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Thursday September 20, 2018



Micron Shares Rise on Upbeat Earnings

Micron Technology, Inc. (MU) announced quarterly earnings on Thursday, September 28. The memory-chip maker reported a sharp increase in revenue that sent profits soaring in the fourth quarter.

Micron reported quarterly revenue of $6.14 billion. This was an increase from last year's fourth quarter revenue of $3.22 billion and more than the $5.96 billion in revenue that Wall Street expected.

"Micron delivered exceptional fourth quarter and fiscal year results, reflecting solid execution and robust demand for our memory and storage solutions," said Micron CEO Sanjay Mehrotra. "We expect healthy industry fundamentals to continue into 2018, supported by increasingly diverse end markets and applications."

The company announced adjusted earnings of $2.02 per share. This was up from the loss of $0.01 per share that the company reported in the same quarter one year ago and was above the $1.84 per share expected by analysts.

Shares of the memory-chip company jumped more than 6% after the report's release and, on Wednesday, reached a 52-week high of $37.15. Since the start of the year, Micron's shares have risen nearly 60%. The company expects demand to continue and analysts predict that new technological developments in areas like networking and artificial intelligence could sustain Micron well into the future.

Micron Technology, Inc. (MU) shares ended the week at $39.33, up 8.4% for the week.

Nike's Earnings Drop

NIKE, Inc. (NKE) released its latest quarterly earnings report on Tuesday, September 26. The athletic apparel company's profits dropped 24% year-over-year, causing shares to fall 4% following the report's release.

Revenue for the first quarter reached $9.07 billion. This is up from revenue of $9.06 billion reported during the same quarter last year but was slightly below the $9.09 billion in revenue that analysts predicted.

"This quarter, we captured near-term opportunities through our new Consumer Direct Offense," said Nike CEO Mark Parker. "Looking ahead to the rest of fiscal 2018, we will ignite Nike's next horizon of global growth through the strength of our brand, the power of our innovative products and the most personal, digitally-connected experiences in our industry."

The company reported net income for the quarter was $950 million, or $0.57 per share. This was down from $1.25 billion, or $0.73 per share during the prior year's quarter.

While Nike's sales growth internationally was strong in the first quarter, revenue in North America has continued to decline in recent quarters. The company has struggled alongside other sporting goods chains to keep its physical locations profitable as shoppers continue to shy away from malls and shopping centers in favor of online shopping. As a result, Nike has been investing time and resources into e-commerce by providing major discounts on its website and making its products available through other online retailers such as Amazon.

NIKE, Inc. (NKE) shares ended the week at $51.84, down 2.4% for the week.

Rite Aid Plummets on Disappointing Sales

Rite Aid Corporation (RAD) reported quarterly earnings on Thursday, September 28. The drugstore chain's lackluster sales caused shares to drop more than 10% on Thursday.

Rite Aid announced revenue for the second quarter was $7.68 billion, which fell short of the analysts' projected revenue of $7.84 billion. Last year, revenue in the second quarter was $8.03 billion.

"While our performance for the quarter reflects a challenging reimbursement rate environment and the effects of an extended merger and asset sale process, securing regulatory clearance for the amended asset sale agreement with Walgreens Boots Alliance gives us a clear path forward to realize the benefits of the transaction and implement our plans to deliver improved results," said Rite Aid CEO John Standley. "As we work to complete the asset sale, which will reduce our leverage and provide greater financial flexibility to invest in our business, we'll also focus on generating momentum for our business by meeting the health and wellness needs of our customers and patients while delivering an outstanding experience in our store."

The company reported net income of $170.7 million, or $0.16 per share. Last year in the second quarter, Rite Aid's net income was $14.8 million, or $0.01 per share.

Rite Aid attributed the earnings improvement to the $325 million merger termination fee from Walgreens Boots Alliance, Inc. for the failed merger between the two drugstore companies, which was abandoned due to anti-trust concerns. Instead of moving forward with the merger, Walgreens plans to purchase 1,932 Rite Aid stores for $4.38 billion. The new deal was approved by the Federal Trade Commission earlier this month and is expected to be completed by the spring of 2018.

Rite Aid Corporation (RAD) shares ended the week at $1.95, down 23.1% for the week.

The Dow started the week of 9/25 at 22,320 and closed at 22,405 on 9/29. The S&P 500 started the week at 2,499 and closed at 2,519. The NASDAQ started the week at 6,403 and closed at 6,496.

Yields Edge Higher for the Week

U.S. Treasury yields climbed this week as details surrounding the proposed U.S. tax overhaul emerged and the Federal Reserve reiterated its commitment to normalize monetary policy. By Friday morning, yields were on track to hit their biggest weekly rise this year.

On Wednesday, President Trump and Republican leaders proposed lower tax rates for businesses and individuals as part of a comprehensive overhaul of the U.S. tax code. The plan would cut the top corporate tax rate from 35% to 20%, repeal the estate tax and eliminate state and local tax deductions. After the details were released, yields on the 10-year and 30-year Treasury notes climbed 8 and 9.2 basis points respectively—marking their biggest one-day jump since March 1.

"The market is a little more optimistic that we are going to actually have some kind of tax cuts," said Scott Wren, senior global equity strategist at Wells Fargo Investment. "The probability is it is going to take a long time to work it all out."

Earlier in the week, yields rose after Federal Reserve Chairwoman Janet Yellen boosted investor's confidence that the Fed will raise interest rates before year's end. In a speech in Cleveland on Tuesday, Yellen indicated that, despite uncertainty surrounding inflation, the Fed should be wary of "moving too gradually" when it comes to raising interest rates.

"We reckon a December rate hike is just about a done deal, but further increases will depend on the data over the next few months proving Dr. Yellen right," said Ian Shepherdson, chief economist at Pantheon Macroeconomics. Fed Fund futures are pricing a greater than 80% probability that the Fed will raise interest rates in December. This is up from 38% approximately one month ago.

On Friday, yields surged yet again following the news that President Trump met with former Federal Reserve Governor Kevin Warsh at the White House to discuss his potential nomination as Fed chair following Yellen's departure in February 2018. Yields rose after news of the meeting amid speculation that Warsh would take a more aggressive stance than Yellen with regard to monetary policy.

"[Warsh is] definitely more hawkish on the spectrum. He is quite a contrast to Yellen," said Gennadiy Goldberg, interest rates strategist at TD Securities in New York. "It does seem he is the front-runner even though it's not a sure thing he will be nominated."

The 10-year Treasury note yield finished the week of 9/29 at 2.33%, while the 30-year Treasury note yield was 2.86%.

Mortgage Rates Stay Steady

Freddie Mac released its latest Primary Mortgage Market Survey (PMMS) on Thursday, September 29. The report revealed that the 15 and 30-year fixed mortgage rates remained unchanged from the previous week.

The 30-year fixed rate mortgage remained unchanged, averaging 3.83% this week. Last year at this time, the 30-year fixed rate mortgage averaged 3.42%.

This week, the 15-year fixed rate mortgage averaged 3.13%—unchanged from last week. The 15-year fixed rate mortgage averaged 2.72% one year ago.

"Rates held relatively flat this week," said Sean Becketti, Chief Economist at Freddie Mac. "The 10-year Treasury yield fell just 1 basis point, while the 30-year mortgage rate remained unchanged at 3.83%."

Based on published national averages, the money market account finished the week of 9/29 at 0.70%. The 1-year CD finished at 1.45%.

Published September 29, 2017

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