Market Wrap For December 16: Dow Posts Triple Point Gain Ahead of Fed Meeting
U.S stocks started off the week on a positive note with triple digit point gains for the Dow following one of the worst weeks in recent memory.
Tuesday is an important day for the markets as the Fed begins its policy meeting which will last until Wednesday. After weeks of anticipating when (or if) the Fed will begin to taper, investors could have answers as soon as tomorrow.
- The Dow gained 0.82 percent, closing at 15,884.57.
- The S&P 500 gained 0.63 percent, closing at 1,786.54.
- The Nasdaq gained 0.71 percent, closing at 4,029.52.
- Gold gained 0.40 percent, trading at $1,239.60 an ounce.
- Oil gained 0.87 percent, trading at $97.44 a barrel.
- Silver gained 1.71 percent, trading at $19.94 an ounce.
News of Note
Fourth Quarter Productivity and Costs rose 3.0 percent, higher than the consensus of 2.9 percent and higher than the previous reading of 1.9 percent. Unit Labor costs declined 1.4 percent, in line with expectations with a prior reading of a decline of 0.6 percent.
US December PMI Manufacturing Flash read 54.4, lower than the consensus of 55.0 and slightly higher than the previous of 54.3.
According to Bloomberg article, holdings in the 14 largest gold exchange traded products have declined 31 percent year over year to 1,813 metric tons. This marks the first annual decrease since 2003.
Markit is forecasting a 7.8 percent GDP growth for China following the country's Flash manufacturing output declining to 51.8 in December from a previous reading of 52.2.
German flash manufacturing PMI rose to a new multi year high of 54.2 in December from a previous reading of 52.7.
France's flash manufacturing PMI has fallen to a seven-month low in December, dropping to 47.1, lower than the consensus of 49.1 and lower from a previous reading of 48.4.
As a whole, the Eurozone flash manufacturing PMI increased to a 31 month high of 52.7 in December, beating the consensus of 51.9 and the previous reading of 51.9.
India's inflation gauges, Wholespale Price Index, rose to a 14 month high of 7.52 percent on year in November from 7 percent in October. The Indian central bank is meeting on Wednesday to discuss ways of curbing inflation.
Equities-Specific News of Note
Analysts at Morgan Stanley noted that Apple (NASDAQ: AAPL) recent deal with China Mobile Limited (NYSE: CHL) will result in 12 million incremental iPhone units sold next year with a bull case of 23 million units and a bear case of 5 million units. Shares of Apple gained 0.54 percent, closing at $557.43 while China Mobile gained 0.25 percent, closing at $52.32.
Analysts at RBC Capital Markets upgraded shares of Monster Beverage Corporation (NASDAQ: MNST) to Top Pick from Outperform with a $77 price target. The analysts believe that the company can successfully leverage its brand name into other beverage areas in the coming years. Shares gained 3.48 percent, closing at $63.60.
Analysts at Goldman Sachs upgrades shares of Lumber Liquidators Holdings, Inc. (NYSE: LL) to Buy from Neutral with an increased price target of $112 from a previous $92. The analyst noted that a recent decline in shares presents investors with an attractive entry point into “one of the premier small-cap growth stories in retailing.” Shares gained 5.53 percent, closing at $94.43.
Analysts at Goldman Sachs upgraded Exxon Mobil (NYSE: XOM) to Buy from Neutral with an increased price target of $109 from a previous $96. The analyst noted that the company is inexpensive compared to the company's history on an absolute basis and relative to the S&P 500 index. Also, the analyst noted that the company could return to organic growth for the first time since 2006. Shares hit new 52 week highs of $98.88 before closing the day at $97.22, up 2.00 percent.
Analysts at Deutsche Bank raised its price target on FedEx (NYSE: FDX) to $183 from a previous $135. The analysts noted the company will benefit from its cost-cutting measures which are set to pay off over next year. Shares gained 1.41 percent, closing at $139.85.
Analysts at Stephens downgraded Starbucks (NASDAQ: SBUX) to Equal Weight from a previous Overweight with a price target of $85.00, down from a previous $95.00 based on a valuation call. Shares gained 0.14 percent, closing at $76.46.
Analysts at both Suntrust and Wells Fargo downgraded shares of Twitter (NYSE: TWTR) to Underperform from Neutral with price targets of $50 and $36 to $39 respectively. Analysts at Wells Fargo noted that investors aren't fully understanding the many challenges the company faces including widely varying degrees of consumer engagement. Analysts at Sutrust issued a cautious tone that shares have run up over 40 percent in the last two weeks on insignificant announcements. Seperately, Fox Business News reported that Carl Icahn's involvement with the company is limited to being a fan of the platform and not an investor. Shares lost 3.97 percent, closing at $56.66.
Analysts at Needham reiterated a Buy rating on Scripps Networks Interactive, Inc. (NYSE: SNI) while raising its price target to $100 from a previous $88. The analyst noted that as distribution consolidation becomes more likely, so does content consolidation. SNI could become a key take-over target due to its relatively small size and high quality cable network channels. Shares gained 0.84 percent, closing at $81.41.
Analysts at UBS upgraded Expedia Inc. (NASDAQ: EXPE) with a price target of $74 from a previous $70. The analyst noted that over the past year the company's management has succeeded in executing on growth initiatives for long term value creation. Shares gained 5.02 percent, closing at $65.88.
Analysts at Oppenheimer labeled Advanced Micro Devices, Inc. (NYSE: AMD) and Cirrus Logic, Inc. (NASDAQ: CRUS) as its “top structural/secular shorts.” The analyst noted that AMD's PC/graphics sales will continue falling faster than PC units as well as its low margins from its PS4 and Xbox One chips will bring down the company's overall corporate gross profit. On Cirrus, the analyst believe that the company will suffer from lower average selling prices resulting in lower gross margins. Shares of AMD lost 2.72 percent, closing at $3.59 while Cirrus lost 1.84 percent, closing at $19.23.
Analysts at Goldman Sachs downgrades shares of Jazz Pharmaceuticals Public Limited Company (NASDAQ: JAZZ) to Neutral from Buy with a price target of $123.00 from a previous $105.00. The analysts noted the downgrade in rating and increase in price target is due to a valuation call. Shares lost 2.04 percent, closing at $112.19.
BP plc (NYSE: BP) signed a 30 year deal with the country of Oman to invest $16 billion in the country's Khazzan tight gas project. Construction will start next year and could produce up to 1 billion cubic feet of gas per day. Shares gained 0.74 percent, closing at $46.03.
General Motors Company (NYSE: GM) announced it will invest around $1.3 billion to update plants in several states. Shares hit new 52 week highs of $41.55 before closing at $41.44, up 3.50 percent.
Blackberry Limited (NASDAQ: BBRY) will be saying goodbye to more top level managers. The company's VP for Strategic Alliances Chris Wormald and VP of Global Sales Rick Costanzo are both set to leave the company in the very short term. Shares gained 1.89 percent, closing at $6.20.
Hess Corporation (NYSE: HES) announced that its fourth quarter earnings will likely come in below the third quarter results as the company cuts production guidance for the period. Shares gained 0.54 percent, closing at $79.38.
Cubist Pharmaceuticals Inc. (NASDAQ: CBST) said that its Phase 3 trial of ceftolozane/tazobactam in complicated intra-abdominal infections has met the FDA and EMA's primary endpoint. Shares gained 5.94 percent, closing at $66.51.
Gilead Sciences' Inc. (NASDAQ: GILD) received FDA approval for its HIV-1 regimen Complera. The company also announced the European Commission has also approved an expanded indication for the regimen. Shares gained 0.03 percent, closing at $71.42.
Winners of Note
AerCap Holdings N.V. (NYSE: AER) confirmed its acquisition of American International Group (NYSE: AIG) ILFC unit in a cash and stock deal worth $5.4 billion. AerCap buying AIG's jet leasing business, International Lease Finance Corporation, marks the last major disposition of AIG's non-core assets. Seperately, AerCap's credit rating poses a risk as a result of the acquisition. S&P put the company on “CreditWatch with negative implications” due to the deal. AerCap hit new 52 week highs of $34.67 before closing at $33.17, up 33.05 percent. AIG gained 1.11 percent, closing at $50.28.
Avago Technologies Limited (NASDAQ: AVGO) has agreed to buy LSI Corporation (NYSE: LSI) for $11.15 per share in a $6.6 billion cash deal. The $11.15 price target marks heights that shares of LSI haven't seen since 2006 and represents a bet that Avago Technologies could jump into networking and storage chips. Shares of Avago hit new 52 week highs of $50.55 before closing at $50.10, up 9.75 percent. LSI Corporation closed at $10.96, up 38.56 percent.
Herbalife Ltd. (NYSE: HLF) announced that PricewaterhouseCoopers has completed its re-audit of the company's financials dating back to 2010. The company announced there were “no material changes” to any of its financial statements. Carl Icahn said that shares are undervalued and has capital to spare. Shares hit new 52 week highs of $77.29 before closing at $74.83, up 9.43 percent.
Himax Technologies, Inc. (NASDAQ: HIMX) has been named as “top pick for 2014” by analysts at Northland Capital with a $15 price target, up from a previous $12. The analysts noted that the company will benefit from an increased momentum in the coming year as well as a number of new unannounced customers in the last month. Shares hit new 52 weeks of $12.17 before closing at $11.81, up 7.80 percent.
YPF S.A (NYSE: YPF) was featured positively in a Barron's piece over the weekend. Barron's noted that the company's vast oil and gas reserves could be worth triple the stock's current level. Shares hit new 52 week highs of $31.99 before closing at $31.66, up 8.39 percent.
Analysts at Wedbush raised its price target on Novavax, Inc. (NASDAQ: NVAX) to $12 from a previous $4. The analyst noted that they expect the company to launch a combination RSV-F vaccine in 2018 with sales reaching $1 billion by 2020. Shares gained 19.12 percent, closing at $4.61, a penny below its 52 week high that was established today.
Decliners of Note
Ecopetrol SA (NYSE: EC) announced on Friday it is planning $10.6 billion in capital spending in 2014. Shares fell to new 52 week lows of $39.68 before closing at $39.73, down 7.00 percent.
TTM Technologies, Inc. (NASDAQ: TTMI) is set to offer $150 million in convertible senior notes due 2020. The company will use the proceeds to repurchase part of its existing 3.25 percent convertible notes due 2015 and for general corporate purposes. Shares lost 10.14 percent, closing at $7.71.
Cooper Tire & Rubber Co. (NYSE: CTB) hit new 52 week lows of $20.55 as shares plunged following a dismissal of the company's appeal relating to its proposed merger with Apollo Tyre. Shares hit new 52 week lows of $20.55 before closing at $21.62, down 5.01 percent.
Quote of the Day
“Why would you want to hold gold and see the value depreciate when you can buy equities and see your money grow.” – Jeff Sica, president of billion dollar asset firm Sica Wealth Management as quoted in Bloomberg today.
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