UPDATE: The miss by GOOG and AMZN (accounting for 13% of Nasdaq market cap) is pushing indices lower after hours...
The S&P 500 And Russell bounced once again off post-December-Taper unchanged levels today but the Dow remains flat from 12/18 as the Nasdaq (led by exuberance in momo social media stocks as AAPL closed <$500) jumped the most in almost 4 months (though remains -1% on the year). The rally in stocks was simply remarkable for its tick-for-tick tracking of USDJPY and EM FX and the S&P was unable to make significant progress past its pre-Turkish-rate-hike levels. Treasuries sold off but remain 3-5bps lower in yield than when Turkey was "fixed". The USD rallied on EUR and JPY weakness (but was almost entirely dead once Europe closed). Precious metals were manhandled instantaneously lower at 8amET then spent the rest of the day trying to recover. Stocks did tumble into the close to recouple with USDJPY but bad news was great news it seems...(for now)
- Obama warns divided Congress that he will act alone (Reuters)
- Fed Decision Day Guide From Emerging Markets to FOMC Voter Shift (BBG)
- Fed poised for $10 billion taper as Bernanke bids adieu (Reuters)
- Bernanke’s Unprecedented Rescue Unlikely to Be Repeated (BBG)
- Argentina Spends $115 Million to Steady Peso (WSJ)
- Billionaires Fuming Over Market Selloff That Sinks Magnit (BBG)
- SAC’s Counsel Testifies at Insider Trading Trial in Unexpected Move by the Defense (NYT)
- Automakers Fuel Japan’s Longest Profit Growth Streak Since 2007 (BBG)
- Turkey Crisis Puts Jailed Millionaire at Heart of Gold Trail (BBG)
- Ukraine expects $2 billion tranche of Russian aid soon (Reuters)
So much for the only silver lining in Q4 and Nasdaq leadership from AAPL. Moments ago AAPL reported results which beats on the top and bottom-line, reportined revenues of $57.6 billion in line with the expected $57.5 billion, and EPS beating modestly at $14.50 vs Exp. $14.07 mostly thank to the retirement of 46 million diluted shares from a year ago. However the good news ended here, with the one thing the market was focusing on - iPhone sales - missing badly, as the company only sold 51 million iPhones in the quarter of the 5S release, compared to expectations of 54.7 million. Additionally, Apple also guided to lower revenues than the street had expected, and is now seeing $42-44 billion in the next quarter compared to consensus estimates of $46.1 billion and for all those calling for the demise of the US consumer - you may be right: AAPL Americas revenue declined by 1% from a year ago, when AAPL also had a new product launch. Is AAPL's largest market starting to say "meh"?
- Gross Told El-Erian ‘Hell No’ Seeking to Stop Departure (BBG)
- How Caterpillar got bulldozed in China (Reuters)
- Davos Bankers Struggle to Convince Elite That Markets Are Safer (BBG)
- Lucrative Role as Middleman Puts Amazon in Tough Spot (WSJ)
- Arctic Air Blankets Northern U.S. as Texas to Get Snow (BBG)
- Lenovo buys IBM's server business in China's biggest IT acquisition (Reuters)
- SEC judge bars "Big Four" China units for six months over audits (Reuters)
- U.S. Accuses Security Background Check Firm of Fraud (WSJ)
- RIP BOE forward guidance: Bank of England rate rise is 'still some way off' - Fisher (Reuters)
Following last night's surprise event, which was China's HSBC PMI dropping into contraction territory for the first time since July, which in turn sent Asian market into a tailspin, the most relevant underreported news was a speech by International Monetary Fund Deputy Managing Director Naoyuki Shinohara who said that "As long as steady progress is being made toward the 2% target, we do not see a need for additional monetary accommodation in Japan." He added that while exit from unconventional monetary policy "is still very likely some way off for the euro area and Japan, I believe that the moment to start planning is now." This warning - an echo of prcisely what we said yesterday - promptly roiled the Yen, sending it far higher and sending the EMini futures sliding by over 10 tick in no time: a drop from which they have not recovered yet.
NFLX is soaring after hours to fresh all time highs, not so much due to some blockbuster numbers, but because the company reported results that beat Wall Street's lowballed estimates once again. These were as follows:
- Revenue of $1.175 billion; EPS of $0.79, or $48.4 million, beating expectations of $0.66; Domestic net adds were 2.33 million, vs estimate 2.05 million, leaving a total of 33.4 million subs at the end of the quarter, and 31.7 million paid subs.
In terms of the company's business model, the things are as they were: NFLX is using the cash generated from its doomed, runoff legacy DVD rental business, which in Q4 generated $110MM of the total profit, or half of total, and is using that to fund its international expansion. So far, NFLX has 10.9 million total international streaming subs, which resulted in losses of $57.2 million. It remains unclear what the breakeven on this international growth strategy is in terms of subs, although NFLX has so far burned $663 million on foreign expansion in the past two years, offset by $991 million in profits at its domestic streaming operations. Does this justify a 300x P/E? For now the market's answer is a resounding yes, having sent the stock higher by $55 in the after hours, up 17%!
IBM Asian Revenues Crash, Adjusted Earnings Beat On Tax Rate Fudge; Debt Rises 20% To Fund Stock BuybacksSubmitted by Tyler Durden on 01/21/2014 16:40 -0500
Fudging Non-GAAP numbers is nothing new: everyone does it, even if it means that real, operating earnings for IBM (and most other companies) are substantially lower, and sure enough IBM's real EPS was $5.73. But this is just the tip, because one has to look deep into the income statement to find just how it is that IBM, whose pre-tax income actually declined by 11% could post a 14% increase in non-GAAP EPS. The answer: taxes. And just like Bank of America, IBM decided to crater its Q4 tax rate, which was 25.5% in Q4 2012 and in Q4 2013 dropped to... 11.2%. Seriously IBM? Incidentally, this epic accounting gimmick is also why one should look at IBM's revenues which were a debacle: not only did they miss expectations of a $28.3 billion in Q4, printing at $27.7 billion, but were down 5%. And while most revenue items were weak, the piece de resistance was Systems and Tech revenue, which cratered 25%!
Equity markets were stumbling lower into the close of the US day session and volume was picking up... the powers that be clearly decided that was not to be allowed and the NASDAQ needed to close green (as we noted previously). JPY was not going to help as overnight volatility had reduced carry games so... slam dat VIX was the game. While not much in nominal size, the 0.3 vols smackdown in VIX starting at 1550ET lifted the S&P 3.5 points to close at the afternoon highs, Trannies up 0.3%! (and helped NASDAQ green and new highs)... But, seconds later (as INTC and AXP earnings disappointed), the entire ramp - and more - was dissolved before S&P futures closed. Ah, the efficient markets...
It hasn't been a good year for discount retailers which rely on the broke US consumer to grow, such as Walmart, Target and Costco, the latter of which in the past has seemingly tried everything it could in the commodity business, even going as far as selling bundled provisions for the apocalypse. Alas, so far it has been unable to boost its margins, and since it is not Amazon where failure is rewarded, or else Jeff Bezos just hypnotizes everyone with his latest money-losing contraption (but, but it has such a great growth rate), it is time Costco tried something different to boost margins. Something really different. Such as selling a Superbowl lower level package for two for the low, low price of $15,999.99.
Just out from Macy's, which first said the following: "The 2013 holiday season was successful for Macy’s and Bloomingdale’s as we offered fresh and distinctive merchandise, delivered great value to the customer and provided a robust omnichannel shopping experience... Even in a questionable macroeconomic environment with challenging weather in multiple states, the positive response from our customers during the holiday season is yet another vote of confidence that our well-established strategies continue to work for us." What well-established strategies one may ask? Why the following of course, which was also just disclosed in a separate news release "outlining cost reduction initiatives to support continued profitable sales growth": "Approximately 2,500 employees are expected to be laid off and are eligible for severance as a result of these organizational changes. Other associates are being reassigned with new duties or transferred; some open positions will not be filled."
Credit markets had been nervous for the last 48 hours heading into today's Fed minutes and reflective of the FOMC's worries over small-cap forward multiple and covenant-lite loan issuance (both of which we have discussed in great detail as excessive) sparked weakness in the Russell and credit spreads. Yesterday's bounce gave way to selling after the minutes (and on a "good" data day). But a late-day no-JPY-supported melt-up saved the day but stocks are still down after first 5 days of the year - still worst since 2008. Treasury yields leaked higher into the minutes then flattened dramatically with 10s and 30s rallying and 5s and below weakening. 5s30s dropped 7bps on the day - biggest flattening since Taper. 10y did not close above 3%. Gold and silver slipped lower after 2pm then recovered into the close, but WTI crude slid all day - holding losses after the Fed ($92.50). The USD limped lower after the Fed with EURUSD unch on the week before tomorrow's ECB statement.
- Here comes JPM's next multibillion legal reserve: Federal Probe Targets Banks Over Bonds (WSJ)
- Mulally Bows Out of Microsoft CEO Race, Staying at Ford (BBG)
- United States sending more troops and tanks to South Korea (Reuters)
- Eurozone unemployment sticks at record high (FT)
- China-Japan 'Voldemort' attacks up ante in propaganda war (Reuters)
- Alternative Lenders Peddle Pricey Commercial Loans (WSJ)
- John McAfee: glad Intel dropping name from security software (Reuters)
- Jobless Benefits Bill Stays Alive Amid Talks on Offsets (BBG)
- Chicago Colder Than South Pole as Frigid Air Clamps Down (BBG)
- Former Miss Venezuela shot dead in attempted robbery (Reuters)
On September 26, mere hours after a foundering JCP swore up and down to CNBC it would not, repeat not, sell shares to raise much needed liquidity, the same company proceed to go ahead... and sell 84 million shares of stock via Goldman Sachs (which two days earlier suggesting JCP may be a bankruptcy candidate in a credit research report). Back then we summarizes JCP's actions as follows: "Guess what. They lied. Is this criminal? Surely the SEC will get involved immediately." Obviously, the last statement was delivered with an unlimited dose of sarcasm. Which is why we were absolutely floored to read in the company's just released 10-Q that the SEC did, in fact, do just that.
With gold down 10 of the last 11 days (until today), Peter Schiff tells CNBC that this temporary downswing is due to "the fantasy of a US recovery," that so many actually believe and thus, due to this 'recovery' the Fed will taper back its quantitative easing. "It's not gonna happen," Schiff explains, "we have a phony recovery," and the Fed will more likely increase the amount of QE in order to sustain it, "which is very bullish for gold." Crucially, Schiff clarifies that he "doesn't think a taper is inevitable," as many believe, "but an end to QE won't happen by the Fed's choice - the market will force them to tread on the brakes as the USD collapses." As we noted earlier, Schiff also believes there is an attempt to do "whatever it takes" to pull the EUR down to maintain the USD - but as today's price action shows, it's not working... "Long-term, the fundamentals have never been better for gold."
On the surface, CSCO's numbers were not terrible: the company only missed its revenue expectation which is fine: after all nobody cares about revenues anymore and the only thing that matters are adjusted, recasted, pro-forma, non-GAAP, made up EPS numbers excluding virtually all COGS, R&D and SG&A items. Just for kicks, CSCO also threw in that last refuge of a company with no growth prospects: yet another massive $15 billion stock buyback. However, in light of the ongoing idiotic hopium that a recovery is just around the corner, as has been the case for the past 5 years always to no avail, what is cratering the company in after hours trading, was its forecast for the next quarter. It was a doozy:
- Q2 EPS was expected to be $0.52. Instead the company lowered the outlook to a range of $0.45-$0.47.
But the punchline... wait for it:
- Q2 revenues was expected up 4%. Instead it will be... drumroll... -8 to -10%!
Yup: the company expected an up to a 10% drop in revenues. Welcome to Mr. Yellen's recovery.