Mid-Day ETF Update: ETFs, Stocks Recover From Earlier Weakness As ISM Releases Corrected Manufacturing Data

Active broad-market exchange-traded funds in Monday's regular session:

SPDR S&P 500 ( SPY ): +0.12%, hit an all-time high

iShares Russell 2000 Index ( IWM ): -0.41%

iShares MSCI Japan ETF ( EWJ ): +1.25%

PowerShares QQQ Trust, Series 1 ( QQQ ): -0.08%, near its 13-year high

iShares MSCI Emerging Markets Index ( EEM ): +0.42%

Broad Market Indicators

Broad-market exchange-traded funds, including SPY, IWM and IVV were mixed to higher, but still reaching record or multi-year highs. Actively traded PowerShares QQQ ( QQQ ) edged down 0.02%, but was also near its 13-year high.

U.S. stocks have rebounded from earlier weakness after ISM issued a second correction to its earlier report, and now says manufacturing activity rose to a seasonally adjusted 55.4 in May from April's 54.9. The ISM initially reported that U.S. factories slowed their pace of expansion to 53.2 in May, and then corrected this and said manufacturing activity rose to 56. The newly released number is closer to the economists forecasts of an increase of 55.8. Meanwhile, the Commerce Department reported that construction spending for April rose to a seasonally adjusted annual rate of $953.5 billion.

Power Play: Technology

Technology Select Sector SPDR ETF (XLK) and iShares Dow Jones US Technology ETF (IYW) were weaker, but both hit their 13-year highs; iShares S&P North American Technology ETF (IGM) and iShares S&P North American Technology-Software Index (IGV) were lower. SPDR S&P International Technology Sector ETF (IPK) was flat, but reached a record high.

Among semiconductor ETFs, SPDR S&P Semiconductor (XSD) and Semiconductor Sector Index Fund (SOXX) edged lower.

In corporate news, semiconductor company Broadcom (BRCM) was up 10% after it said it is considering strategic alternatives for its cellular-baseband business including a potential sale or wind-down of it, which the connectivity provider expects would cut annual expenses by about $600 million. The successful sale or wind-down of the cellular baseband business is expected to result in a roughly $700 million reduction in annualized GAAP research-and-development and selling, general and administrative expenses, of which approximately $100 million relates to estimated reductions in stock-based compensation, the company said. As such, it expects non-GAAP research-and-development and selling, general and administrative expenses to be reduced by roughly $600 million from such a move.

Broadcom also said it expects to organically reinvest roughly $50 million of the savings on an annualized basis into projects in the Broadband, Infrastructure and Connectivity businesses to accelerate its plans in the area of small cells, embedded processing and low-power connectivity. The company also reiterated its forecast for revenue between $2.0 billion and $2.1 billion for its fiscal Q2 ending June 30. Analysts polled by Capital IQ were recently looking for $2.1 billion.

Meanwhile, it raised its forecast for product gross margin, saying it now expects both GAAP and non-GAAP product gross margin to be at or above the high end of its prior range, which was up 100 to 200 basis points on a GAAP basis from Q1, and up 75 to 175 basis points on a non-GAAP basis from Q1. The boost to the margin guidance is "driven principally by mix," the company said.

Winners and Losers


Select Financial Sector SPDRs (XLF) was up 0.07%, near multi-year highs. Direxion Daily Financial Bull 3X shares (FAS) was up 0.36%. Its bearish counterpart, FAZ, was down 0.42%.

Among sector news, Japan's Dai-ichi Life is in advanced talks to buy Protective Life Corp (PL) in a deal that could be worth more than $5 billion, Reuters reported, citing unnamed sources. Dai-ichi, Japan's second largest private life insurance company, confirmed it's looking for a U.S. acquisition, but said nothing has been decided, the news agency reported. The deal would be the biggest so far in a string of overseas acquisitions by Japan's insurers, which are seeing growth overseas amidst a sluggish outlook at home. PL shares were up 11%.


Dow Jones U.S. Energy Fund (IYE) and Energy Select Sector SPDR (XLE) were firmer, hitting record highs.

Among stocks, Rice Energy (RICE) was down 1.32% after it reported that it has successfully tested the company's first Utica Shale well in central Belmont County, Ohio. In addition, RICE has strategically added to its firm transportation portfolio, providing increased market access for its growing production profile. Finally, the company's borrowing base under its revolving credit facility was increased to $385 million.


Crude was down 0.28%; United States Oil Fund (USO) was down 0.50%. Natural gas was up 0.55% and United States Natural Gas Fund (UNG) was up 0.12%.

Gold was down 0.10% and silver was up 0.42%. Among rare metal funds, SPDR Gold Trust (GLD) was down 0.47% and iShares Silver Trust (SLV) was down 0.33%.

Health Care

Health Care SPDR (XLV) iShares Dow Jones US Healthcare (IYH) and Vanguard Health Care ETF (VHT) edged lower. Biotech ETF iShares NASDAQ Biotechnology Index (IBB) was down 0.22%.

In corporate news, Puma Biotechnology (PBYI) was down 20% after it presented positive results from an ongoing Phase II clinical trial of Puma's investigational drug PB272 for the treatment of HER2 positive metastatic breast cancer that has metastasized to the brain. The efficacy results from the first cohort of the trial showed that for the 40 evaluable patients, 3 (8%) patients experienced a partial response (PR), 4 (10%) patients experienced prolonged stable disease (SD) for greater than or equal to 6 months and 12 (30%) patients experienced stable disease (SD) for less than 6 months. The median progression free survival of the 40 evaluable patients was seen to be 1.9 months and the median overall survival was seen to be 8.7 months.


Consumer Staples Select Sector SPDR (XLP), iShares Dow Jones US Consumer Goods (IYK), and Vanguard Consumer Staples ETF (VDC) were weaker.

Retail ETFs SPDR S&P Retail (XRT) and Market Vectors Retail ETF (RTH) were also lower. PowerShares Dynamic Retail (PMR) was flat.

Among stocks, Arctic Cat (ACAT) was down 10.15% after it said Claude Jordan has resigned as the board chairman and chief executive officer of the all-terrain vehicles manufacturer. Former chairman and current board director Chris Twomey has been appointed as the interim CEO as the board begins search for a permanent CEO.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Copyright (C) 2016 All rights reserved. Unauthorized reproduction is strictly prohibited.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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