Trader’s Edge – Friday 29 April 2016
Overseas Mkt Report – U.S. Stocks Finish Lower as Data, Earnings Disappoint
U.S. stocks closed lower Thursday with the Dow recording its worst day in over two months as Apple extended its losing streak, while the broader market crumbled under the combined weight of disappointing data and weak corporate earnings. The U.S. economy grew only 0.5% in the first quarter, the worst performance in two years. Services spending pushed personal consumption up 1.9% in the quarter, while business spending sank 5.9%. Trade data and inventory adjustment also weighed on the GDP reading.
Initial U.S. unemployment claims were up by 9,000 last week to 257,000. The less volatile four-week moving average was down 4,750 to 256,000. Claims are still near the lowest levels since the 1970s. The Bank of Japan chose to maintain its current stimulus and interest rate policy. The market had broadly expected the country to launch a fresh set of measures in an attempt to kick start inflation.
At the close, the Dow and the NASDAQ were both down around 1.2%, while the S&P 500 was 0.9% lower. For Australian ADRs listed on the NYSE, BHP Billiton rose 17 cents (0.55%) to $31.09, ResMed slipped 15 cents (-0.26%) to $56.50, Telstra Corporation gained 2 cents (0.10%) to $20.54, Spark New Zealand lifted 24 cents (1.95%) to $12.57 and Westpac declined 36 cents (-1.52%) to $23.36.
At 7:45 AM (AEDT), the 10-year Treasury note yield was 1.82% and the 5-year yield was 1.29%.
Facebook (FB) posted a strong start to 2016 by beating expectations on both top and bottom lines. The outperformance was due in part to robust growth in Asia Pacific and North America. Growth in digital advertising continues unabated, and Facebook continues to steal market share from less-personalised content platforms. Facebook also announced the board approved the proposal to create a Class C share of nonvoting stock, which will allow Mark Zuckerberg to sell or donate his shares to his foundation without losing control of the company. Shares soared nearly 10% on the report.
Abbott Laboratories (ABT) announced its intention to purchase St Jude Medical (STJ) for US$25 billion–a 20% premium to Morningstar’s fair value estimate for the latter firm–in a bid to remain relevant and competitive in its medical device business. St. Jude shares soared 27% on the deal while Abbott’s fell 5.8%. Ford (F) posted upbeat results on the back of strong F-150 truck sales. Overall, the firm made 61 cents per share in the first quarter, up from 29 cents a share in the year-ago quarter and well above analyst expectations that they would earn 48 cents per share. Comcast (CMCSA) confirmed rumours it was purchasing DreamWorks Animation SKG (DWA) for US$3.8 billion. The all-cash deal of US$41 per share represents a 27% premium for the movie studio and will be folded into Comcast’s existing Universal business.
European markets were little changed on Thursday. The French CAC 40 and the FTSE 100 were both flat, while Germany’s DAX was up 0.2%.
Asian markets were mostly lower after the Bank of Japan surprise. The Nikkei 225 dropped 3.6%, while the Shanghai Composite shed 0.3% and the Hang Seng was up 0.1%. India’s Sensex lost 1.8%.
Local Market Expected to Open Lower – Ahead of the local open, SPI futures were 8 points lower at 5,193.Thursday 28 April – close. The local market opened higher today on the back of gains on Wall Street overnight with the Fed keeping rates on hold. The positivity continued throughout the day as stocks remained above the flat-line until close, buoyed by the mining sector. There were mixed results from the sectors; materials and energy gained most significantly while health care was the biggest laggard. The Australian dollar gained against most major currencies.