Clarity from Washington Would Help (VZ, FNSR, HRB, NFLX, DIS, SNE, JKS)
Stocks were taking it on the chin mid-morning after a weak jobs report. The ADP report continues to show better jobs growth in the private sector, and we tend to think it is the more accurate report. However, neither report is showing the growth in jobs that is truly needed to jumpstart the economy. Consumer spending, which makes up about 70% of GDP, remains healthy as evidenced by another month of solid same-store sales in August. However, jobs growth is really needed for the next leg of the recovery to take hold, and without that, there is the risk the economy could take a step back. We think a little more clarity out of Washington could help instead of the government consistently looking to rewrite the rules for various industries, which only adds uncertainty in already uncertain times.
The Optical Networking Stocks Index was the top performing tickerspy Index at mid-day, led by Finisar (FNSR) with a 18% gain. The Chinese Solar Stocks Index was worst performing tickerspy Index at mid-day, with JinkoSolar Holding (JKS) down -8%.
[Please note that all prices are intraday as of about 11:30 AM.]
As of late morning, all the major market averages were deep in the red. Oil was also trading lower, while gold prices were decidedly higher.
On the economic front, the Bureau of Labor Statistics reported that zero jobs were created in the month of August, with the private sector only adding 17,000 workers. The numbers were hurt by 45,000 striking Verizon (VZ) workers who are now back working. Unemployment remained unchanged at 9.1%.
In earnings news, network equipment maker Finisar reported better-than-expected results last night. The Sunnyvale, California company said its net income decreased to $10.1 million, or 11 cents per share, from $19.1 million, or 24 cents per share, due to a one-time charge. Finisar earned 21 cents per share excluding the charge, which was a penny better than the analyst consensus. Revenue grew by 10% to $228.2 million. The stock was climbing higher on the news.
Tax preparer H&R Block (HRB) recorded a big loss, sending its shares lower. For its fiscal Q1, the company recorded a loss of -$175.1 million, or -57 cents per share, compared to a loss of -$130.7 million, or -41 cents per share, a year earlier. Excluding one-time items, its adjusted loss was -37 cents. Revenue fell -2% to $267.6 million. Analysts were looking for a loss of -40 cents on revenue of $276.3 million.
Shares of the Netflix (NFLX), meanwhile, plunged after Starz Entertainment announced yesterday that it would not renew its video streaming agreement with the company. The breakdown in talks between the two companies means that content from Starz would be removed from the Netflix streaming service starting in March. The Starz library included movies from Walt Disney (DIS) and until recently Sony (SNE). Starz and Netflix reportedly could not agree on the value of Starz’ content. Forty-one pros and 1,095 tickerspy members held Netflix in their portfolios at the end of Q2.
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