Market Wrap For February 6: Stocks Higher With All Eyes On Friday's Jobs Report
U.S. stocks moved sharply higher today as investors and traders digested positive news about the job market.
It is unclear if Thursday's momentum will be carried forward Friday with the release of the January employment survey.
- The Dow gained 1.22 percent, closing at 15,628.53.
- The S&P 500 gained 1.24 percent, closing at 1,773.43.
- The Nasdaq gained 1.14 percent, closing at 4,057.12.
- Gold gained 0.02 percent, trading at $1,257.20 an ounce.
- Oil gained 0.48 percent, trading at $97.85 a barrel.
- Silver gained 0.56 percent, trading at $19.92 an ounce.
News of Note
Initial Jobless Claims fell 20,000 to 331,000, lower than 337,000 consensus estimate.
January International deficient in goods and services came gap came in wider than expected at -$38.7 billion versus a consensus estimate of -$36.0 billion.
Fourth Quarter Nonfarm Productivity rose 3.2 percent, higher than the 2.5 percent expected. Unit labor costs decline 1.6 percent, more than the decline of 0.5 percent expected.
The Bloomberg Consumer Comfort Index fell to its lowest level in ten weeks at -33.1.
The average rate for a 30-year fixed mortgage fell to its lowest levels since November at 4.23 percent.
EIA Natural Gas Inventory declined 262bcf.
Applied Predictive Technologies, a retail analysts firm, said that retail sales fell 9.6 percent during the most intense period of the “Polar Vortex” (January 5-7) with Chicago and Detroit hit the hardest.
The NRF forecasts that retail sales will rise 4.3 percent in 2014 to improve on last year's 3.7 percent gain.
Mathew Martoma, former SAC Capital portfolio manager was convicted of helping his company earn more than a quarter billion dollars through insider knowledge.
The Bank of England left its benchmark rate of half a percent unchanged and its QE program remains the same at 375 billion pounds.
The European Central Bank has left its key interest rate unchanged at 0.25 percent.
Equities-Specific News of Note
An article in Barron's suggested that DuPont (NYSE: DD) is one of the world's biggest sellers of seeds, pesticides, fertilizers and other crops. As such, shares could rise 20 percent as “investors start to give DuPont credit for that business.” Shares gained 1.71 percent, closing at $62.96.
Analysts at Goldman Sachs upgraded Lennar (NYSE: LEN) to Conviction Buy from Neutral with a price target raised to $48 from a previous $38. The analysts noted “We believe the market is valuing LEN almost exclusively for its core homebuilder business, while ascribing little value to its ancillary businesses” and that “we did a sum of the parts that shows $37 of the current ~$40 price can be explained by core homebuilding, with an additional $16 of value from its other businesses. We did a deep dive on FivePoint communities, Rialto and Multifamily, including modeling out the profitability and value creation of each business, driving our estimates higher and putting us 2%/9% above Street EPS in 2014/2015." Shares gained 5.39 percent, closing at $41.72.
Analysts at Janney upgraded American Express (NYSE: AXP) to Buy from Neutral with a price target raised to $99 from a previous $91. The analysts' bullish view stems from recent meetings with the company's executives regarding its initiatives to increase business with smaller merchants. The analysts noted "We came away from the meeting feeling more confident that these initiatives combined with its focus on more affluent consumers should enable to it to continue to deliver strong returns and EPS growth." Shares gained 2.37 percent, closing at $85.70.
Analysts at Miller Tabak upgraded Buffalo Wild Wings (NASDAQ: BWLD) to Buy from Hold with a price target of $148. The analysts cited valuation reasons and the company's higher sales as well as lower costs for chicken wings. The analysts see the company posting solid top-line growth over time. Shares gained 3.72 percent, closing at $131.85.
Costco (NASDAQ: COST) reported that its net sales grew six percent on year to $7.99 billion in January. Comparable sales increased five percent in the U.S. and eight percent internationally. Shares gained 3.38 percent, closing at $114.24.
Carlyle Group (NYSE: CG) beat out Apollo Global Management (NYSE: APO) in the final round of bidding for the $3 billion plus auction for Illinois Tool Works' (NYSE: ITW) packaging business. Shares of Carlyle gained 4.93 percent, closing at $34.03 while Apollo gained 0.70 percent, closing at $31.83. Illinois Toll Works gained 0.68 percent, closing at $78.12.
During it's post-earnings conference call, Disney (NYSE: DIS) hinted that it can one day monetize the video on demand and streaming video on demand channels to make up for lost broadcast advertising revenue. Shares gained 5.28 percent, closing at $75.55.
The Wall Street Journal reported that a New York regulator halted indefinitely Ocwen Financial's (NYSE: OCN) $2.7 billion bid to purchase mortgage servicing rights from Wells Fargo (NYSE: WFC) Shares of Ocwen lost 4.26 percent, closing at $41.36 but traded as low as $37.25. Wells Fargo gained 1.22 percent, closing at $44.77.
Netflix (NASDAQ: NFLX) said that it reached an agreement to stream Clifford the Big Red Dog as the company continues to boost its library of kids shows. Netflix's largest competitor, Amazon (NASDAQ: AMZN) debuted ten new pilots on its Prime Instant Video. Shares of Netflix gained 0.86 percent, closing at $407.91 while Amazon gained 2.32 percent, closing at $354.48.
Icahn Enterprises (NYSE: IEP) is set to appoint Keith Cozza has the firm's new CEO. Cozza was a prior executive in Icahn Enterprises and acted as COO of its investment vehicle. Current CEO Daniel Ninivaggi will become the co-CEO of an IEP subsidiary. King Carl will, of course, remain chairman. Shares of Icahn Enterprises gained 3.46 percent, closing at $106.69.
Bloomberg said that the spread between Jos. A. Bank's (NASDAQ: JOSB) share price and the bid from Men's Wearhouse (NYSE: MW) is the largest of any pending deal valued at more than $500 million. Bloomberg quoted analyst at FBN Securities who said “that would normally appeal to traders who see an opportunity to profit by betting that a deal will ultimately get done. Given Jos. A. Bank's poison pill, staggered board and reported interest in buying Eddie Bauer, there may be too many hurdles,” Shares of Jos. A. Bank gained 1.12 percent, closing at $54.00 while Men's Wearhouse lost 1.49 percent, closing at $46.24.
Canadian Solar (NASDAQ: CSIQ) sold its fourth utility scale solar power plant to a fund managed by BlackRock Shares lost 1.47 percent, closing at $36.84.
McDonald's (NYSE: MCD) will close 74 restaurants in Japan after the company reported its profit in the country fell by close to 50 percent in 2013 and same store-sales fell 6.2 percent. Shares gained 1.45 percent, closing at $94.94.
Winners of Note
After the market closed yesterday, Green Mountain Coffee Roasters (NASDAQ: GMCR) announced a ten year relationship with Coca-Cola. As part of the agreement, Coca-Cola will purchase a ten percent stake in Green Mountain and the two will collaborate on the Keurig cold platform. Green Mountain will be Coke's exclusive partner for “the production and sale of The Coca-Cola Company-branded single-serve, pod based cold beverages.” Green Mountain also reported its first quarter results. The company announced an EPS of $0.96, beating the consensus estimate of $0.90. Revenue of $1.38 billion missed the consensus estimate of $1.4 billion. Green Mountain expects its second quarter EPS to be $0.93 to $0.98, below the consensus estimate of $1.02. Full year 2014 EPS is expected to be $3.75 to $3.85 with a consensus of $3.82.
This morning, analyst at KeyBanc raised their target on Green Mountain to $150 from a previous $100. The analysts noted "We believe the Coca-Cola deal transforms Green Mountain from a controversial single-serve coffee company to a global beverage growth company and should put to rest many of the allegations of fraud and accounting misconduct, thereby significantly reducing the "tail risk" and supporting a higher valuation. In addition, the aforementioned deal validates our optimism on the Company's Cold platform, thereby significantly increasing the Company's addressable market and earnings power." Shares of Green Mountain hit new 52 week highs of $110.50 before closing the day at $102.10, up 26.24 percent.
Following Green Mountain's agreement last night, shares of SodaStream (NASDAQ: SODA) plummeted by ten percent. Shares rose today as investors weight the possibility that Pepsi may take a closer look at the company to stay competitive with Coca-Cola in the new market. Analysts at KeyBanc downgraded shares to Hold from Buy and noted "Given KO's endorsement of GMCR as its single-serve partner in the fast-growing home carbonation category, as well as SODA's recent poor operating results (the Company negatively preannounced 4Q13 earnings on January 13, 2014), we believe investors are likely to view GMCR as the emerging leader in home carbonation, and we, therefore, expect that the recent negative sentiment on SODA's stock is likely to deteriorate further. As such, we believe current developments in the home carbonation category warrant a more cautious view on SODA's stock, and we are therefore downgrading our rating to a HOLD (from a BUY) until we see a more compelling reason to own the name." Shares gained 7.15 percent, closing at $38.35.
A court presiding over Juniper's infringement suit against Palo Alto Networks (NASDAQ: PANW) has denied a Juniper motion for infringement and granted Palo Alto motions for summary judgement of no infringement for two of Juniper's patents. Shares of Palo Alto hit new 52 week highs of $67.62 before closing the day at $66.94, up 11.66 percent.
This morning, RetailMeNot (NASDAQ: SALE) reported its fourth quarter results. The company announced an EPS $0.26, missing the consensus estimate of $0.29. Revenue of $78.5 million beat the consensus estimate of $68.71 million. Shares gained 9.36 percent, closing at $37.27.
Decliners of Note
After failing to impress investors with its first ever quarterly results, Twitter (NYSE: TWTR) was the recipient of several downgrades today. Analysts at Susquehanna maintained a Market Perform rating but cut their price target to $48 from a previous $55. The analysts noted that Twitter's MAU growth of nine million users quarter over quarter missed their consensus by eight million users. The analysts also noted that when Facebook was a similar size, it was able to add 63 million MAU in a quarter. Analysts at UBS maintained a Sell rating and $42 price target and stated that even after yesterday's sell-off in the post-market session, shares are still trading at a huge premium compared to Facebook (30x 2014E EV/SALES versus 13x for Facebook.) Analysts at Cantor Fitzgerald maintained a Sell rating with a $45 price target noting that both MAUs and engagement, two main drivers of long-term growth came in weaker than expected. Shares tumbled 24.16 percent, closing at $50.03.
Chesapeake Energy (NYSE: CHK) said in a conference call today that it expects to spend approximately 20 percent less on capital improvements throughout 2014 and projected a capital expenditure budget of $5.2 billion to $5.6 billion. The company also said that December's average daily production was around 649,000 boe, far below its guidance of 680,000 to 695,000. The company cited freezing temperature and other weather related issues for its outputs. Shares lost 6.87 percent, closing at $24.41.
After yesterday's strong rally, shares of Sprint (NYSE: S) and T-Mobile U.S. (NYSE: TMUS) fell today following a Bloomberg report that FCC/DOJ regulators have “resisted the concept” of a merger between the two carriers. Sprint, along with parent company SoftBank will “decide in the next few weeks whether to move ahead on a bid.” Shares of Sprint lost 7.29 percent, closing at $7.88 while T-Mobile U.S. lost 6.93 percent, closing at $29.55.
Last night, Pandora Media (NYSE: P) reported its fourth quarter results. The company announced an EPS of $0.11, beating the consensus estimate $0.08. Revenue of $200.8 million was in-line with the consensus estimate. Pandora issued first quarter guidance and sees its revenue to be $170 million to $176 million, within the $171.7 million consensus estimate. The company expects its EPS to be -$0.16 to -$0.14, worse than the consensus estimate of -$0.12. Analysts remained mixed as analysts at Barrington Research said that the dip in share prices represents a buying opportunity while analysts at Albert Fried said that shares "could be dead money" as the company faces risks in the ad market until April. Shares lost 10.05 percent, closing at $32.23.
Earnings of Note
This morning, General Motors (NYSE: GM) reported its fourth quarter results. The company announced an EPS of $0.67, missing the consensus estimate of $0.87. Revenue of $40.5 billion missed the consensus estimate of $40.89 billion. General Motors said that it's “2013 calendar-year net income attributable to common stockholders of $3.8 billion, or $2.38 per fully diluted share, down from $4.9 billion, or $2.92 per fully diluted share in 2012. Operating performance improved during the year, but was more than offset by a net loss from special items and incremental tax expense.” The company said that it is now in “execution” mode and that its “sole focus will be on delivering results on a global basis.” Shares lost 0.03 percent, closing at $35.23.
This morning, Dunkin' Brands (NASDAQ: DNKN) reported its fourth quarter results. The company announced an EPS of $0.43, beating the consensus estimate of $0.40. Revenue of $183.17 million beat the consensus estimate of $178.5 million. During the quarter, Dunkin' Brands saw its comparable store sales grow 3.5 percent and has added 309 net new restaurants worldwide, 149 of which was in the U.S. Shares gained 3.36 percent, closing at $48.89.
This morning, Kellogg (NYSE: K) reported its fourth quarter results. The company announced an EPS of $0.83, beating the consensus estimate of $0.82. Revenue of $3.5 billion missed the consensus estimate of $3.52 billion. Shares gained 0.64 percent, closing at $57.74.
This morning, Teva Pharmaceutical (NASDAQ: TEVA) reported its fourth quarter results. The company announced an EPS of $1.42, beating the consensus estimate of $1.40. Revenue of $5.45 billion beat the consensus estimate of $5.02 billion. Teva's net profit for the quarter rose to $380 billion from last quarter's $320 million. The company noted a higher sale of generic medicines in the U.S. Total generic sales rose one percent to $2.7 billion, specialty medicines rose five percent to $2.2 billion and Copaxone rose eight percent to $1.1 billion. Shares lost 1.54 percent, closing at $44.69.
After the market closed, LinkedIn (NYSE: LNKD) reported its fourth quarter results. The company announced an EPS OF $0.39, beating the consensus estimate of $0.38. Revenue of $447.2 million beat the consensus estimate of $438.28 million. The company is guiding its first quarter revenue to be $455 million to $460 million, below the consensus estimate of $470.3 million. The company sees its full year 2014 revenue to be $2.02 billion to $2.05 billion, below the consensus estimate of $2.16 billion. Shares were trading lower by 10.17 percent at $200.72 prior to the post earnings conference call.
Quote of the Day
“LinkedIn is for the people you know. Facebook is for the people you used to know. Twitter is for people you want to know” ~ Source unknown
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