economic calender received attention, with weaker-than-expected Q4 GDP the highlight. However, a jump in consumption was a notable brightspot. Employment costs for Q4 rose largely as expected. There were significant moves in oil prices as WTI rallied sharply in the afternoon to settle ~8% higher. Month-end dynamics were cited by some for the strength. Events in Europe seemed to have little impact on US markets, with debt negotiations between Greek officials and the Eurogroup failing to reach a conclusion, as expected. It was another busy day of earnings, with generally mixed takeaways as FX headwinds and the impact of lower energy prices remained the major themes. Utilities was the worst performer, while energy was the sole positive sector. Treasuries rallied, while the dollar weakened versus the yen, but was stronger against the euro. Gold prices rallied ~2%.

Digest:

    • Economic calendar in focus:
      • It was a busy day of economic releases, with US Q4 GDP the highlight. The headline figure rose a weaker-than-expected 2.6%, with the consensus at +3.2%. Despite the miss, consumption showed notable strength, rising 4.3% for its biggest increase since Q1 2006 and up from 3.2% in Q3. Net exports were a drag as the trade deficit deteriorated, taking 1% from the headline GDP number. Nonresidential fixed investment was also softer, rising just 1.9% after increasing 9.7% in Q2 and 8.9% in Q3. There was also some attention on a steady build in inventories, which is generally expected be a headwind for GDP in the current quarter. Separately, the Employment Cost Index for Q4 rose +0.6% versus the +0.5% consensus. The index has been firm lately, rising 0.7% in the previous two quarters, but the Q4 y/y rate was a relatively low 2.2%. Elsewhere, the Univ. Michigan Consumer Sentiment final measure for January was 98.1, just below the 98.2 consensus.
    • Mixed day for retail:
      • There was mixed news for the retail group. AMZN +13.7% was the highlight after reporting a big Q4 beat driven by strong NA performance. COST +1.7% was another standout after announcing a special cash dividend. However, most other names sold off, with many companies down more than 2%. DECK (19.7%) and TUES (15.8%) reported weaker earnings, while DKS (6.3%) fell on dampened speculation about a sale of the company. There was no specific driver of the group's broad weakness, although there seemed to be some elevated concerns about the potential of an immediate tailwind to the consumer from lower gas prices. Both V +2.8% and MA +0.8% noted in their earnings calls that there has been no evidence yet that extra savings from lower gas were translating into additional consumer discretionary spending.
    • Energy leads, industrials among laggards:
      • The themes of lower oil and FX headwinds remained in focus for other reporters. Energy was the day's best performer, reversing from earlier weakness to rally in the afternoon. Earnings seemed to provide a headwind early on, with CVX (0.5%) reporting a Q4 beat, but also a 13% y/y reduction in its 2015 capex budget. The sector later got a lift as oil prices jumped in the afternoon. There was no clear catalyst for the oil rally, which picked up steam around 1:30pm. Industrials underperformed, with TYC (2.2%) citing FX headwinds, while MTW (2.8%), which has a significant exposure to oil and gas markets, reported an EPS miss. Healthcare also underperformed, with FX headwinds a focus in earnings for ABBV (4.4%) and ALGN (9.6%). Tech lagged, with hardware and semis weaker. There was a downbeat reaction to earnings from XRX (2.9%) in hardware, while most semis names sold off despite upbeat earnings from BRCM +2.7%. Utilities was the worst performer, despite a decline in rates.
    • Notable Movers:
      • +13.7% AMZN (Amazon.com): Big Q4 EPS beat on strong NA performance (international softer than expected); GMs a widely cited bright spit on help from 3P, AWS and investment cycle leverage; Street also positive on move to start breaking out AWS.
      • +12.4% SYNA (Synaptics): FQ2 EPS beat by ~18% on stronger revenue; Q3 EPS guidance ~40% above consensus at mid-point; analysts positive on growth outlook for fingerprint touch and TDDI solutions.
      • +10.2% BIIB (Biogen Idec): Revenue in line, but EPS beat on lower expenses; Tecfidera sales better, helped by an extra selling week (expected to continue to grow in 2015); while 2015 revenue guidance was light, EPS was better on operating leverage; Street seemed most upbeat on company’s pipeline update.
      • +4.7% GOOG (Google): Q4 widely described as noisy, but Street positive on stronger Google Sites Revenue (mobile search, video and better FX neutral CPC trends helped); some better sentiment surrounding management commentary about maintaining a balance between growth and investment.
      • +2.8% V (Visa): Fiscal revenue and EPS better; also reaffirmed F15 outlook; Street positive on better top-line performance (and reiterated guidance) in the face of difficult FX headwinds; however, FX volatility helped cross-border yields.
      • -6.3% DKS (Dick’s Sporting Goods): NY Post cited sources who said CEO wants to keep control of company; added PE not willing to buy company without taking control; noted takeover talks never became serious.
      • -9.6% ALGN (Align Technology): Q4 EPS slight miss, revenue marginally better; attention on weaker 2015 guidance; Street noted lower guidance due to larger FX headwind, investment in salesforce, ERP systems and expansion into obstructive sleep apnea; downgraded at JMP.
      • -10.3% CBI (Chicago Bridge & Iron): Vogtle nuclear project delayed by 18 months; project sponsors did not agree to completion date changes and seeking to recover $740M in incremental costs.
      • -15.8% TUES (Tuesday Morning): Fiscal Q2 revenue, comps and EPS a bit light; company blamed under-ordering, though this did benefit GMs via limited markdown activity; some concerns about upcoming investments in 2016, though strong transaction growth and healthy comps noted as bright spots.
      • -19.7% DECK (Deckers): Fiscal Q3 EPS light despite a lower tax rate as sales missed (comps -7%); lowered F15 sales growth guidance by 150 bp to 13.5% on lower UGG expectations; also lowered EPS guidance over 2.5% below consensus; initial F16 outlook disappointed; some analysts defended.
      • -27% HA (Hawaiian Holdings): Q4 EPS and revenue largely in line; focus on Q1 RASM guided down 3.5%-6.5% due to forex and reduced Asian fuel surcharges.
    • Sector Performance (vs the S&P)
      • Outperformers: Energy +0.74%, Materials (0.45%), Telecom (0.55%), Consumer Disc. (1.08%)
      • Underperformers: Utilities (2.24%), Consumer Spls. (1.88%), Financials (1.62%), Industrials (1.62%), Healthcare (1.53%), Tech (1.43%)

Data:

    • DXY: 94.73, +0.05%
    • €-$ (0.0037) or (0.33%) to 1.1290
    • $-¥ (1.03) or (0.87%) to 117.38
    • €-¥ (1.62) or (1.21%) to 132.52
    • 2-year yield (5) bps to 0.47%
    • 10-year yield (10) bps to 1.65%
    • 30-year yield (9) bps to 2.23%
    • WTI Crude (Mar 15): +$3.05 or +6.85% to $47.58
    • Gold (Feb 15): +$29.20 or +2.33% to $1283.80
    • Breadth on the NYSE was negative 2.1:1; breadth on the Nasdaq was negative 2.9:1
    • Total Exchange volume on the NYSE of 1,216M was 148% of the 30-day average – Exchange volume excludes regional data
    • Index performance:
      • Month/Quarter/Year-to-date: Dow (3.69%), S&P (3.10%), Nasdaq (2.13%) Russell (3.26%)

 

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