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Alibaba IPO, iPhone 6 Run Straight Into Market Volatility


Today's financial recap and tomorrow's financial outlook.


Today was a big day for the tech space.

Alibaba (BABA) priced its IPO at $68 per share, the high end of the expected range. That turned out to be a bargain price for those who received allocations of the deal, as Alibaba opened for trading at $92.70 before closing at $93.89 The company now has a larger market capitalization than major tech names like (AMZN) and Cisco Systems (CSCO).

Other Chinese Internet stocks were weak on the day, and the Guggenheim China Technology ETF (CQQQ) sagged 0.9%.

Yahoo! (YHOO), which owns a significant stake in Alibaba, had a sell-the-news reaction to the IPO, falling 2.7% to $40.93. Yahoo! shares had sharply this past summer on anticipation of the deal.

Apple (AAPL) released its new iPhone 6 and iPhone 6 Plus today. Media reports indicated strong demand retail outlets around the world, but the stock declined 0.8%.

And as we saw with Alibaba and Yahoo!, related names took a hit. Several Apple suppliers, including Cirrus Logic (CRUS) and Invensense (INVN) sold off.

In earnings, Oracle (ORCL) dropped 4.2% after reporting weaker-than-expected fiscal first-quarter results after the close Thursday. The company also announced the transition of founder and CEO Larry Ellison to a new role as executive chairman and chief technology officer. Oracle executives Mark Hurd and Safra Catz will share the CEO role going forward.

Taking a look at the broader action, the market was in a good mood in the early going. Scottish voters voted against independence from the United Kingdom, which drove a modest 0.27% gain in the FTSE 100.

US stocks did even better at the open, with the S&P 500 (SPX) shooting up to a new all-time high at 2019.26 less than ten minutes into the trading session.

However, traders quickly took a risk-off posture, with small caps, transports, and biotech names rapidly retreating while bonds and utility stocks rose.

The S&P fell as low as 2006.59, but made up some of the dip by the close, finishing at 2010.40, essentially flat. That rebound was largely confined to the large caps. For example, the Russell 2000 fell 1.1% on the day, and the iShares MSCI Emerging Markets ETF (EEM) was down 0.8%.

Some of the volatility may have also been caused by today's quadruple witching expiration, as well as S&P's quarterly rebalancing.

Economic data was light today. Indicators for August were up 0.2% for August, missing the 0.4% consensus. However, July's reading was revised up to 1.1% from 0.9%.

Monday's Financial Outlook

Existing Home Sales data for August will be released at 10:00 a.m. ET. The consensus estimate is 5.2 million.

The only big name reporting earnings is AutoZone (AZO), which will release its fiscal fourth-quarter results before the open.

Tech investors are eager for Apple's announcement for opening weekend iPhone sales. The consensus view seems well-represented by Citigroup analyst Jim Suva who said today that "demand is off the charts", with supply constraints the likely limiting factor.

Overall, the strong US dollar and weakness in small caps hasn't shaken up the bulls, but these areas should be watched as they could be early warnings of future weakness in equities.

Twitter: @Minyanville

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No positions in stocks mentioned.

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