When emerging markets stocks and exchange-traded funds were really ripping higher several years ago, market observers would frequently cite the consumer as the next bastion of growth in developing economies.
That prompted enthusiasm for ETFs such as the Columbia Emerging Markets Consumer ETF (NYSE: ECON). Previously known as the EGShares Emerging Markets Consumer ETF (and still listed on Google Finance as "EGA Emerging Global Shares Trust"), ECON is one of the largest and most seasoned options among emerging markets consumer ETFs. The ETF tracks the Dow Jones Emerging Markets Consumer Titans 30 Index.
That index just turned 7, underscoring the point that index and ETF providers have been delivering access to consumer trends in developing economies for a while.
“The emerging market consumer is not a new theme and since the inception of the Dow Jones Emerging Markets Consumer Titans 30 Index (1/8/2010), these companies have outperformed broader EM indices. Over three year rolling return periods (rolled monthly), the Dow Jones Emerging Markets Consumer Titans 30 Index has consistently outperformed both the MSCI EM Index and the S&P Emerging BMI Index under almost all market conditions,” according to S&P Dow Jones Indices.
ECON, which rose 5 percent last year, allocates 22.5 percent of its weight to South Africa, Africa's second-largest economy behind Nigeria. China is the ETF's second-largest geographic exposure at 21.1 percent. The other BRIC economies, Brazil, Russia and India, combine for about 28 percent of ECON's weight.
In total, the ETF offers exposure to 11 countries. Three are Latin American economies and four are Southeast Asian economies, including that region's largest, Indonesia.
“There is no denying demographics – emerging market populations will continue to grow rapidly and the emerging market consumers will continue to increase their wealth. However, broad emerging market benchmarks do not target this exposure [emphasis omitted], as the consumer sectors make up less than 20 percent of those benchmarks,” according to S&P Dow Jones Indices.
Consumer discretionary stocks are 54.1 percent of ECON's weight while consumer staples names represent 43.2 percent. By comparison, discretionary and staples stocks combine for just over 17 percent of the MSCI Emerging Markets Index.
The average market value of the 30 stock's in ECON's underlying index is nearly $29 billion.
Following the market opening Thursday, the Dow traded up 0.01 percent to 19,804.80 while the NASDAQ gained 0.27 percent to 5,570.46. The S&P also rose, gaining 0.02 percent to 2,272.40.
Leading and Lagging Sectors
In trading on Thursday, utilities shares fell by 0.55 percent. Meanwhile, top losers in the sector included Ormat Technologies, Inc. (NYSE: ORA), down 2 percent, and Sempra Energy (NYSE: SRE), down 1.5 percent.
Netflix, Inc. (NASDAQ: NFLX) reported stronger-than-expected earnings for its fourth quarter on Wednesday.
Netflix reported Q4 EPS of $0.15 on revenue of $2.48 billion. Analysts expected earnings of 0.14 per share on revenue of.$2.47 billion.
The company added 1.93 million domestic subscribers and 5.12 million subscribers internationally during the quarter.
Equities Trading UP
Shares of Catabasis Pharmaceuticals Inc (NASDAQ: CATB) got a boost, shooting up 18 percent to $4.94 after the company disclosed that its Phase 1 data on edasalonexent has been published in the Journal of Clinical Pharmacology.
Oclaro, Inc. (NASDAQ: OCLR) shares were also up, gaining 16 percent to $9.41 after the company reported strong preliminary results for its second quarter.
Equities Trading DOWN
Zynerba Pharmaceuticals Inc (NASDAQ: ZYNE) shares dropped 16 percent to $18.95 after the company reported a proposed public offering of common stock.
Shares of GNC Holdings Inc (NYSE: GNC) were down around 13 percent to $9.74. Goldman Sachs downgraded GNC from Neutral to Sell.
DryShips Inc. (NASDAQ: DRYS) was down, falling around 23 percent to $1.23. DryShips reported a 1-for-8 reverse stock split.
In commodity news, oil traded up 1.10 percent to $52.46 while gold traded down 0.86 percent to $1,201.70.
Silver traded down 2.40 percent Thursday to $16.86, while copper fell 0.08 percent to $2.61.
European shares were higher today. The eurozone’s STOXX 600 gained 0.09 percent, the Spanish Ibex Index rose 0.24 percent, while Italy’s FTSE MIB Index climbed 0.47 percent. Meanwhile the German DAX gained 0.09 percent, and the French CAC 40 rose 0.16 percent while U.K. shares fell 0.40 percent.
Housing starts rose 11.3 percent in December to an annual pace of 1.23 million. Economists expected a rate of 1.2 million for December.
Initial jobless claims dropped 15,000 to 234,000 in the week ended January 14. However, economists were projecting claims to reach 245,000 in the week.
The Philadelphia Fed manufacturing index rose to 23.60 in January, versus a prior reading of 21.50. Economists estimated a reading of 15.80.
San Francisco Federal Reserve Bank President John C. Williams is set to speak in Fairfield, Calif. at 10:00 a.m. ET.
The Energy Information Administration’s weekly report on natural gas stocks is schedule for release at 10:30 a.m. ET.
The EIA’s weekly report on petroleum inventories will be released at 11:00 a.m. ET.
Data on money supply for the recent week will be released at 4:30 p.m. ET.
Federal Reserve Chair Janet Yellen is set to speak in Stanford, Calif. at 8:00 p.m. ET.
Credit Suisse said Netflix, Inc. (NASDAQ: NFLX)’s strong fourth quarter results and solid guidance validates its long-term thesis on the stock, which surged more than 7 percent to set a new 52-week high.
Netflix reported fourth quarter revenue and EPS at $2.48 billion/$0.23 versus CS estimate of $2.5 billion/$0.17. Domestic paid streaming subscribers came in at 47.9 million, topping guidance of 47.6 million and domestic streaming revenue of $1.40 billion was in line with guidance.
The company added 7 million subscribers in the quarter and finished 2016 with 93.8 million users and generated $8.3 billion in global streaming revenue, good for 35 percent year-over-year growth.
For the first quarter, Netflix expects to add 1.50 million domestic streaming customers and 3.70 million International streaming customers. Total streaming revenue guidance calls for $2.516 billion.
“More importantly, for the longer term, Netflix will be looking to show a greater balance between growth and profitability – which to us validates the long-term investment thesis for its international and newer cohorts to follow along the margin expansion trajectory of the US,” analyst Stephen Ju wrote in a note.
As a result, Ju raised his FY 2017 revenue/EPS estimate to $11.54 billion/$1.54 from $11.45 billion/$1.13.
However, Ju maintained his Neutral rating on the stock citing balanced risk/reward. But, he raised the price target by $10 to $143.
Shares of Netflix closed Wednesday at $133.26.
International Business Machines Corp. (NYSE: IBM) is set to kick off the fourth quarter earnings season for large-cap technology firms by reporting its quarterly numbers on Thursday after the market close.
Analyst Joseph Foresi of Cantor Fitzgerald, who has a Neutral rating and price target of $156 on the stock, expects the revenue decline to be minimal in constant currency.
The analyst sees EPS of $4.97, higher than the Street view of $4.89. Foresi projects fourth-quarter revenue of $21.80 billion, versus the FactSet consensus of $21.69 billion. Strategic Imperatives is expected to grow by 12.5 percent in the fourth quarter to account for more than 40 percent of revenues.
“We expect two out of the five major product and services lines to be up low- to mid-single digits y/y and one other segment to be flat for the period. Currency could impact revenues somewhat this quarter due to recent depreciation in the GBP post the Brexit vote,” Foresi wrote in a note.
In addition, Foresi expects IBM to issue a conservative outlook for 2017. The analyst estimates EPS/revenue of $14.17/$79.7 billion versus consensus of $13.75/$78.7 billion.
Meanwhile, investors will be looking for signs around the timing of a return to overall growth, especially organic growth, which is expected in 2018.
Following are some of the key earnings dates that tech investors should take note of:
February lean hogs are trading at 65.35, up 0.15 cents/lb. April lean hogs are trading at 68.75, down 0.07 cents/lb. June lean hogs are trading at 77.90, up 0.07 cents/lb
Wednesday USDA estimated hog slaughter was 440,000 head, the total for the week is now 1.183 million head.
Weekly weights for Iowa-Southern Minnesota as of January 14th were 281.9 pounds versus 282.5 the previous week
February live cattle is trading at 120.10, up down 0.20 cents/lb. April live cattle is trading at 119.20, down 0.20 cents/lb. June live cattle is trading at 108.65, down 0.27 cents/lb
Live cattle futures are steady to lower just after the open.
Wednesday's USDA estimated cattle slaughter was 115,000 head yesterday. The total for the week is now 295,000 head.