Market Wrap For January 14: Markets Rebound On Earnings Season Kickoff
Major indices reversed Monday's losses and posted strong gains following a better than expected retail sales report and a luke-warm start to earnings season.
Philidalphia's Fed chief Charles Plosser said that he wants QE over by the end of the year, a view which remains unchanged after the week December payroll report. Plosser expects the unemployment rate to decline to 6.2 percent by year's end and inflation will move higher towards the Fed's 2 percent target.
- The Dow gained 0.71 percent, closing at 16,373.86.
- The S&P 500 gained 1.08 percent, closing at 1,838.88.
- The Nasdaq gained 1.69 percent, closing at 4,183.02.
- Gold lost 0.54 percent, trading at $1,244.40 an ounce.
- Oil gained 0.70 percent, trading at $92.44 a barrel.
- Silver lost 0.64 percent, closing at $20.25
News of Note
ICSC Retail Store Sales fell 1 percent week over week, compared to a decline of 5.4 percent last week.
NFIB Small Business Optimism Index read 93.9, higher than the consensus estimate of 93.5 with a prior reading of 92.5.
December Import prices were +0.0 percent, lower than the consensus of +0.4 percent with a prior reading of -0.9 percent. Export prices rose 0.4 percent, higher than the consensus of +0.1 percent with a prior reading of +0.1 percent.
December Retail Sales rose 0.2 percent, higher than the slight 0.0 percent expected rise with a prior reading of a rise of0.4 percent.
Redbook Chain Store Sales rose 2.9 percent year over year compared to a rise of 4.1 percent year over year last week.
November Business Inventories rose 0.4 percent to $1,699.8 billion. Sales rose 0.8 percent to $1,318.2 billion with an inventory/sales ratio of 1.29.
Members of the House and Senate have agreed on how to allocate the $1.01 trillion in funding through September 30 following Congressional approval in December.
A federal appeals court struck down the FCC's net neutrality rule. The rule prohibits wireline providers from discriminating against or providing preferential treatment for specific types of data traffic.
Japan's current account deficit widened to 592.8 billion yen ($5.7 billion) in November. The increase is due to a rise in the value of imports given the weaker yen and the country's increased demand for energy due to the shutdown of nuclear power plants.
Inflation in the United Kingdom hit the Bank of England's target of two percent for the first time in four years in December.
Eurozone industrial output grew 1.8 percent on month in November from a previous drop of 0.8 percent in October.
Equities-Specific News of Note
Analysts at FBN initiated coverage of Facebook (NASDAQ: FB) with an Outperform rating and $70 target. The analysts noted that the company will remain a dominant force in social media. The analysts initiated several other companies in the Internet sector. Shares gained 3.72 percent, closing at $57.74.
Analysts at Morgan Stanley downgraded General Mills (NYSE: GIS) to Underweight from Equal-weight with a $48 price target. The analysts noted that the company's sales should continue to lag its peers. The analysts expect the company to “continue to pursue (and struggle to achieve) high-quality high single-digit EPS growth.” Shares lost 0.02 percent, closing at $48.80.
Analysts at Jefferies noted that Intel (NASDAQ: INTC) will have a huge pricing advantage over its competitors as its processors may be 50 percent cheaper versus the competition in a year with the pricing advantage improving to 66 percent in three years. Shares are Buy rated with a $32 price target. Shares hit new 52 week highs of $26.55 before closing the day at $26.51, up 3.96 percent.
Analysts at Wells Fargo (NYSE: WFC) upgraded Google (NASDAQ: GOOG) to Outperform with a price target of $1,300 to $1,350 from a previous $900 to $1,000. the analysts noted that “we anticipate Google will strengthen its leadership position in the fight for brand budgets.” Separately, Google announced it has acquired Nest Labs, makers of high-tech thermostats and smoke detectors that can be remotely controlled and monitored through mobile devices. Shares hit new 52 week highs of $1,151.00 before closing the day at $1,149.40, up 2.35 percent.
Analysts at Jefferies speculated that the price tag to acquire Time Warner Cable (NYSE: TWC) will be close to $150 a share, higher than Charter Communications (NYSE: CHTR) bid in the low $130 range. Shares of Time Warner gained 2.72 percent, closing at $136.00 while Charter gained 2.32 percent, closing at $137.34.
Analysts at Deutsche Bank upgraded Cliffs Natural Resources (NYSE: CLF) to Buy from Hold with a price target of $27, raised from a previous $22. The analysts noted that the company's strategic outlook coupled with management's cost reductions could pave the way towards long-term growth. Shares gained 2.59 percent, closing at $22.94.
Analysts at UBS (NYSE: UBS) initiated coverage of Capital One (NYSE: COF) with a Buy rating and $87 price target. The analysts noted that Capital One is undervalued and is “above its immediate post-Crisis levels but below levels at which it traded before the crisis.” The analysts issued Neutral ratings for American Express (NYSE: AXP) and Discover Financial Services (NYSE: DFS) noting that “the group appears to be fully valued on a P/E basis.” Shares of Capital One gained 1.30 percent, closing at $77.36, while American Express gained 0.15 percent, closing at $87.12 and Discover gained 2.09 percent, closing at $54.78.
Analysts at FBR said that its time for investors to take profits in Freeport McMoRan (NYSE: FCX) after its strong six month bull run. Shares were downgraded to Market Perform from Outperform. The analysts noted “We believe Freeport McMoRan has closed the majority of its valuation gap, upside potential from the possible divestiture of certain oil and gas assets into an MLP now seems limited, and widening oil differentials might affect the realization.” Shares gained 1.38 percent, closing at $36.12.
A day after Elliot Management disclosed a 6.2 percent stake in Juniper Networks (NASDAQ: JNPR) the company issued a public response. “Juniper welcomes open communications with its shareholders and values their input,” as part of a statement. Seperately, analysts at Oppenheimer upgraded shares to Outperform from Perofrm with a price target of $32. The analysts believe that the company does not have enough time to prove Elliot Management is wrong as eight of the company's 11 board members are up for election later this month. Shares gained 0.39 percent, closing at $25.42.
A source revealed to the Wall Street Journal that Foxconn shipped approximately 1.4 million iPhone 5S devices to China Mobile (NYSE: CHL) last week. Shares of Apple gained 1.99 percent, closing at $546.39 while China Mobile gained 1.08 percent, closing at $50.48
Lululemon's (NASDAQ: LULU) CFO John Currie spoke during its ICR XChange presentation today. Currie said that the company's same store sales would be positive if online sales were included. Currie said that its consumer research revealed that its customers loyalty levels remain “off the charts.” Shares lost 0.89 percent,c losing at $49.26.
AstraZenecca's (NYSE: AZN) updated its outlook today as the company noted “a return to growth should come earlier than analysts consensus currently forecasts,” and that it expects 2017 group revenues to be “broadly in line” with 2013 revenues. Analysts at Deutsche Bank noted that the company has a history of missing long term forecasts. Additionally, the analysts questioned the company's lack of reference to core EPS in its revised guidance and its vague use of “broadly in line.” Shares hit new 52 week highs of $62.35 before closing the day at $62.17, up 4.28 percent.
Jana Partners disclosed a 9.5 percent stake in QEP Resources (NYSE: QEP) , up from a prevoiusly reported 7.6 percent stake. Jana Partners said that it will continue to push QEP management to maximize shareholder value. Shares gained 2.25 percent, closing at $29.99. Shares gained 0.23 percent, closing at $94.72.
The FDA expressed skepticism that Johnson & Johnson's (NYSE: JNJ) anticoagulant Xarelto is effective in cutting the risk of additional heart problems in patients that have suffered a heart attack. Shares gained 0.23 percent, closing at $94.72.
Anadarko Petroleum (NYSE: APC) said that it's total liability to Tronox (NYSE: TROX) should be no mor than $1.76 billion, a figure far below the $14.5 billion a judge ruled last month. Shares of Anadarko gained 3.15 percent, closing at $80.84 while Tronox gained 0.78 percent, closing at $23.38.
Several lawmakers and politicians have asked for an inquiry into the data breach at Target. (NYSE: TGT) It is possible that executives of the committee will be answering some tough questions in Washington D.C. The SEC, FTC, state attorney generals are all looking into the issue as well. Shares gained 0.34 percent, closing at $61.71.
Eminence Capital said that it plans to nominate two people to the board of Jos. A. Bank (NASDAQ: JOSB) in its quest to force the company to merge with Men's Wearhouse (NYSE: MW). Shares of Jos. A. Bank gained 0.14 percent, closing at $56.49 while Men's Wearhouse gained 2.72 percent, closing at $51.76.
Winners of Note
During the Detroit Auto Show, executives at Tesla Motors (NASDAQ: TSLA) said that the company had delivered 6,900 cars during the fourth quarter. Previously, the company guided for a delivery of slightly under 6,000. Shares surged 15.74 percent, closing at $161.27.
Analysts at Goldman Sachs (NYSE: GS) placed Jabil Circuit (NYSE: JBL) in its Conviction Buy List with a $20 price target. Shares were previously Neutral rated. The analysts noted that the company will experience better than expected growth in 2015 and that “buying quality EMS companies after severe weakness at key customers has historically led to outperformance.” Shares gained 7.84 percent, closing at $17.89.
Allergan (NYSE: AGN) won a court ruling to block a generic version of Lumigan from entering the American market until 2027. Seperately, the company's CEO said that “we can afford to pay more than anyone else” as the company plans to shop around for acquisitions in 2014. Shares hit new 52 week highs of $121.35 before closing the day at $121.22, up 5.94 percent.
Analysts at Nomura called Canadian Solar (NASDAQ: CSIQ) an “unappreciated gem” based on the company shares only trading at 6x Nomura's 2014 EPS estimates which are below peer multiples. Shares hit new 52 week highs of $40.32 before closing the day at $39.67, up 10.87 percent.
Decliners of Note
Shares of Intercept Pharmaceuticals (NASDAQ: ICPT) continue to fall today. Yesterday the CEO said that the company may need the assistance of a larger drug maker to help bring OCA to market. Shares lost 29.98 percent, closing at $255.12.
Stratasys (NASDAQ: SSYS) issued guidance for 2014 this morning which came in below the Street's estimates. The company forecast its fiscal 2014 EPS to fall in a range of $2.15 to $2.25, below the consensus estimate of $2.35. The company also guided its revenue in a $660 million to $680 million range which is higher than the $655 million consensus. The company said that higher operating expenses and higher investments in research and development will drag its 2014 profits lower. Shares lost 8.18 percent, closing at $119.37.
GameStop (NYSE: GME) released an updated guidance this morning. The company sees its fourth quarter EPS coming in a range of $1.85 to $1.95 a share, significantly lower than its previous guidance of $1.97 ot $2.14. The consensus estimate stands at $2.14. Shares plunged 19.88 percent, closing at $36.31.
Earnings of Note
JPMorgan (NYSE: JPM) announced its fourth quarter results this morning. The company reported an EPS of $1.40, higher than the consensus estimate of $1.24. Revenue of $24.1 billion came in higher than the consensus estimate of $23.81 billion. Shares gained 0.07 percent, closing at $57.74.
Wells Fargo announced its fourth quarter results this morning. The company reported an EPS of $1.00, higher than the consensus estimate of $0.98. Revenue of $20.67 billion came in higher than the consensus estimate of $20.63 billion. Shares gained 0.07 percent, closing at $45.59.
Quote of the Day
“I believe the economy has met the criteria of significant improvement in labor market conditions for ending the program and that further increases in the balance sheet are unlikely to provide appreciable benefits for recovery.” - Charles Plosser in comments made today.
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