Asset Management & Market Research

Week in review ...

Monday brought a relief rally on news of the “bail-in” of Banco Espirito Santo be the Bank of Portugal, which allayed concerns last week that there would be contagion among European banks. From mid-morning losses, the major averages rallied throughout the day to close not far from the day’s highs. The SPX and Nasdaq both added 0.72% while the Dow rose 0.46%.

Geopolitical risks were front and center Tuesday, as a modestly weak open gave way to a 200-point intraday drop in the Dow (the index finished the day down 140). The catalyst was rising tensions in Ukraine, as Polish Foreign Minister Sikorski stated that the recent buildup of large-scale Russian armed forces on the Ukrainian border could be a precursor to a full-scale invasion.  Minimally, Sikorski said the buildup of Russian troops was meant to intimidate Ukrainian forces into halting their advance.

On Wednesday, Russia said it is preparing retaliatory measures in response to new US and EU  sanctions. Interfax reported that Russian president Putin has issued a decree banning or limiting the import of foodstuffs, farm produce, and raw materials from countries that have signed joint sanctions against Russia. The Euro STOXX 50 fell again, with its drop off the 52-week high now over 8%.  Markets here didn’t do much of anything: the SPX was dead flat on the day.

Thursday saw numerous offshore developments that gave investors pause – this despite the strong jobless claims report. European stocks sold off after German industrial output rose less than expected (the latest reading came in at -0.5%, well short of expectations for a gain 0f 0.3%), and concerns were heightened that the Ukraine conflict and sanctions against Russia will undermine the European economy. Russia announced counter-measures with sanctions on food imports from the US, EU, Canada and Australia. White House press secretary Josh Earnest said the “all options are on the table” with regard to Iraq, where ISIS continues to make gains. And the ECB left rates unchanged. A volatile session which saw the Dow drop nearly 110 points at its low, finished of 75 points, or 0.46%. The SPX lost 0.56%.

Overnight, President Obama authorized the use of airstrikes against militants in Iraq and after Israel renewed airstrikes in Gaza after militants there broke a cease-fire and fired rockets into Israel. Before the markets opened here Friday, airstrikes against ISIS were carried out by the US  military. Futures reversed before the opening on reports that an official Russian news agency had suggested that the country seeks to de-escalate the Ukrainian crisis. This carried over into the trading session where modest gains in the morning turned into a 1.15% surge in the SPX.

For the week, the Dow rose 0.4 percent, the S&P 500 gained 0.3 percent, and the Nasdaq rose 0.4 percent.

 

The following are this week’s top 20 percentage gainers and losers, categorized by sectors (over $300 mln market cap and 100K average daily volume).

Today’s top 20 % gainers

  • Technology:CMCM (24.02 +29.71%),IMPV (28.05 +24.04%),TWOU (17.08 +17.64%),ELLI(34.16 +16.61%),SWIR (21.83 +14.8%)
  • Services:BYI (74.7 +25.48%),ARC (6.75 +20.73%)
  • Industrial Goods:PIKE (11.84 +47.15%),TREX (35.88 +25.93%),CSTE (52.89 +16.49%)
  • Healthcare:IG (6.26 +21.06%),DEPO (12 +20.5%),PRSC (44.81 +19.29%),NKTR (12.64 +17.73%),INFI (10.84 +16.06%),DXCM (44.25 +15.21%)
  • Consumer Goods:TOUR (23.98 +16%),BDBD (12.64 +15.15%),NLS (11.91 +14.56%)
  • Basic Materials:SYRG (12.8 +16.92%)

Today’s top 20 % losers

  • Technology:ECOM (16.24 -28.3%),COUP (14.98 -27.37%),WWWW (19.9 -25.65%),IMMR(10.71 -21.32%),S (5.67 -20%),ALLT (10.89 -17.32%)
  • Services:FUEL (16.6 -37%),SALE (17.09 -29.89%),ASPS (86.42 -22.51%),ARCO (7.99 -19.4%),GPRO (37.65 -19.32%),CMLS (4.48 -18.15%),BLMN (16.34 -17.92%),SKYW (9.26 -17.12%)
  • Healthcare:INSM (11.82 -31.83%),THOR (23.26 -30.03%),RVNC (25.37 -26.66%),STAA(10.74 -18.65%)
  • Consumer Goods:NUS (48.01 -18.45%)
  • Basic Materials:CRR (107.07 -18.22%)

 

Here’s a summary of the week’s key economic reports …

Monday

The latest Sentix survey shows morale among investors in the euro zone slumped to 2.7 in August, the lowest level in a year, and down from 10.1 in July, Reuters says.“After last month’s recovery the euro zone Sentix index has suffered a painful set-back,” Sentix said in a statement, attributing it to sharply reduced growth expectations due to the sanctions. “As this slump derives from an event which is subject to politics and power play, the central banks, particularly the European Central Bank, will have difficulty in trying to counter this,” Sentix added.

Tuesday

Financial data firm Markit said its final services Purchasing ManagersIndex hit 60.8 in July, down from the preliminary reading of 61.0, which was also the reading for June. The 61.0 print for June was the highest final reading for any month since the survey began in October 2009. A reading above 50 signals expansion in economic activity. “The services sector grew at a rapid pace, just slightly weaker than June’s post-recession high, accompanied by a surge in factory production,” said Chris Williamson, chief economist at Markit.

New orders for U.S. factory goods rose more than expected in June as demand increased across the board, pointing to a strengthening in manufacturing activity. The Commerce Department said on Tuesday new orders for manufactured goods increased 1.1 percent after a downwardly revised 0.6 percent decline in May. Economists polled by Reuters had forecast new orders received by factories rising only 0.6 percent after May’s previously reported 0.5 percent fall. (Reuters)

The Institute for Supply Management said its services index rose to 58.7 last month, the highest since December 2005, from 56.0 in June. The reading blew past economists’ forecasts for 56.3, according to a Reuters survey. A reading above 50 indicates expansion in the sector. Non-manufacturing business activity rose to 62.4, the highest since February 2011, from 57.5 in June, and the new orders index jumped to 64.9, the highest since August 2005, from 61.2 in June. Employment rose to 56, a six-month high, from 54.4.

Wednesday

Applications for U.S. home mortgages rose last week as refinancing applications increased, an industry group said on Wednesday. The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, rose 1.6 percent in the week ended Aug. 1. The MBA’s seasonally adjusted index of refinancing applications rose 3.8 percent, while the gauge of loan requests for home purchases, a leading indicator of home sales, fell 1.3 percent. Fixed 30-year mortgage rates averaged 4.35 percent in the week, up 2 basis points from 4.33 percent the week before.

The U.S. trade deficit narrowed more than expected in June as petroleum imports dropped to a 3-1/2 year low, suggesting that trade was less of a drag on second-quarter economic growth than initially thought. The Commerce Department said on Wednesday the trade gap dropped 7.0 percent to $41.5 billion, the lowest reading since January. May’s trade deficit was revised up to $44.7 billion.

Thursday

The ECB left rates unchanged, as expected, but ECB President Mario Draghi still had plenty to say. Mr. Draghi appeared relaxed on weakening inflation and the plight of the euro, but took aim at the euro-zone countries he doesn’t feel are doing enough to spur economic growth—read France and Italy – and praised those that did. Well done Spain. He sounded a note of caution on geopolitical risks, reeling off a lengthy list of problem countries around the world, but said it was too early to assess the impact on the European economy of sanctions on Russia. (WSJ)

Initial jobless claims fell by 14,000 to 289,000 in the week of July 27 to Aug. 2. That’s a sharply lower figure than Wall Street expected. A sizable drop in claims in July was likely exaggerated by the retooling undertaken by major manufacturers each summer to gear up for new production. Workers can file for temporary benefits when their plants are shut down. The average of new claims over the past four weeks, for example, dropped by 4,000 last week to 293,500, the lowest level since February 2006. Continuing claims decreased by 24,000 to a seasonally adjusted 2.52 million in the week ended July 26. Continuing claims reflect the number of people already receiving benefits.

Friday

China saw a record trade surplus in July, with exports climbing 14.5% YOY, the fastest pace in 15 months. That’s double the 7.2% rate in June and roundly beating market expectations. “Some analysts attributed the export spurt to delayed shipments caused by recent volatility in the yuan which may not sustain,” Reuters said. Imports fell 1.6%, leaving the country with a record trade surplus of $47.3 billion for the month, the wire said.

U.S. non farm productivity rebounded more strongly than expected in the second quarter, putting a lid on wage pressures and giving the Federal Reserve room to keep interest rates low for a while. The Labor Department said on Friday productivity increased at a 2.5 percent annual rate after contracting at a revised 4.5 percent pace in the first quarter, which was the fastest decline since the fourth quarter of 1981. Productivity, which measures hourly output per worker, was previously reported to have declined at a 3.2 percent rate in the first three months of the year. Economists had forecast productivity rising at a 1.5 percent rate in the April-June period.

U.S. wholesale inventories rose less than expected in June, which could have an impact on the growth estimate for the second-quarter. The Commerce Department said on Friday wholesale inventories increased 0.3 percent after a downwardly revised 0.3 percent gain in May. Economists polled by Reuters had expected stocks at wholesalers to rise 0.6 percent in June after a previously reported 0.5 percent increase the prior month. Wholesale inventories in June were held back by a decline in automobiles and nondurable goods. Sales at wholesalers rose 0.2 percent after increasing 0.7 percent in May. There were declines in sales of nondurable goods, hardware and apparel.



Author: Kevin Lane

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