After suffering its worst day in more than two years, what can the Dow Jones Industrial Average do for an encore? It can drop some more.
S&P 500 futures have declined 0.4%, while Dow Jones Industrial Average futures have dropped 184 points, or 0.7%. Nasdaq Composite futures have fallen 0.6%. Stocks have also sold off in Asia and Europe.
The declines were spurred by fears that interest rates will have to rise at a faster pace following signs that wage growth in the U.S. is picking up. And while everyone, including yours truly, seems to be predicting some sort of correction, the tone is mainly positive. Goldman Sachs' strategist David Kostin notes that when the S&P 500 has gained 5% or more in January it's always gone on to gain more over the last 11 months of the year--except in 1987. He doesn't think this is 1987--and neither does Barron's Randall Forsyth.
But no one should count on the same kind of rise we saw to start the year, as we argued in an earlier column. Evercore ISI's Dennis DeBusschere notes that rising bond yields make stocks less attractive, though earnings are still strong. Together, that suggests further gains, but without the benefit of rising valuations. "We do not expect a swift decline in equities but a slower pace of future returns," he says.
That depends on what you call swift, though, doesn't it?
Arconic (ARNC) has dropped 2.8% to $28.30 after r eporting an adjusted profit of 31 cents a share, topping analyst forecasts for 24 cents a share, on sales of $3.27 billion, ahead of Street expectations for $3.09 billion. Arconic said it would earn between $1.45 a share and $1.55 a share in 2018, below forecasts for $1.61 a share.
Bristol-Myers Squibb (BMY) has gained 3.8% to $65.88 after reporting a profit of 68 cents a share, one cent above analyst forecasts, on sales of $5.4 billion, ahead of expectations for $5.35 billion. The company said it would earn between $3.15 and $3.30, while analyst had been expected $3.23. Bristol also said a drug trial of Opdivo combined with Yervoy met its primary endpoint. "This is a clear win for BMY," Leerink's Seamus Fernandez wrote this morning.
Hess (HES) has slumped 3,7% to $46 after reporting an adjusted loss of $1.01 a share, worse than analyst forecasts for a 91 cent loss. It was Hess' 13th consecutive quarterly loss.
Chevron (CVX) has fallen 1.3% to $117.05 after Goldman Sachs removed it from the firm's Conviction Buy list.
Dick's Sporting Goods (DKS) has slumped 4.7% to $30.02 after getting cut to Underweight from Equal Weight at Barclays.
Marathon Petroleum (MPC) has declined 1.3% to $66.52 after getting downgraded to Hold from Buy at Jefferies.
Nokia (NOK) has gained 1.9% to $5.50 after getting raised to Buy from Neutral at BofA Merrill Lynch.
VMware (VMW) has dropped 2.6% to $119.56 after getting cut to Neutral from Buy at Citigroup.
After Friday's close, investors in Wells Fargo (WFC) were blindsided by a consent decree with the Federal Reserve that required the departure of four board members and limits the bank's balance sheet expansion.
Some analysts have responded to the news with downgrades-- RBC Capital analyst Gerard Cassidy cut Wells to Underperform from Outperform--but others are already trying to identify when the stock might be worth buying. Credit Suisse analyst Susan Roth Katzke, for one, notes that the the decree could mean 1% to 2% less revenue growth for Wells, with most of that hitting the bottom line. She estimates that the company could earn between $4.45 and $4.60 a share under that scenario, and at a price/earnings multiple of 12 to 13, would get a stock price somewhere near $56 at the low end and $58 at the high end.
"In the best case scenario, this marks the beginning of the end of the bank's sales practice related issues," Katzke writes. "We'll revisit our recommendation to the degree that a measure of the downside risk is captured in the share price."
Looks like we're almost there. Shares of Wells Fargo have tumbled 7.3% to $59.40 at 7:49 a.m. today.
Call it the Sup-AR Bowl?
Super Bowl LII had a distinct look and feel from inside Minneapolis' U.S. Bank Stadium, where the Philadelphia Eagles upset the New England Patriots. Augmented reality apps, 3-D replays and an app for in-seat concession ordering dazzled the crowd not only during the game but during commercial breaks and downtime. And there were plenty of tech-themed ads, such as an AI-inspired spot from Sprint (S), giant robots from Intuit (INTU), Amazon.com (AMZN) spoofing Alexa, and the YouTube-sponsored pregame show courtesy of Alphabet (GOOGL).
Virtex Arena created AR football games for those inside the stadium. Online bank Ally Financial (ALLY) introduced a game that encouraged customers with high-interest savings accounts, to save money.
Those who wanted to view their seats before purchasing tickets that averaged about $3,200 on Thursday, could do so through an AR view of the stadium. An app from Silicon Valley's VenueNext offered mobile ticketing, in-seat concession ordering and instant-replay videos.
Of course, there were other technologies on display Super Sunday. Intel's (INTC) freeD technology, True View, deployed a few dozen high-end 5K cameras to capture game action and render it in 3-D replays. Local start-up Securonet, meanwhile, helped law enforcement monitor the crowd with its FieldWatch livestream app. More than 2,000 officers had the app downloaded to their smartphones.
AR's coming-out party, in particular, is significant as it tries to break through to a larger audience after years of unfulfilled promise. The emergence of Apple's (AAPL) ARKit and Google's ARCore platforms have made it possible for developers to create "wow" apps. Nonetheless, it remains a work in progress at sporting events. Remember two years ago, when Microsoft (MSFT) touted its HoloLens mixed-reality glasses as a way to transport consumers to stadiums from their living rooms. Couch potatoes are still waiting for that experience.
Wait till next year? - Jon Swartz