Market Wrap For December 20: Markets Gain On GDP Data
Major indices received a boost in Friday's trading activity following a better than expected third quarter GDP. The surprising economic data is yet another key data that may suggests that the economy is healthy enough and could handle the Fed's recent decision to taper its bond buying program.
In a statement, Boston Fed Chief Eric Rosengren noted “I, too, expect the economy to continue to improve, and my forecast is for real GDP to grow at a rate close to 3 percent next year. Like the Committee, my assessment has brightened in recent months. But, by the same token, I do not yet have sufficient confidence in this outlook to risk the removal of any monetary accommodation at this time.”
- The Dow gained 0.26 percent, closing at 16,221.40.
- The S&P 500 gained 0.49 percent, closing at 1,818.55.
- The Nasdaq gained 1.15 percent, closing at 4,104.74.
- Gold gained 0.60 percent, trading at $1,200.80 an ounce.
- Oil gained 0.09 percent, trading at $99.13 a barrel.
- Silver gained 0.88 percent, trading at $19.35 an ounce.
News of Note
Third Quarter GDP increased 4.1 percent, above the 3.6 percent consensus.
Third Quarter Corporate Profits rose $39.2 billion, higher than the previous reading of $38.3 billion.
December Kansas City Fed Manufacturing Survey came in at -3.0 compared to a previous reading of +7.0 in November.
Yesterday's Federal Reserve balance sheet showed that the central bank's assets reached a record $4.01 trillion.
The Bank of Japan has left its key interest rate at 0.1 percent and maintained its commitment to expand the monetary base by 60 to 70 trillion Yen a year.
The S&P has cut its EU long-term credit rating to AA+ from a previous AAA due to an “overall weaker creditworthiness of the EU's 28 member states.” Outlook remained at stable and doesn't affect the ratings of individual countries.
Chinese stocks suffered its ninth consecutive session of declines, the worst run since 1994. Borrowing remains difficult despite the central bank's recent emergency cash injection yesterday of 200 billion yuan (approximately $33 billion.)
Equities-Specific News of Note
Analysts at Credit Suisse upgraded Carnival (NYSE: CCL) to Outperform from a previous Neutral rating following the company's strong earnings report which included an EPS beat of $0.04. The analysts placed a $43 price target on shares. Shares gained 2.13 percent, closing at $38.86.
Analysts at JPMorgan admitted defeat in rating 3M (NYSE: MMM) with a previous Underweight rating and upgraded shares to Neutral. The analysts changed perspective came as a result of the company's recently announced dividends, share buyback and future guidance. Shares hit new 52 week highs of $138.09 before closing at $137.06, up 0.48 percent.
Analysts at Credit Suisse named Chevron (NYSE: CVX) as a top energy pick for 2014. The analysts noted the company could be active in its M&A and acquire a top E&P (exploration and production) firm such as PDC Energy, (NASDAQ: PDCE) Diamondback Energy (NASDAQ: FANG) and EOG Resources (NYSE: EOG). Chevron lost 0.36 percent, closing at $122.78. PDC Energy gained 2.59 percent, closing at $53.40, Diamondback Energy gained 1.89 percent, closing at $50.74 and EOG Resources gained 1.84 percent, closing at $168.37.
Analysts at Cleveland Research noted a positive read of J.C. Penney's (NYSE: JCP) December sales trends including an improved comparable store sales trends. Shares gained 4.52 percent, closing at $8.32.
Analysts at Citigroup downgraded Transocean (NYSE: RIG) to Sell from Neutral with a $40 price target as part of a negative call on the entire offshore drilling services sector. The analysts noted that pricing power is beginning to erode in the sector. Shares lost 0.31 percent, closing at $47.01.
Analysts at Goldman Sachs downgraded Domino's Pizza (NYSE: DPZ) to Neutral from Buy based on valuation reasons and that the Pizza chain's global growth potential is already factored into the share price. Shares gained 0.36 percent, closing at $68.93.
Analysts at Credit Suisse reiterated an Outperform rating on Bristol-Myers Squibb (NYSE: BMY) following its divestiture of its diabetes JV stake. The analyst raised its price target to $60.00 from a prevous $56.00. Shares lost 0.74 percent, closing at $53.44.
Fastenal (NASDAQ: FAST) announced that it does not expect to report a positive fourth quarter. The company said it will likely miss analysts EPS expectations due to weakness in heavy manufacturing and lower than expected gross margins. The company is expected to announce results on January 17. Shares lost 4.94 percent, closing at $45.64.
Sprint (NYSE: S) is allegedly involved with up to six banks to work out financing proposals for a potential bid of T-Mobile USA (NYSE: TMUS). Shares of Sprint hit new 52 week highs of $9.87 before closing at $9.85, up 6.60 percent while shares of T-Mobile USA also hit new 52 week highs of $31.13 before closing at $31.00, up 4.69 percent.
2014 is a “must win” for PepsiCo (NYSE: PEP) in India. In a letter to employees, the company's Indian chief told employees that the company “cannot afford to lose a day” and called for “relentless execution” as it battles Coca-Cola (NYSE: KO) to gain market share in one of the fastest growing markets worldwide. Shares of Pepsi gained 0.32 percent, closing at $81.92 while Coca-Cola gained 0.45 percent, closing at $40.04.
Winners of Note
Last night, a Jazz Pharmaceuticals (NASDAQ: JAZZ) subsidiary is set to offer $57 per share for Gentium (NASDAQ: GENT). The deal gives Jazz Defitelio, which will be “highly complementary to the company's experience in and focus on orphan diseases in the area of hematology/oncology.” Analysts at Brean Capital increased its price target on Jazz to $171 following the acquisitions. Shares of Jazz hit new 52 week highs of $126.84 before closing at $123.91, up 8.01 percent. Gentium gained 2.82 percent, closing at $57.22, a slight premium above the offer price.
Oracle (NASDAQ: ORCL) announced it will acquire Responsys (NASDAQ: MKTG) in a $1.5 billion deal which values shares at $27.00. The move is seen as a strategic initiative as Oracle is loking to compete against competitors such as Salesforce.com. (NYSE: CRM) Shares of Responsys gained 40.34 percent, closing at $27.40 while Oracle lost 0.63 percent, closing at $36.37. News of the acquisition in the field also sent shares of Constant Contact (NASDAQ: CTCT) to new 52 week highs of $31.34 before closing the day at $30.60, up 6.84 percent.
Ambarella (NASDAQ: AMBA) announced it will be working with Google (NASDAQ: GOOG) on a “new class of wearable cameras” for the Helpouts application and services. The two companies will join together at the Consumer Electronics Show to demonstrate the wearable camera. Shares of Ambarella hit new 52 week highs of $28.83 before closing the day at $27.94, up 11.45 percent.
Ariad Pharmaceuticals (NASAQ: ARIA) said that the FDA has approved a revised USPI and a REMS for Iclusig. The move “allows immediate resumption of its marketing and commercial distribution” as the drug was suspended in October. Shares gained 16.49 percent, closing at $6.43.
Analysts at RBC Capital Markets initiated coverage of Nimble Storage (NASDAQ: NMBL) with an Outperform rating and $40 price target. The analysts noted the company's shares represents an extremely attractive price to performance ratio that makes the company a potential M&A target. Shares hit new 52 week highs of $39.49 before closing at $37.50, up 5.78 percent.
Decliners of Note
CarMax (NYSE: KMX) reported its third quarter results this morning. The company's EPS of $0.47 came in below the consensus estimate of $0.48. Revenue of $2.94 billion came in above the consensus estimate of $2.89 billion. The company noted that it saw a tightening of the credit terms offered by its subprime providers. Shares lost 9.37 percent, closing at $48.08.
Earnings of Note
BlackBerry (NASDAQ: BBRY) announced its third quarter results this morning. The company's EPS of a loss of $0.67 came in higher than the consensus estimate of a loss of $0.43. Revenue of $1.2 billion missed the consensus estimate of $1.58 billion. The company announced a new strategic partnership with Foxconn to manufacture future smartphones. Shares of BlackBerry initially fell 6 percent in pre-market trading but reversed these losses as investors saw what some analysts deemed as a sign of life at the company. Shares finished the day higher by 15.52 percent, closing at $7.22.
Walgreens (NYSE: WAG) announced its first quarter results this morning. The company's EPS of $0.72 was in line with estimates. Revenue of $18.3 billion came in ahead of the consensus estimate of $17.98 billion. The company noted that traffic increased 0.2 percent and the average basket size was 2.2 percent higher compared to the previous year. Shares gained 3.76 percent, closing at $59.08.
Quote of the Day
"However, the company is financially strong, has a broad and trusted product portfolio to work with, a talented employee base and a new leadership team dedicated to implementing our new road map." - BlackBerry's CEO John Chen during the company's conference call today.
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