Mid-Day ETF Update: ETFs, Stocks Turn Negative Following Yellen's Comments on Overvaluation

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

SPDR S&P 500 ( SPY ): -0.35%

iShares Russell 2000 Index ( IWM ): -1.26%

iShares MSCI Emerging Markets Index ( EEM ): -0.46%

PowerShares QQQ Trust, Series 1 ( QQQ ): -0.71%

Market Vectors Gold Miners ( GDX ): -1.84%

Broad Market Indicators

Broad-market exchange-traded funds, including SPY, IWM and IVV, edged lower at session's half; actively traded PowerShares QQQ ( QQQ ) was down 0.75% but after it reached a new 13-year high.

U.S. stocks also reversed earlier gains following Fed Chair Janet Yellen's comments during her testimony before Congress this morning that social media, biotech and other momentum stocks could be overvalued. Economic data reported earlier were mixed. U.S. import price index rose 0.1% in June due to higher fuel costs, but missed expectations. Excluding fuel, import prices fell 0.1%. Retail sales climbed a seasonally adjusted 0.2% in June but also missed forecasts. Excluding autos, retail sales rose 0.4%. Finally, the New York Fed reported that the Empire State manufacturing survey rose to a 4-year high, to 25.6 in July.

Power Play: Financial

Select Financial Sector SPDRs (XLF) was up 0.28%. Direxion Daily Financial Bull 3X shares (FAS) was up 0.56% while its bearish counterpart, FAZ, was down 0.57%.

JPMorgan Chase (JPM) was up 3.71% after the bank reported better-than-expected Q2 earnings and said it has seen an improvement across its businesses. Net income for Q2 fell to $6.0 billion, compared with net income of $6.5 billion in the second quarter of 2013. Earnings per share were $1.46, compared with $1.60 in the second quarter of 2013. However, that tops forecasts for $1.29. Revenue for the quarter was $25.3 billion, down 2% compared with the prior year, but above forecasts for $23.76 billion.

Winners and Losers


Technology Select Sector SPDR ETF (XLK), iShares Dow Jones US Technology ETF (IYW), 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 down 0.46%.

Among semiconductor ETFs, SPDR S&P Semiconductor (XSD) and Semiconductor Sector Index Fund (SOXX) were in the red.

Shares of social media companies extended losses Tuesday after Federal Reserve Chairman Janet Yellen remarked to the Senate Banking Committee that several market sectors, including the social media and biotech sector, appear to be overvalued. Yellen said that valuation metrics in some sectors "appear substantially stretched ... particularly those for smaller firms in the social media and biotechnology industries, despite a notable downturn in equity prices for such firms early in the year."

Social media companies that have slipped following Yellen's remarks include Facebook (FB) down 1.39%, LinkedIn (LNKD) down 1.4%, MeetMe (MEET) down 4%, Pandora Media (P) down 1.93%, Twitter ( TWTR ) down 0.81%, and Yelp (YELP) down 3.98%.


Dow Jones U.S. Energy Fund (IYE) was down 1.05%; Energy Select Sector SPDR (XLE) was down 0.98%.

Ocean Power Technologies (OPTT) was down 30% after the company said it has cancelled plans to build a wave energy project off the coast of Australia, saying it says is no longer commercially viable. According to an SEC filing, OPTT's subsidiary, Victorian Wave Partners, tendered a notice to the Australian Renewable Energy Agency, terminating its demonstration project funding deed. OPTT says it will repay what it has received of a A$66.5 million government grant, which was intended to be used toward the A$232 million proposed cost of building the project.


Crude was down 1.51%; United States Oil Fund (USO) was down 1.63%. Natural gas was down 0.58% and United States Natural Gas Fund (UNG) was down 1%.

Gold was down 0.77%, and silver was down 0.31%. Among rare metal funds, SPDR Gold Trust (GLD) was down 2.42% and iShares Silver Trust (SLV) was down 0.55%.


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

Wolverine World Wide (WWW) was down 2.34% after it reported Q2 adjusted EPS of $0.31, better than the analyst consensus of $0.27 per share on Capital IQ. Revenue was $613.5 million, ahead of expectations of $608.8 million. Based on revised expectations for the remainder of the year, the company expects its full-year consolidated revenue to approximate $2.775 billion, representing growth of approximately 3% compared to prior year revenue of $2.69 billion, and about in line to just shy of the Street view of $2.791 billion. The company is reaffirming its adjusted earnings per share estimate in the range of $1.57 to $1.63 per share - growth of 10% to 14% compared to prior year adjusted earnings per share of $1.43. The Street is at $1.61 per share. On a reported basis, earnings per share are expected in the range of $1.32 to $1.38 per share and reflect the impact of the company's Strategic Realignment Plan.

As part of the realignment plan, the company is closing about 140 retail locations, primarily Stride Rite stores, over the next 18 months. Wolverine estimates pretax charges related to the plan in the range of $30 million to $37 million, and expects to record these charges between now and the end of fiscal 2015 as it executes each component. Approximately $13 million to $15 million of this estimate represents non-cash charges, primarily asset write-offs related to closed retail locations and restructuring charges related to the remaining retail store fleet and international operations. Of this non-cash amount, $3.4 million was recorded in the second fiscal quarter.

Health Care

Health Care SPDR (XLV), iShares Dow Jones US Healthcare (IYH) and Vanguard Health Care ETF (VHT) were higher. Biotech ETF iShares NASDAQ Biotechnology Index (IBB) was up 0.64%.

Codexis (CDXS) was up 46% after it said late Monday that it signed a platform technology license agreement with GlaxoSmithKline (GSK) under which it will receive $25 million over the next two years. Under the terms of the agreement, Codexis granted GSK a license to use Codexis' proprietary CodeEvolver protein engineering platform technology in the field of human healthcare. The license allows GSK to use Codexis' platform technology to develop novel enzymes for use in the manufacture of GSK's pharmaceutical and health care products. GSK may also use the licensed technology to develop new therapeutic, diagnostic and prophylactic products in the human health field. Upon completion of technology transfer, GSK will have Codexis' state-of-the-art CodeEvolver protein engineering platform installed at its Upper Merion, Pennsylvania research and development site.

Codexis is eligible to receive up to $25 million over approximately the next two years, $6 million of which will be paid upfront shortly after signing and an additional $19 million subject to satisfactory completion of technology transfer milestones. Codexis also has the potential to receive numerous additional milestone payments that range from $5.75 million to $38.5 million per project based on GSK's successful application of the licensed technology. In addition, Codexis will be eligible to receive royalties based on net sales, if any, of a limited set of products developed by GSK using Codexis' CodeEvolver protein engineering platform technology.

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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