Tag Archives: stocks

Despite An Uptick In Equities; Fund Investors Remain Risk Adverse

By Tom Roseen Generally ignoring mixed economic news, equity investors continued to follow the lead of oil prices throughout the fund-flows week ended March 2, 2016. On Thursday, February 25, markets rallied, with the Dow Jones Industrial Average posting a 212-point gain after investors learned that Venezuela’s oil minister had said he was meeting next month with other oil ministers, with a goal of stabilizing oil prices. Technology and financial issues led the rally as investors took a risk-on approach, helped by news of a jump in durable goods orders; investors ignored the details that shipments of nondefense capital goods excluding aircraft were negative and that the Shanghai Composite dropped 6.4% for the day. Throughout the flows week investors cheered the comments of St. Louis Federal Reserve President James Bullard, who reiterated that the pressure to raise interest rates has eased. Preliminary Q4 2015 GDP growth was revised upward during the week to 1.0%, which helped offset a dip in oil prices on Friday. Despite better-than-expected earnings reports from the likes of J.C. Penney and Kraft Heinz, investors continued to bid up gold. On Monday, February 29, investors continued to push up utilities issues and gold prices, underscoring the markets’ continued volatility. Nonetheless, oil futures rose sharply on reports of a possible production freeze, and investors’ global economic fears declined slightly after China lowered its reserve-requirement for that nation’s banks. On Tuesday stocks rallied, with investors bidding up financial and technology stocks on news that oil prices had jumped higher and that the ISM Manufacturing Index rose to 49.5% for February; while still in contraction territory, that beat consensus estimates. The NASDAQ Composite witnessed its largest one-day gain since August 2015 as utilities and Treasuries took a breather. Another strong gain in oil prices on Wednesday pushed stocks into the black once again. Investors met the “Goldilocks” news from the Federal Reserve’s Beige Book with a sigh of relief; it hinted that the central bank might be slow to raise interest rates this year, while showing the economy is still growing. This rally pushed the ten-year Treasury yield to its strongest closing high since February 5. Despite the risk-on attitude by many investors this past week, risk aversion remained the mantra of fund investors. For the week fund investors were net purchasers of fund assets (including those of conventional funds and exchange-traded funds [ETFs]), injecting a net $6.4 billion for the fund-flows week ended March 2. The increase in recent market volatility pushed investors toward safe-haven plays and fixed income securities, padding the coffers of money market funds (+$5.7 billion net), taxable bond funds (+$2.9 billion net), and municipal bond funds (+$0.2 billion net), while being net redeemers of equity funds (-$2.4 billion). For the first week in five equity ETFs witnessed net inflows; however, this past week they took in just $450 million. As a result of rises in oil prices and good economic news during the week, authorized participants (APs) were net purchasers of domestic equity ETFs (+$1.5 billion), injecting money into the group for the first week in three. Despite a slight improvement in the global markets, APs-for the fifth consecutive week-were net redeemers of nondomestic equity ETFs (-$1.0 billion). Perhaps as a result of persistent risk aversion, accompanied by the rally in technology firms, APs bid up some unlikely names, with the SPDR Gold Trust ETF (NYSEARCA: GLD ) (+$1.1 billion), the PowerShares QQQ Trust ETF (NASDAQ: QQQ ) (+$0.6 billion), and the iShares U.S. Real Estate ETF (NYSEARCA: IYR ) (+$0.3 billion) attracting the largest amounts of net new money of all individual equity ETFs. At the other end of the spectrum, the SPDR S&P 500 Trust ETF (NYSEARCA: SPY ) (-$1.2 billion) experienced the largest net redemptions, while the iShares MSCI Japan ETF (NYSEARCA: EWJ ) (-$362 million) suffered the second largest redemptions for the week. For the third week in four conventional fund (ex-ETF) investors were net redeemers of equity funds, redeeming $2.8 billion from the group. Domestic equity funds, handing back $2.9 billion, witnessed their fourth consecutive week of net outflows, while posting a weekly gain of 3.32%. Meanwhile, their nondomestic equity fund counterparts, posting a 3.69% return for the week, witnessed net inflows (although just +$87 million) for the fifth consecutive week. On the domestic side investors lightened up on large-cap funds and equity income funds, redeeming a net $1.6 billion and $1.0 billion, respectively. On the nondomestic side international equity funds witnessed $362 million of net inflows, while global equity funds handed back some $274 million net. For the third week in four taxable bond funds (ex-ETFs) witnessed net inflows, taking in a little under $2.0 billion. High-yield funds witnessed the largest net inflows, taking in $2.6 billion (for their second consecutive week of net inflows), while government-mortgage funds witnessed the second largest net inflows (+$0.4 billion). Corporate investment-grade debt funds witnessed the largest net redemptions from the group, handing back $754 million for the week. For the twenty-second week in a row municipal bond funds (ex-ETFs) witnessed net inflows, taking in $125 million this past week.

FireEye Curbs 2016 Loss Expectations, But Stock Still Tumbles

FireEye ( FEYE ) curbed its loss expectations for 2016 by a nickel at the midpoint of its guidance range as the cybersecurity firm slashed its capital expenditures view by $15 million, but its shares still fell. FireEye stock was down 2.5%, near 18, in afternoon trading on the stock market today , after shares had risen for nine straight trading days. Shares edged up last week during the cybersecurity RSA Conference in San Francisco. At the conference, FireEye announced a partnership with agent-less vendor ForeScout Technologies and unveiled an endpoint exploit-protection product. And its $275 million iSight Partners acquisition is already bearing fruit, FireEye executives told IBD. Tuesday, FireEye cut its 2016 capital expenditures view to $35 million vs. its earlier guidance for $50 million. FireEye sees $1.20 to $1.27 losses per share ex items, trimming earlier views for $1.25 to $1.32. FireEye reiterated sales guidance for $815 million to $845 million, which would be up 33% vs. 2015. FireEye retained its billings ex items guidance for $975 million to $1.055 billion. The consensus of 34 analysts polled by Thomson Reuters expected $829.9 million in sales and a per-share loss ex items of $1.30. Positive cash flow is still expected to come in at $70 million to $80 million, FireEye said. The updated guide comes as FireEye kicks off its 2016 analyst briefing. IBD’s 25-company Computer Software-Security industry group, which ranks a lowly No. 177 out of 197 groups, was down 1% Tuesday afternoon. FireEye stock has a low IBD Composite Rating of 17 out of a possible 99. Verisign ( VRSN ), Palo Alto Networks ( PANW ) and Check Point Software Technology ( CHKP ) stocks lead the group with CRs of 84, 79 and 73, respectively.

Akamai Says M&A, Stock Buyback Both Do-able

Akamai Technologies ( AKAM ) is sticking with its revenue target of $5 billion by 2020-21. At its investor day on Monday, the company said that it has enough cash to pursue stock repurchases as well as acquisitions. “We could do both — M&A or share buybacks,” said Akamai CFO Jim Benson. He said that Akamai has about $1.5 billion in cash. Akamai did not change Q1 guidance calling for profit in a range of 61 cents to 64 cents per share and revenue of $562 million at its midpoint, up 7% from $526.5 million a year earlier. Akamai’s 2015 revenue rose 12% to $2.2 billion. “Although Akamai expects a lower overall growth rate for 2016, management is maintaining its long-term revenue goal of $5 billion by 2020, which implies a CAGR (compound annual growth rate) of 18%,” said Jim Breen, a William Blair analyst, in a report. Cambridge, Mass.-based Akamai is the biggest provider of content delivery network services to media and entertainment companies. Akamai’s CDN technology speeds up e-commerce transactions, business software downloads and video streaming to mobile devices. Akamai has expanded into higher-margin cloud infrastructure services and security, aiming to offset price cuts in the CDN business that averages 15% to 20% a year. At the investor day in Boston, Akamai said that it expects to grow sales overseas as well as to corporate customers. “The media business was de-emphasized relative to last year and is beginning to be overshadowed by the performance and security businesses,” said Michael Bowen, an analyst at Pacific Crest Securities, in a report. Akamai’s stock is up about 4% in 2016. It has an IBD Composite Rating of 59 out of a possible 99. Akamai competes with Limelight Networks ( LLNW ) and Level 3 Communications ( LVLT ) as well as Verizon Communications ( VZ ). Verizon carries a high Composite Rating of 98 and makes IBD’s Big Cap 20 weekly screen of large-cap growth stocks.